10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-5424

DELTA AIR LINES, INC.

State of Incorporation: Delaware

IRS Employer Identification No.: 58-0218548

Hartsfield Atlanta International Airport, Atlanta, Georgia 30320

Telephone: (404) 715-2600

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes    No

Number of shares outstanding by each class of common stock,
as of July 31, 2002:

Common Stock, $1.50 par value -123,257,398 shares outstanding

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS
PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
Notes to the Condensed Consolidated Financial Statements
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
INDEPENDENT ACCOUNTANTS' REPORT
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
Exhibit 4.1 CREDIT AGREEMENT
Exhibit 4.2 REIMBURSEMENT AGREEMENT
Exhibit 10.1 2002 RETENTION PROGRAM
Exhibit 10.2 FORM OF STOCK OPTION AWARD AGREEMENT
Exhibit 10.3 LETTER DATED MAY 28, 2002
Exhibit 12 COMPUTATION OF RATIO OF EARNINGS
Exhibit 15 LETTER FROM DELOITTE & TOUCHE LLP
Exhibit 99.1 CERTIFICATION OF THE CEO AND CFO

FORWARD-LOOKING STATEMENTS

         Statements in this Form 10-Q (or otherwise made by Delta or on Delta’s behalf) which are not historical facts, including statements about Delta’s estimates, expectations, beliefs, intentions, projections or strategies for the future, may be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or Delta’s present expectations. Factors that could cause these differences include, but are not limited to:

1. the many effects on Delta and the airline industry from the terrorist attacks on the United States on September 11, 2001, including the following:

• the adverse impact of the terrorist attacks on the demand for air travel;

• the change in Delta’s operations and higher costs resulting from, and customer reaction to, new airline and airport security directives, including the Aviation and Transportation Security Act;

• the availability and cost of war and terrorism risk and other insurance for Delta;

• the credit downgrades of Delta and other airlines by Moody’s Investors Service and Standard & Poor’s, and the possibility of additional downgrades, to the extent it makes it more difficult and/or more costly for us to obtain financing;

• potential declines in the values of the aircraft in Delta’s fleet or facilities and related asset impairment charges;

• additional terrorist activity and/or war;

2.	general economic conditions, both in the United States and in our markets outside the United States;
3.	competitive factors in our industry, such as mergers and acquisitions, airline bankruptcies, the airline pricing environment, the growth of low cost carriers, international alliances, codesharing programs and capacity decisions by competitors;
4.	outcomes of negotiations on collective bargaining agreements and other labor issues;
5.	changes in the availability or cost of aircraft fuel or fuel hedges;
6.	disruptions to operations due to adverse weather conditions and air traffic control-related constraints;

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7.	actions by the United States or foreign governments, including the Federal Aviation Administration and other regulatory agencies;
8.	the willingness of customers to travel generally, and with Delta specifically, which could be affected by factors such as Delta’s and the industry’s safety record; and
9.	the outcome of Delta’s litigation.

         Caution should be taken not to place undue reliance on Delta’s forward-looking statements, which represent Delta’s views only as of August 13, 2002, and which Delta has no current intention to update.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DELTA AIR LINES, INC.
Consolidated Balance Sheets

(In Millions, Except Share Data)

				June 30,		December 31,
ASSETS				2002		2001*
				(Unaudited)
CURRENT ASSETS:
	Cash and cash equivalents			$	1,747	$	2,210
	Restricted cash				94		—
	Short-term investments				—		5
	Accounts receivable, net of an allowance for uncollectible accounts of $29 at June 30, 2002 and $43 at December 31, 2001				560		368
	Expendable parts and supplies inventories, net of an allowance for obsolescence of $129 at June 30, 2002 and $139 at December 31, 2001				181		181
	Deferred income taxes				535		518
	Fuel hedge contracts, at fair market value				71		55
	Prepaid expenses and other				325		230
			Total current assets		3,513		3,567
PROPERTY AND EQUIPMENT:
	Flight equipment				20,342		19,427
		Less: Accumulated depreciation			5,915		5,730
	Flight equipment, net				14,427		13,697
	Flight equipment under capital leases				382		382
		Less: Accumulated amortization			280		262
	Flight equipment under capital leases, net				102		120
	Ground property and equipment				4,527		4,412
		Less: Accumulated depreciation			2,517		2,355
	Ground property and equipment, net				2,010		2,057
	Advance payments for equipment				121		223
			Total property and equipment, net		16,660		16,097
OTHER ASSETS:
	Investments in debt and equity securities				55		96
	Investments in associated companies				209		180
	Cost in excess of net assets acquired, net				2,092		2,092
	Operating rights and other intangibles, net of accumulated amortization of $249 at June 30, 2002 and $246 at December 31, 2001				91		94
	Restricted investments for Boston airport terminal project				463		475
	Other noncurrent assets				982		1,004
			Total other assets		3,892		3,941
Total assets				$	24,065	$	23,605

*     Derived from the audited Consolidated Balance Sheet included in Delta’s 2001 Annual Report to Shareowners.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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DELTA AIR LINES, INC.
Consolidated Balance Sheets
(In Millions, Except Share Data)

					June 30,			December 31,
LIABILITIES AND SHAREOWNERS' EQUITY					2002			2001*
					(Unaudited)
CURRENT LIABILITIES:
	Current maturities of long-term debt				$	249		$	260
	Short-term obligations					92			765
	Current obligations under capital leases					33			31
	Accounts payable and miscellaneous accrued liabilities					1,718			1,617
	Air traffic liability					1,577			1,224
	Income and excise taxes payable					872			1,049
	Accrued salaries and related benefits					1,165			1,121
	Accrued rent					212			336
		Total current liabilities				5,918			6,403
NONCURRENT LIABILITIES:
	Long-term debt					9,100			7,781
	Long-term debt issued by Massachusetts Port Authority					498			498
	Capital leases					58			68
	Postretirement benefits					2,294			2,292
	Accrued rent					795			781
	Deferred income taxes					641			465
	Other					497			464
			Total noncurrent liabilities			13,883			12,349
DEFERRED CREDITS:
	Deferred gains on sale and leaseback transactions					494			519
	Manufacturers’ and other credits					349			310
		Total deferred credits				843			829
COMMITMENTS AND CONTINGENCIES (Notes 3, 7 and 8)
EMPLOYEE STOCK OWNERSHIP PLAN PREFERRED STOCK:
	Series B ESOP Convertible Preferred Stock, $1.00 par value, $72.00 stated and liquidation value; 6,128,676 shares issued and outstanding at June 30, 2002, and 6,278,210 shares issued and outstanding at December 31, 2001					441			452
	Unearned compensation under employee stock ownership plan					(199	)		(197	)
			Total Employee Stock Ownership Plan Preferred Stock			242			255
SHAREOWNERS’ EQUITY:
	Common stock, $1.50 par value; 450,000,000 shares authorized; 180,893,810 shares issued at June 30, 2002 and 180,890,356 shares issued at December 31, 2001					271			271
	Additional paid-in capital					3,266			3,267
	Retained earnings					2,335			2,930
	Accumulated other comprehensive income					31			25
	Treasury stock at cost, 57,637,479 shares at June 30, 2002 and 57,644,690 shares at December 31, 2001					(2,724	)		(2,724	)
				Total shareowners’ equity		3,179			3,769
Total liabilities and shareowners’ equity					$	24,065		$	23,605

*     Derived from the audited Consolidated Balance Sheet included in Delta’s 2001 Annual Report to Shareowners.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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DELTA AIR LINES, INC.
Consolidated Statements of Operations
(Unaudited)
(In Millions, Except Share Data)

			Three Months Ended						Six Months Ended
			June 30,						June 30,
			2002			2001*			2002			2001*
OPERATING REVENUES:
	Passenger			3,217		$	3,537		$	6,095		$	7,135
	Cargo			109			131			220			271
	Other, net			148			108			262			212
				3,474			3,776			6,577			7,618
OPERATING EXPENSES:
	Salaries and related costs			1,563			1,560			3,064			3,167
	Aircraft fuel			401			463			740			977
	Depreciation and amortization			291			331			572			655
	Contracted services			241			253			504			510
	Landing fees and other rents			211			192			414			390
	Aircraft maintenance materials and outside repairs			181			193			366			380
	Aircraft rent			179			186			357			374
	Other selling expenses			140			165			285			344
	Passenger commissions			89			144			196			285
	Passenger service			98			127			192			241
	Asset writedowns and other nonrecurring items			23			60			63			60
	Other			184			216			386			464
		Total operating expenses		3,601			3,890			7,139			7,847
OPERATING LOSS				(127	)		(114	)		(562	)		(229	)
OTHER INCOME (EXPENSE):
	Interest expense, net			(155	)		(91	)		(296	)		(177	)
	Gain (loss) from sale of investments			—			7			(3	)		7
	Fair value adjustments of SFAS 133 derivatives			(15	)		112			(43	)		95
	Miscellaneous income (expense), net			10			(13	)		15			(17	)
				(160	)		15			(327	)		(92	)
LOSS BEFORE INCOME TAXES				(287	)		(99	)		(889	)		(321	)
INCOME TAX BENEFIT				101			9			306			98
NET LOSS				(186	)		(90	)		(583	)		(223	)
PREFERRED STOCK DIVIDENDS				(3	)		(4	)		(7	)		(7	)
NET LOSS AVAILABLE TO COMMON SHAREOWNERS			$	(189	)	$	(94	)	$	(590	)	$	(230	)
BASIC AND DILUTED LOSS PER SHARE			$	(1.54	)	$	(0.76	)	$	(4.79	)	$	(1.87	)
WEIGHTED AVERAGE SHARES USED IN BASIC AND DILUTED PER SHARE COMPUTATION				123,243,476			123,052,899			123,243,816			123,041,961
DIVIDENDS PER COMMON SHARE			$	0.025		$	0.025		$	0.050		$	0.050

* Derived from the Consolidated Statement of Operations previously included in Delta’s Form 10-Q for the quarterly period ended June 30, 2001.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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DELTA AIR LINES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Millions)

			Six Months Ended
			June 30,
			2002			2001*
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss		$	(583	)	$	(223	)
	Adjustments to reconcile net loss to cash provided by operating activities, net			254			686
	Changes in certain assets and liabilities, net			404			88
		Net cash provided by operating activities		75			551
CASH FLOWS FROM INVESTING ACTIVITIES:
	Property and equipment additions:
		Flight equipment, including advance payments		(868	)		(1,246	)
		Ground property and equipment		(133	)		(303	)
	Decrease in restricted investments			15			—
	Decrease in short-term investments, net			5			239
	Proceeds from sale of investments			24			53
	Proceeds from sale of flight equipment			9			26
	Other, net			1			(13	)
		Net cash used in investing activities		(947	)		(1,244	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Payments on long-term debt and capital lease obligations			(176	)		(93	)
	Issuance of long-term obligations			1,318			151
	(Payments on) issuance of short-term obligations			(625	)		800
	Issuance of common stock			—			2
	Cash dividends on common and preferred stock			(19	)		(20	)
	Payments on notes payable, net			(78	)		(2	)
	Redemption of preferred stock			(11	)		(5	)
	Other, net			—			1
		Net cash provided by financing activities		409			834
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				(463	)		141
Cash and cash equivalents at beginning of period				2,210			1,364
Cash and cash equivalents at end of period			$	1,747		$	1,505
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid (received) during the period for:
	Interest (net of amounts capitalized)		$	286		$	257
	Income taxes		$	(482	)	$	(94	)
NON-CASH TRANSACTIONS:
Aircraft delivered under seller financing			$	265		$	—

* Derived from the Condensed Consolidated Statement of Cash Flows previously included in Delta’s Form 10-Q for the quarterly period ended June 30, 2001.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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DELTA AIRLINES, INC.
Statistical Summary
(Unaudited)

		Three Months Ended						Six Months Ended
		June 30,						June 30,
Statistical Summary:		2002			2001			2002			2001
	Revenue Passenger Miles (millions)		26,319			27,828			49,549			53,113
	Available Seat Miles (millions) (1)		35,859			38,239			69,599			75,966
	Passenger Mile Yield		12.23	¢		12.71	¢		12.30	¢		13.43	¢
	Operating Revenue Per Available Seat Mile		9.69	¢		9.88	¢		9.45	¢		10.03	¢
	Passenger Revenue Per Available Seat Mile		8.97	¢		9.25	¢		8.76	¢		9.39	¢
	Operating Cost Per Available Seat Mile		10.05	¢		10.17	¢		10.26	¢		10.33	¢
	Operating Cost Per Available Seat Mile — Excluding (2)		9.98	¢		10.02	¢		10.17	¢		10.25	¢
	Passenger Load Factor		73.39	%		72.77	%		71.19	%		69.92	%
	Breakeven Passenger Load Factor		76.30	%		75.12	%		77.76	%		72.16	%
	Breakeven Passenger Load Factor — Excluding (2)		75.79	%		73.88	%		77.03	%		71.57	%
	Passengers Enplaned (thousands)		27,427			28,130			52,045			55,062
	Revenue Ton Miles (millions)		3,018			3,190			5,691			6,167
	Cargo Ton Miles (millions)		386			407			736			844
	Cargo Ton Mile Yield		28.30	¢		32.30	¢		29.92	¢		32.11	¢
	Fuel Gallons Consumed (millions)		634			682			1,233			1,378
	Average Price Per Fuel Gallon, net of hedging gains		63.13	¢		67.95	¢		60.00	¢		70.91	¢
	Number of Aircraft in Fleet, End of Period		831			826			831			826
	Full-Time Equivalent Employees, End of Period		75,700			82,800			75,700			82,800

(1)	As a result of a strike by its pilots, Comair suspended its operations between March 26, 2001 and July 1, 2001. Accordingly, Comair had no Available Seat Miles (ASMs) during this period.
(2)	Calculation excludes unusual items for the applicable periods as discussed in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q.

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DELTA AIR LINES, INC.
Notes to the Condensed Consolidated Financial Statements
June 30, 2002
(Unaudited)

1.   ACCOUNTING AND REPORTING POLICIES

         Delta’s accounting and reporting policies are summarized in Note 1 of the Notes to the Consolidated Financial Statements (pages 29-32) in our 2001 Annual Report to Shareowners (Annual Report) and in Note 2 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q. These interim financial statements should be read in conjunction with the Consolidated Financial Statements and the accompanying notes in the Annual Report. Management believes that the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal recurring items, necessary for a fair statement of results for the interim periods presented. We have reclassified certain prior period amounts in our Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows to be consistent with the presentation of our current period financial statements.

         Due to seasonal variations in the demand for air travel and other factors, including the continued negative impact of the effects of the September 11 terrorist attacks on our business, operating results for the interim period are not necessarily indicative of operating results for the entire year.

Restricted Assets

         As of June 30, 2002, we had $94 million in restricted cash included in total current assets on our Consolidated Balance Sheets. This amount primarily relates to cash held either in trust or under a surety bond as collateral to support letters of credit for projected workers compensation claims. The letters of credit and surety bond expire in February 2003.

         As of June 30, 2002, we had $463 million in restricted investments included in other assets on our Consolidated Balance Sheets. This amount is restricted for the redevelopment and expansion of Terminal A at Boston’s Logan International Airport. For additional information about this project, see Note 8 of the Notes to the Consolidated Financial Statements (pages 38-41) in the Annual Report.

2.   ADOPTION OF NEW ACCOUNTING STANDARD

Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets”

         We adopted SFAS 142 on January 1, 2002. This statement addresses financial accounting and reporting for goodwill and other intangible assets. Prior to January 1, 2002, accounting principles generally accepted in the United States of America (U.S. GAAP) required that goodwill be amortized over its estimated useful life, not to exceed 40 years. SFAS 142 requires that

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goodwill no longer be amortized. Instead, SFAS 142 requires us to apply a fair market value-based impairment test to the net book value of our goodwill at least annually. Goodwill is presented as cost in excess of net assets acquired in our Consolidated Balance Sheets.

         SFAS 142 also redefines intangible assets and addresses their related amortization. As a result, we are required to evaluate our existing intangible assets to determine their useful lives. For those intangible assets determined to have indefinite lives, amortization has been discontinued; we will review these assets at least annually for potential impairment using a fair market value-based impairment test. Intangible assets that have determinable useful lives will continue to be amortized on a straight-line basis over their remaining estimated useful lives.

         The adoption of SFAS 142 resulted in a positive impact of $15 million, net of tax, and $30 million, net of tax, for the three and six months ended June 30, 2002, respectively, related to the discontinuance of amortization of existing goodwill and certain intangible assets. For fiscal year 2002, we expect the adoption of SFAS 142 to increase income by approximately $60 million, net of tax. The following tables show reconciliations of our reported net loss and loss per share to adjusted net loss and loss per share as if the non-amortization provisions of SFAS 142 had been applied to the prior year periods:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2002			2001			2002			2001
(in millions, except per share data)
Net loss	$	(186	)	$	(90	)	$	(583	)	$	(223	)
Add back: goodwill and international route amortization, net of tax		—			15			—			30
Adjusted net loss	$	(186	)	$	(75	)	$	(583	)	$	(193	)
Basic and diluted loss per share:
Net loss	$	(1.54	)	$	(0.76	)	$	(4.79	)	$	(1.87	)
Add back: goodwill and international route amortization, net of tax		—			0.12			—			0.24
Adjusted net loss	$	(1.54	)	$	(0.64	)	$	(4.79	)	$	(1.63	)

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         We believe that certain of our intangible assets have indefinite useful lives and, upon adoption of SFAS 142, we discontinued amortization of these assets. Because our leasehold and operating rights have definite useful lives, we will continue to amortize those assets over their respective lease terms. During the March 2002 quarter, we completed our initial test of potential impairment of indefinite-lived intangible assets, other than goodwill; that test indicated no impairment at the date of adoption of SFAS 142. The following tables present information about our intangible assets, other than goodwill, at June 30, 2002:

		As of June 30, 2002
		Gross Carrying		Accumulated
		Amount		Amortization
(in millions)
Amortized Intangible Assets:
	Leasehold and operating rights	$	113	$	(84	)
	Other		2		(1	)
	TOTAL	$	115	$	(85	)
		Net Carrying
		Amount
Unamortized Intangible Assets:
	International routes	$	60
	Other		1
	TOTAL	$	61

         During the June 2002 quarter, we completed our transitional goodwill impairment test, which indicated no impairment at the date of adoption of SFAS 142.

3.   SALE OF RECEIVABLES

         During 1999, we entered into an agreement under which we sold a defined pool of our accounts receivable, on a revolving basis, through a special-purpose, wholly owned subsidiary to a third party. In exchange for the sale of receivables, we received cash and a subordinated promissory note. The principal amount of the promissory note was $223 million at June 30, 2002, and is included in accounts receivable on our Consolidated Balance Sheets.

         As part of this agreement, the subsidiary is required to pay fees to a third party based on the amounts invested by the third party. For the three and six months ended June 30, 2002, these fees were $1.1 million and $2.3 million, respectively. These fees are included in other income (expense) under miscellaneous income (expense), net in our Consolidated Statements of Operations.

         During the June 2002 quarter, this agreement was amended in certain respects, including (1) extending to March 31, 2003 from June 15, 2002 the scheduled termination date of this agreement; (2) decreasing to $250 million from $325 million the maximum amount of cash we may receive from the sale of a defined pool of our accounts receivable on a revolving basis; and (3) permitting the third party to terminate the agreement prior to its scheduled termination date and to require us to repurchase any outstanding receivables if Delta’s senior unsecured long-term debt

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is rated either below Ba3 by Moody’s or below BB- by Standard & Poor’s (rather than below Ba2 by Moody’s and below BB by Standard & Poor’s, as was previously the case). If the agreement had been terminated at June 30, 2002, we would have been required to repurchase outstanding receivables for $176 million.

         During the June 2002 quarter, Standard & Poor’s downgraded Delta’s credit rating on our senior unsecured long-term debt. At June 30, 2002, our senior unsecured long-term debt was rated Ba3 by Moody’s and BB- by Standard & Poor’s. Both Moody’s and Standard & Poor’s ratings outlook for our long-term debt is negative.

         For additional information regarding Delta’s sale of receivables, see Note 18 of the Notes to the Consolidated Financial Statements (page 52) in the Annual Report.

4.  MARKETABLE AND OTHER EQUITY SECURITIES

priceline.com, Inc. (priceline)

         During the June 2002 quarter, there were no changes in our equity interest in priceline. At June 30, 2002, Delta’s equity interest in priceline consisted of (1) 13,469 shares of Series B Redeemable Preferred Stock (Series B Preferred Stock); (2) a warrant to purchase up to 4.5 million shares of priceline common stock for $2.97 per share (2001 Warrant); (3) a warrant to purchase up to 4.7 million shares of priceline common stock for $4.72 per share (Amended 1999 Warrant); and (4) 1.8 million shares of priceline common stock. For additional information regarding the Series B Preferred Stock, the 2001 Warrant, the Amended 1999 Warrant and our priceline common stock, see Note 4 (pages 11-12) of the Notes to the Condensed Consolidated Financial Statements in our Form 10-Q for the quarter ended March 31, 2002 and Note 3 of the Notes to the Consolidated Financial Statements (pages 33-35) in our Annual Report.

         At June 30, 2002, the carrying values of our holdings in Series B Preferred Stock and priceline common stock were $13 million and $5 million, respectively. The Series B Preferred Stock and priceline common stock are accounted for as available-for-sale securities. In accordance with SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities,” the Series B Preferred Stock and the priceline common stock are recorded at fair market value in investments in debt and equity securities on our Consolidated Balance Sheets and any change in fair market value is recorded in accumulated other comprehensive income. The Series B Preferred Stock is recorded at face value, which approximates fair market value. At June 30, 2002, the carrying value of the 2001 Warrant and the Amended 1999 Warrant totaled $8 million. The warrants are recorded at fair market value in investments in debt and equity securities on our Consolidated Balance Sheets and any change in fair market value is recorded in the Consolidated Statements of Operations in accordance with SFAS 133, “Accounting for Derivative Instruments and Hedging Activities.”

Republic Airways Holdings, Inc. (Republic)

         On June 7, 2002, we entered into a contract carrier agreement with Chautauqua Airlines, Inc. (Chautauqua), a regional air carrier which is a subsidiary of Republic. In conjunction with this agreement, Delta received from Republic (1) a warrant to purchase up to 1.5 million shares of Republic’s common stock for $12.50 per share (2002 Warrant); (2) a warrant to purchase up to 1.5 million shares of

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Republic’s common stock at a price per share equal to 95% of the public offering price per share in Republic’s initial public offering of common stock (IPO Warrant); and (3) the right to purchase up to 5% of the shares of common stock that Republic offers for sale in its initial public offering at a price per share equal to the initial public offering price.

         The 2002 Warrant is exercisable in whole or in part at any time until June 7, 2012. The fair market value of the 2002 Warrant on the date received was approximately $11 million, and will be recognized in income ratably over the expected term of the contract carrier agreement. There was an immaterial change in the carrying value of the 2002 Warrant at June 30, 2002. The 2002 Warrant is accounted for in the same manner as described above for the priceline Amended 1999 Warrant and 2001 Warrant.

         The IPO Warrant is exercisable in whole or in part at any time (1) beginning on the closing date of Republic’s initial public offering of common stock and (2) subject to earlier cancellation if the connection carrier agreement is terminated in certain circumstances, ending on the tenth anniversary of that closing date. We will record the fair market value of the IPO Warrant on the closing date of Republic’s initial public offering of common stock.

         The 2002 Warrant, the IPO Warrant and the shares of Republic common stock underlying these securities are not registered under the Securities Act of 1933; however, we have certain demand and piggyback registration rights relating to the underlying shares of Republic common stock.

         For additional information regarding SFAS 133 and the Chautauqua contract carrier agreement, see Notes 5 and 7, respectively, of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

5. DERIVATIVE INSTRUMENTS

         Under SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” we record all derivative instruments on the balance sheet at fair market value and recognize certain non-cash changes in these fair market values in the Consolidated Statements of Operations. SFAS 133 applies to the accounting for our fuel hedging program, our interest rate hedging program and our holdings of equity warrants and other similar rights in other companies.

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         The impact of SFAS 133 on our Consolidated Statements of Operations is summarized as follows (in millions):

	Income (Expense)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2002			2001			2002			2001
Change in time value of fuel hedge contracts	$	(2	)	$	(2	)	$	(26	)	$	(7	)
Ineffective portion of fuel hedge contracts		3			—			5			(4	)
Fair value adjustment of equity rights		(16	)		114			(22	)		106
Fair value adjustments of SFAS 133 derivatives, pretax	$	(15	)	$	112		$	(43	)	$	95
Total, net of tax	$	(9	)	$	69		$	(27	)	$	59

Hedging Programs

         At June 30, 2002, our short-term fuel hedge contracts had an estimated fair market value of $71 million. We had no long-term fuel hedge contracts at June 30, 2002. Unrealized gains of $35 million, net of tax, were recorded in accumulated other comprehensive income. For additional information regarding SFAS 133 and our fuel hedging policy, see Note 4 of the Notes to the Consolidated Financial Statements (pages 35-36) in our Annual Report.

         See Note 13 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q for information about interest rate hedging agreements we entered into subsequent to June 30, 2002.

Equity warrants and other similar rights

         We own equity warrants and other similar rights in certain companies, primarily Republic and priceline. At June 30, 2002, the total fair market value of these rights was $22 million. The changes in fair market value of these rights are recorded in our Consolidated Statements of Operations as fair value adjustments of SFAS 133 derivatives. For additional information regarding these equity interests, see Note 3 of the Notes to the Consolidated Financial Statements (pages 33-35) in the Annual Report and Note 4 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

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6.  AIRCRAFT FLEET

         Our total aircraft fleet, orders, options and rolling options at June 30, 2002 are summarized in the following table. Options have scheduled delivery slots. Rolling options replace options and are assigned delivery slots as options expire or are exercised.

	Current Fleet
Aircraft Type	Owned		Leased		Total		Orders		Options		Rolling Options
B-727-200		28		6		34		—		—		—
B-737-200		4		48		52		—		—		—
B-737-300		3		18		21		—		—		—
B-737-800		69		—		69		61		60		260
B-757-200		80		41		121		—		20		52
B-767-200		15		—		15		—		—		—
B-767-300/300ER		55		32		87		—		10		11
B-767-400		21		—		21		—		24		6
B-777-200		8		—		8		5		20		17
MD-11		8		7		15		—		—		—
MD-88		63		57		120		—		—		—
MD-90		16		—		16		—		—		—
EMB-120		39		6		45		—		—		—
ATR-72		4		15		19		—		—		—
CRJ-100/200		63		122		185		41		214		—
CRJ-700		3		—		3		55		165		—
Total		479		352		831		162		513		346

         The table above reflects the following changes which occurred during the June 2002 quarter:

• We accepted delivery of one B-737-800, one B-767-400, nine CRJ-200 and one CRJ-700 aircraft.

• We retired six B-727-200, two B-737-300 and two EMB-120 aircraft.

• We returned one B-727-200 and one EMB-120 aircraft to the lessor due to the expiration of the leases.

• We returned one CRJ-200 aircraft to active flight service after it was returned from a sublessee.

• We subleased two B-737-800 aircraft to a third party.

         The above table includes 27 grounded aircraft: 16 B-737-200, three B-737-800, three B-767-200, one B-767-400 and four MD-88. We temporarily grounded these aircraft as a result of capacity reductions implemented after the September 11 terrorist attacks.

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7.   COMMITMENTS AND LEASE OBLIGATIONS

Aircraft & Engine Order Commitments

         Future expenditures for aircraft and engines on order as of July 31, 2002 are estimated to be $5.2 billion. The following table shows the timing of these commitments:

Year Ending December 31,
(in billions)		Amount
Remainder of 2002		$	0.4
2003			1.2
2004			1.7
2005			1.3
2006			0.6
	Total	$	5.2

         The table above reflects the delay of delivery of 9 regional jet aircraft from 2002 to 2003 due to a labor strike at Bombardier.

Contract Carrier Agreement Commitments

         We have contract carrier agreements with two regional air carriers, Atlantic Coast Airlines and SkyWest Airlines, which expire in 2010. During the June 2002 quarter, we entered into a contract carrier agreement with a third regional air carrier, Chautauqua Airlines, which will operate a total of 22 regional jets under the Delta Connection program. These aircraft are scheduled to be placed in service between November 2002 and November 2003.

         Delta’s contract carrier agreement with Chautauqua expires in June 2012. Delta may not terminate the agreement without cause during the approximately first five years of its term. After that period, we may terminate the agreement at any time by providing Chautauqua with certain advance notice. If we elect to terminate this agreement in this circumstance, Chautauqua has the right (1) to require us to purchase or lease any or all of the aircraft owned by Chautauqua which they operate for us under this agreement and (2) to assign to us any or all of the leased aircraft that they operate for us under this agreement, provided we are able to continue the leases under terms no less favorable to Delta than applied to Chautauqua.

         In the event we are required to purchase the Chautauqua aircraft, the purchase price would be the amount necessary (1) to reimburse Chautauqua for the equity it provided to purchase the aircraft and (2) to repay in full any debt outstanding at such time that is not being assumed in connection with such purchase. If we are required to lease those aircraft, the lease would have (1) a sublease rate equal to the debt payments for the debt financing on the aircraft calculated as if 90% of the aircraft purchase price was financed by such debt and (2) specified other terms and conditions.

         Under these contract carrier agreements, we schedule certain aircraft that are operated by those airlines using Delta’s flight code, sell the seats on those flights and retain the related revenues. We pay those airlines an amount based on their cost of operating those flights plus a

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specified margin. For the three and six months ended June 30, 2002, we recorded costs totaling approximately $120 million and $260 million, respectively, related to the Atlantic Coast Airlines and SkyWest agreements, which include reimbursement to the carriers as well as direct costs we incurred under the programs. For the six months ending December 31, 2002, we expect to record costs totaling approximately $280 million related to the three contract carrier agreements. At June 30, 2002, these regional air carriers operated 91 aircraft for us under these agreements. We anticipate the three regional air carriers will operate 100 aircraft for us by December 31, 2002. We estimate that the total fair market value of the aircraft that the three regional air carriers could assign to us or require us to purchase or lease if we terminate the connection carrier contracts in certain circumstances is approximately $1.6 billion.

         For additional information regarding our agreements with Atlantic Coast Airlines and SkyWest, see Note 11 of the Notes to the Consolidated Financial Statements (page 43) in the Annual Report.

Lease Obligations

         The following table summarizes, as of June 30, 2002, our minimum rental commitments under capital leases and operating leases with initial or remaining terms in excess of one year:

Years Ending December 31,	Capital		Operating
(in millions)	Leases		Leases
Remainder of 2002	$	26	$	570
2003		30		1,249
2004		21		1,206
2005		14		1,186
2006		6		1,151
After 2006		11		8,072
Total minimum lease payments		108	$	13,434
Less: Amounts of lease payments which represent interest		17
Present value of future minimum capital lease payments		91
Less: Current obligations under capital leases		33
Long-term capital lease obligations	$	58

         At June 30, 2002, the total minimum lease payments for operating leases in the table above do not reflect approximately $160 million in future minimum lease payments to be received over their lease terms by Delta from noncancelable subleases.

         For additional information regarding our lease obligations and purchase commitments, see Notes 10 and 11, respectively, of the Notes to the Consolidated Financial Statements (pages 42-43) in the Annual Report.

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8.  DEBT INSTRUMENTS

Enhanced Equipment Trust Certificates (EETC) Financing

         On April 30, 2002, Delta issued in a public offering $1.1 billion aggregate principal amount of Pass Through Certificates, Series 2002-1 (Certificates), commonly referred to as an EETC financing. The Certificates bear interest at fixed rates ranging from 6.42% to 7.78%, and require principal payments from 2003 to 2023. This financing is secured by 17 B-737-800, one B-757-200, six B-767-400 and eight B-767-300ER aircraft owned by Delta. Additionally, Delta issued in a private placement $90 million principal amount of a subordinated tranche of certificates to an affiliate of Delta.

1997 Bank Credit Agreement

         We used a portion of the proceeds of the EETC financing discussed above to repay the $625 million of outstanding borrowings which became due under the 1997 Bank Credit Agreement. This agreement expired on May 1, 2002.

Other Financing Arrangements

         On December 12, 2001, Delta entered into an agreement under which Delta could borrow, prior to July 1, 2002, up to $935 million on a secured basis, subject to certain conditions. Borrowings under this facility become due or are reduced, as applicable, on the earlier of (1) 366 days after the date of the borrowing or (2) Delta’s completion in 2002 of certain financings. The amount available under this facility was reduced to $759 million on January 25, 2002 following the sale by Delta of $176 million principal amount of its Pass Through Certificates, Series 2000-1D. Upon completion of the EETC financing on April 30, 2002, discussed above, this facility terminated. We had no outstanding borrowings under this facility.

         On January 31, 2002, we entered into a facility under which we may borrow up to approximately $350 million, secured by previously delivered regional jet aircraft which we purchased for cash. This facility expires on February 1, 2003, except that amounts borrowed prior to that date are due between 366 days and 18 months after the date of borrowing (subject to earlier repayment if certain longer term financing is obtained for those regional jet aircraft). The interest rate under this facility is LIBOR plus a margin. At June 30, 2002, there were no outstanding borrowings under this facility.

         Also on January 31, 2002, we entered into a facility to finance on a secured basis at the time of acquisition certain future deliveries of regional jet aircraft. During the June 2002 quarter, this facility was amended to increase the number of regional jet aircraft eligible for financing under this facility, which in turn increased the total borrowings available to us to $328 million from $157 million. Borrowings under this facility (1) are due between 366 days and 18 months after the date of borrowing (subject to earlier repayment if certain longer-term financing is obtained for these aircraft) and (2) bear interest at LIBOR plus a margin. At June 30, 2002, $248 million was outstanding under this facility.

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         For additional information about our debt, see Note 8 of the Notes to the Consolidated Financial Statements (pages 38-41) in the Annual Report. Additionally, see Note 13 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q for a discussion of events which occurred subsequent to June 30, 2002.

9.  COMPREHENSIVE INCOME (LOSS)

         Comprehensive income (loss) includes unrealized gains and losses on marketable equity securities and changes in the fair market value of certain derivative instruments which qualify for hedge accounting. Comprehensive loss, net of taxes, totaled $226 million and $95 million for the three months ended June 30, 2002 and 2001, respectively. For the six months ended June 30, 2002 and 2001, comprehensive loss, net of taxes, was $577 million and $304 million, respectively. The differences between net loss and comprehensive loss for the three and the six months ended June 30, 2002 and 2001 are detailed in the following table:

		Three Months Ended						Six Months Ended
		June 30,						June 30,
(in millions)		2002			2001			2002			2001
Net loss		$	(186	)	$	(90	)	$	(583	)	$	(223	)
Other comprehensive income (loss):
	Realized loss on marketable equity securities		—			12			4			12
	Unrealized gain (loss) on marketable equity securities		(3	)		28			(7	)		(4	)
	Realized gain on derivative instruments		(43	)		(102	)		(64	)		(208	)
	Unrealized gain (loss) on derivative instruments		(16	)		53			79			67
	Other		—			—			(1	)		—
	Income tax effect on other comprehensive income (loss)		22			4			(5	)		52
Total other comprehensive income (loss)			(40	)		(5	)		6			(81	)
Comprehensive loss, net of tax		$	(226	)	$	(95	)	$	(577	)	$	(304	)

         As of June 30, 2002, we had recorded $55 million ($35 million net of tax) as total unrealized gains on open fuel hedge contracts in accordance with SFAS 133, which will be realized over the 12 months ending June 30, 2003. For additional information about the impact of SFAS 133 on our Consolidated Financial Statements, see Note 4 of the Notes to the Consolidated Financial Statements (pages 35-36) in the Annual Report and Note 5 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

10.  SHAREOWNERS’ EQUITY

         During the six months ended June 30, 2002, we issued a total of 3,454 shares of common stock under our broad-based employee stock option plans, Delta 2000 Performance Compensation Plan and the Non-Employee Directors’ Stock Plan.

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11. GEOGRAPHIC INFORMATION

         Delta is managed as a single business unit that provides air transportation for passengers and cargo. Our operating revenues by geographic region are summarized in the following table:

		Three Months Ended				Six Months Ended
		June 30,				June 30,
(in millions)		2002		2001		2002		2001
North America		$	2,802	$	3,029	$	5,376	$	6,242
Atlantic			506		540		870		958
Latin America			135		145		276		297
Pacific			31		62		55		121
	Total	$	3,474	$	3,776	$	6,577	$	7,618

12. EARNINGS (LOSS) PER SHARE

         We calculate basic earnings (loss) per share by dividing the income (loss) available to common shareowners by the weighted average number of common shares outstanding. Diluted earnings (loss) per share includes the dilutive effects of stock options and convertible securities. To the extent stock options and convertible securities are anti-dilutive, they are excluded from the calculation of diluted earnings (loss) per share. The following table shows our computation of basic and diluted loss per share:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2002			2001			2002			2001
(in millions, except per share data)
BASIC AND DILUTED:
Net loss	$	(186	)	$	(90	)	$	(583	)	$	(223	)
Dividends on allocated Series B ESOP Convertible Preferred Stock		(3	)		(4	)		(7	)		(7	)
Net loss available to common shareowners	$	(189	)	$	(94	)	$	(590	)	$	(230	)
Weighted average shares outstanding		123.2			123.1			123.2			123.0
Basic and diluted loss per share	$	(1.54	)	$	(0.76	)	$	(4.79	)	$	(1.87	)

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         The following table shows additional shares that were excluded from the above computation of diluted loss per share because their effect is anti-dilutive:

		Three Months Ended				Six Months Ended
		June 30,				June 30,
(in millions)		2002		2001		2002		2001
Additional shares assuming:
	Exercise of stock options		—		1.0		—		1.0
	Conversion of allocated Series B ESOP Convertible Preferred Stock		5.8		5.5		5.9		5.6
	Conversion of performance-based stock units		0.4		0.3		0.4		0.3
Total additional shares			6.2		6.8		6.3		6.9

         For both the three and six months ended June 30, 2002, we had 55 million stock options that were excluded from the diluted loss per share computation because the exercise price of the options was greater than the average price of common stock for those respective periods. For both the three and six months ended June 30, 2001, we had 44 million stock options that were excluded from the diluted loss per share computation because the exercise price of the options was greater than the average price of the common stock for those respective periods.

13. SUBSEQUENT EVENTS

Interest Rate Hedging Agreements

         To more effectively manage our interest rate exposure, on July 18, 2002, we entered into two interest rate hedging agreements relating to our (1) $300 million principal amount of Series C Medium Term Notes due March 15, 2004, which pay interest at a fixed rate of 6.65% per year and (2) $500 million principal amount of Notes due December 15, 2005, which pay interest at a fixed rate of 7.70% per year.

         Under the first interest rate hedging agreement, we are paying LIBOR plus a margin per year, and receiving 6.65% per year, on a notional amount of $300 million until March 15, 2004. Under the second agreement, we are paying LIBOR plus a margin per year, and receiving 7.70% per year, on a notional amount of $500 million until December 15, 2005. Each of these transactions qualifies for hedge accounting under SFAS 133 and will be accounted for as fair value hedges. We do not enter into interest rate hedge agreements for speculative purposes.

Other Financing Arrangements

         During July 2002, we borrowed $222 million which is due in installments through January 2017 and is secured by nine CRJ-200, two CRJ-700, and two B-737-800 aircraft. This debt bears interest at a floating rate. A portion of the proceeds from these borrowings was used to repay $153 million of outstanding interim financing for ten CRJ-200 aircraft.

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Delta Family-Care Savings Plan’s Series C Guaranteed Serial ESOP Notes (Series C ESOP Notes)

         As discussed in Note 8 of the Notes to the Consolidated Financial Statements (pages 38-41) in the Annual Report, holders of the Series C ESOP Notes are presently entitled to the benefits of an unconditional, direct-pay letter of credit issued by Bayerische Hypo-Und Vereinsbank AG under a credit agreement between Delta and a group of banks. Subsequent to June 30, 2002, a scheduled $29 million principal payment was made on the Series C ESOP Notes, which, in turn, resulted in a reduction of the amount required under the letter of credit. As of August 13, 2002, the letter of credit totaled $366 million, covering $261 million outstanding principal amount of the Series C ESOP Notes, approximately one year of interest on the Notes and $75 million of potential make whole premium amounts.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

RESULTS OF OPERATIONS

Business Environment

         Our financial results for the three and six months ended June 30, 2002 were materially adversely affected by the continuing effects on our business of the terrorist attacks on the United States on September 11, 2001. See pages 12-13 of the Annual Report for information about the terrorist attacks; our significantly lower passenger traffic and yield after those attacks; the 16% reduction in scheduled capacity that we implemented on November 1, 2001 due to the significant reduction in post-September 11 traffic; our employee staffing reductions resulting from the capacity reductions; and related matters.

         During the three and six months ended June 30, 2001, our financial performance was materially adversely affected by (1) the slowing U.S. economy; (2) a strike by the pilots at one of our wholly owned subsidiaries, Comair, which resulted in the suspension of Comair’s operations between March 26 and July 1; (3) the cancellation of a substantial number of flights due to a job action by some Delta pilots; and (4) public concern over a possible strike by Delta pilots.

         Our unaudited consolidated net loss was $186 million for the June 2002 quarter compared to a net loss of $90 million in the June 2001 quarter. Passenger revenues decreased 9%, reflecting a 5% decline in traffic and a 4% decline in yield. Had Comair’s operations not been suspended in the prior year, we estimate that traffic and yield would both have decreased 9% for the June 2002 quarter compared to the June 2001 quarter.

         Our unaudited consolidated net loss was $583 million for the six months ended June 30, 2002 compared to a net loss of $223 million for the same period a year ago. Passenger revenues decreased 15%, reflecting a 7% decline in traffic and an 8% decline in yield. Had Comair’s operations not been suspended in the prior year, we estimate that traffic and yield would have decreased 8% and 11%, respectively, for the six months ended June 30, 2002 compared to the same period in 2001.

         Since September 11, the airline industry, including Delta, has faced a substantial revenue challenge due to reduced traffic and yield. While traffic has increased since the September 11 terrorist attacks, the rate of improvement is lower than we had hoped. Moreover, our passenger revenue is lagging our improvement in traffic because of a weak yield environment, reflecting a sharp decline in business travel after September 11. Other factors contributing to our weak revenues include (1) industry capacity that exceeds the depressed level of demand, which has resulted in heavy fare discounting to stimulate demand; (2) a government imposed passenger security fee adopted after September 11 which, though intended to be paid by customers, has had the effect of reducing our revenues due to the current demand situation; and (3) a reduction in traffic due to the real and perceived “hassle factor” resulting from increased airport security measures. Our results have also been adversely affected by the growing presence of low cost carriers.

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         Our financial performance has also been negatively impacted by significant cost pressures. These include increases in: (1) pension expense due primarily to the decrease in the fair value of our pension plan assets resulting from the stock market decline and to the Delta pilot contract ratified in June 2001; (2) interest expense related to an increase in debt outstanding; (3) war and terrorism risk insurance premiums; and (4) security costs.

         To mitigate the revenue and cost pressures discussed above, we have focused on managing costs, capacity and liquidity. The primary elements of our cost management program have been (1) the reduction of staffing levels; (2) capacity reductions, including the accelerated retirement of certain aircraft types; and (3) a detailed line item review of all other elements of our cost structure. Capacity in the June 2002 quarter was down 6% compared to the June 2001 quarter. Had Comair’s operations not been suspended in the prior year, we estimate that capacity would have been down 9% for the June 2002 quarter compared to the June 2001 quarter. We currently have 27 mainline aircraft that remain temporarily grounded as a result of capacity reductions implemented after the September 11 terrorist attacks. At June 30, 2002, cash, cash equivalents and short-term investments totaled $1.7 billion.

Outlook

         We anticipate that the weak revenue environment will continue for the remainder of 2002. We also expect significant cost pressures related to increases in pension, interest, insurance and security expense to continue. We estimate total annual cost increases for 2002 compared to 2001 related to these items to be approximately $750 million to $800 million. For the twelve months ending December 31, 2002, we now expect to incur unusual operating costs of approximately $100 million related to the temporary carrying cost of surplus pilots and grounded aircraft related to our capacity reductions on November 1, 2001. This expectation is lower than our earlier estimates due to changes in pilot staffing requirements.

         As a result of the September 11 terrorist attacks, aviation insurers significantly reduced the coverage and increased the premium rates for war and terrorism risk insurance for commercial airlines. Since then, the U.S. government has been providing U.S. airlines with excess war and terrorism risk insurance coverage for 60-day periods, with the current 60-day period to expire on August 17, 2002. If the government fails to renew this excess coverage, our results of operations would be materially adversely affected.

         Delta’s projections of the cost for obtaining war and terrorism risk insurance have increased from our earlier estimate due to continuing delays in obtaining agreement from the U.S. government to provide reinsurance support for the airline industry’s war and terrorism risk insurance alternative called Equitime. Equitime is intended to allow the U.S. airline industry to fund substantial war and terrorism risk insurance, relying on the federal government to reinsure for catastrophe liability protection until other viable insurance alternatives develop or Equitime becomes financially self-sufficient. The start up of Equitime is contingent on (1) agreement with the Federal Aviation Administration (FAA) for catastrophe reinsurance and (2) broad participation by U.S. airlines as investors/participants.

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         The pace of passenger revenue recovery will continue to determine our mainline capacity plans for the remainder of the year, as well as impacting our cost estimates for that period. We expect our capacity for the September 2002 quarter to be 3%-4% below the September 2001 quarter.

         Based on the above, we do not expect the September 2002 quarter results to differ significantly from the June 2002 quarter results.

Three Months Ended June 30, 2002 and 2001

Net Income (Loss) and Earnings (Loss) per Share

         Our unaudited consolidated net loss was $186 million for the June 2002 quarter ($1.54 diluted loss per share), compared to a net loss of $90 million ($0.76 diluted loss per share) in the June 2001 quarter.

         Excluding the unusual items described below, our net loss was $162 million in the June 2002 quarter ($1.34 diluted loss per share), compared to a net loss of $123 million ($1.03 diluted loss per share) in the June 2001 quarter.

Unusual Items

         Our results of operations for the June 2002 and June 2001 quarters include the following items, which are collectively referred to as “unusual items” in this discussion of those three month periods.

June 2002 Quarter

• A $23 million expense ($15 million net of tax, or $0.12 diluted earnings per share) for the temporary carrying cost of surplus pilots and grounded aircraft related to our capacity reductions which became effective on November 1, 2001. This cost also includes related requalification training and relocation costs for certain pilots.

• A $15 million non-cash charge ($9 million net of tax, or $0.08 diluted earnings per share) for fair value adjustments of financial instruments accounted for under SFAS 133. This charge relates to derivative instruments we use in our fuel hedging program and to our equity warrants and other similar rights in other companies, primarily priceline. For additional information on SFAS 133, see Note 5 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

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June 2001 Quarter

• A $112 million non-cash gain ($69 million net of tax, or $0.57 diluted earnings per share) for fair value adjustments of financial instruments accounted for under SFAS 133. This gain relates to derivative instruments we use in our fuel hedging program and to our equity warrants and other similar rights in other companies, primarily priceline.

• A $60 million charge ($36 million net of tax, or $0.30 diluted earnings per share) related to our decision to accelerate the retirement of nine B-737 aircraft in 2002. The retirement of these aircraft was intended to more closely align capacity with expected demand and to improve scheduling and operating efficiency.

Operating Revenues

         Operating revenues totaled $3.5 billion in the June 2002 quarter, an 8% decrease from $3.8 billion in the June 2001 quarter. Passenger revenues decreased 9% to $3.2 billion. Revenue passenger miles decreased 5% on a capacity decline of 6%, while passenger mile yield fell 4%. These decreases reflect the continuing effects of the terrorist attacks on September 11 on our business. Had Comair’s operations not been suspended in the prior year, we estimate that revenue passenger miles would have decreased 9%, capacity would have decreased 9% and passenger mile yield would have decreased 9% in the June 2002 quarter compared to the June 2001 quarter.

North American Passenger Revenues - North American passenger revenues fell 9% to $2.6 billion for the June 2002 quarter. Revenue passenger miles decreased 4% on a capacity decrease of 4%, while passenger mile yield decreased 6%. The decline in passenger mile yield reflects the challenging revenue environment, including a significant reduction in business traffic after September 11. Had Comair’s operations not been suspended in the prior year, we estimate that revenue passenger miles would have decreased 8%, capacity would have decreased 8% and passenger mile yield would have decreased 11% in the June 2002 quarter compared to the June 2001 quarter.

International Passenger Revenues - International passenger revenues decreased 9% to $616 million during the June 2002 quarter. Revenue passenger miles decreased 10% on a capacity decrease of 13%, while passenger mile yield rose 2%. The increase in international passenger mile yield is primarily due to the capacity reductions exceeding traffic declines on a year-over-year basis and, particularly for Pacific flights, a weak June 2001 quarter.

Cargo and Other Revenues - Cargo revenues fell $22 million to $109 million, or 17%, in the June 2002 quarter primarily due to the continuing effects of the September 11 terrorist attacks, including the implementation of FAA restrictions on cargo. Cargo ton miles decreased 5%, and cargo ton mile yield decreased 12%. Other revenues increased $40 million to $148 million, or 37%, primarily due to increases in mileage memberships, administrative service fees and codeshare revenues.

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Operating Expenses

         Operating expenses for the June 2002 quarter totaled $3.6 billion, a 7% decrease from $3.9 billion in the June 2001 quarter. Operating capacity decreased 6% to 36 billion available seat miles. CASM decreased 1.2% to 10.05¢ and fuel price neutralized CASM fell 0.4% to 10.13¢. Excluding unusual items, operating expenses decreased 7%, CASM decreased 0.4% to 9.98¢, and fuel price neutralized CASM increased 0.5% to 10.07¢.

         Salaries and related costs remained flat at $1.6 billion. The June 2002 quarter reflects a $175 million decrease due to staffing reductions implemented as a result of the capacity reductions made after September 11, 2001, partially offset by an $85 million increase in pension expense and an increase in salary and benefit rates for certain workgroups. The June 2001 quarter reflects decreased salary and related costs at Comair resulting from the Comair pilot strike during that period.

         Aircraft fuel expense totaled $401 million during the June 2002 quarter, a 13% decrease from $463 million in the June 2001 quarter. The average fuel price per gallon fell 7% to 63.13¢. Total gallons consumed decreased 7% mainly due to capacity reductions. Our fuel cost is shown net of fuel hedge gains of $43 million in the June 2002 quarter and $102 million in the June 2001 quarter. Approximately 57% and 60% of our aircraft fuel requirements were hedged during the June 2002 and 2001 quarters, respectively.

         Depreciation and amortization expense fell 12% due to a lower asset base in the current year, as well as our adoption on January 1, 2002 of SFAS 142, which requires that goodwill and certain other intangible assets no longer be amortized. For additional information regarding SFAS 142, see Note 2 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

         Contracted services expense decreased 5%, or $12 million, due to capacity reductions, partially offset by a $10 million increase in security costs. Landing fees and other rents increased 10% reflecting increased airport and landing fee rates in the current period as well as higher year-over-year Comair costs due to the impact in the June 2001 quarter of the Comair pilot strike. Aircraft maintenance materials and outside repairs expense decreased 6%, or $12 million, due primarily to a $20 million reduction in maintenance volume and materials consumption, partially offset by higher year-over-year Comair costs due to the impact in the June 2001 quarter of the Comair pilot strike. Aircraft rent expense fell 4% due mainly to a decrease in the number of leased aircraft resulting from our fleet simplification efforts. Other selling expenses decreased 15% due primarily to lower credit card and booking fee costs resulting from lower revenues, as well as reduced advertising and promotion spending, partially offset by higher year-over-year Comair costs due to the impact in the June 2001 quarter of the Comair pilot strike.

         Passenger commissions expense declined 38%, primarily due to the change in our commission rate structure as well as lower revenues and the continued development of lower cost distribution channels such as delta.com. On March 14, 2002, we eliminated travel agent base commissions for tickets sold in the United States and Canada. Revenues from online channels

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accounted for approximately 18% of passenger revenue in the June 2002 quarter compared to 14% in the June 2001 quarter.

         Passenger service expense decreased 23% due to meal service reductions and lower traffic. Other operating expenses decreased 15%, or $32 million, primarily due to decreases in interrupted trip expenses, professional fees and general supply and utility costs, partially offset by a $40 million increase in war and terrorism risk insurance.

Operating Loss and Operating Margin

         We incurred an operating loss of $127 million for the June 2002 quarter, compared to an operating loss of $114 million in the June 2001 quarter. Operating margin, which is the ratio of operating income (loss) to operating revenues, was (4%) and (3%) for the June 2002 and June 2001 quarters, respectively.

         Excluding unusual items, we incurred an operating loss of $104 million for the June 2002 quarter, compared to an operating loss of $54 million in the June 2001 quarter. Operating margin excluding unusual items was (3%) and (1%) for the June 2002 and June 2001 quarters, respectively.

Other Income (Expense)

         Other expense in the June 2002 quarter was $160 million, compared to other income of $15 million in the June 2001 quarter. As discussed previously, the June 2002 quarter includes a $15 million non-cash charge for fair value adjustments under SFAS 133, while the June 2001 quarter includes a $112 million non-cash gain for fair value adjustments under SFAS 133. In addition, the June 2002 quarter includes a $64 million increase in interest expense, net, due to higher levels of debt outstanding.

Six Months Ended June 30, 2002 and 2001

Net Income (Loss) and Earnings (Loss) per Share

         Our unaudited consolidated net loss was $583 million for the six months ended June 30, 2002 ($4.79 diluted loss per share), compared to net loss of $223 million ($1.87 diluted loss per share) for the six months ended June 30, 2001.

         Excluding the unusual items described below, our net loss was $516 million for the six months ended June 30, 2002 ($4.25 diluted loss per share), compared to net loss of $246 million ($2.05 diluted loss per share) for the six months ended June 30, 2001.

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Unusual Items

         Our results of operations for the six months ended June 30, 2002 and 2001 include the following items, which are collectively referred to as “unusual items” in this discussion of those six month periods.

Six Months Ended June 30, 2002

• A $63 million expense ($40 million net of tax, or $0.32 diluted earnings per share) for the temporary carrying cost of surplus pilots and grounded aircraft related to our capacity reductions which became effective on November 1, 2001. This cost also includes related requalification training and relocation costs for certain pilots.

• A $43 million non-cash charge ($27 million net of tax, or $0.22 diluted earnings per share) for fair value adjustments of financial instruments accounted for under SFAS 133. This charge relates to derivative instruments we use in our fuel hedging program and to our equity warrants and other similar rights in other companies, primarily priceline. For additional information on SFAS 133, see Note 5 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

Six Months Ended June 30, 2001

• A $95 million non-cash gain ($59 million net of tax, or $0.48 diluted earnings per share) for fair value adjustments related to SFAS 133. This gain relates to derivative instruments we use in our fuel hedging program and to our equity warrants and other similar rights in other companies, primarily priceline.

• A $60 million charge ($36 million net of tax, or $0.30 diluted earnings per share) related to our decision to accelerate the retirement of nine B-737 aircraft in 2002. The retirement of these aircraft was intended to more closely align capacity with expected demand and to improve scheduling and operating efficiency.

Operating Revenues

         Operating revenues totaled $6.6 billion for the six months ended June 30, 2002, a 14% decrease from $7.6 billion during the six months ended June 30, 2001. Passenger revenues decreased 15% to $6.1 billion, reflecting a 7% decrease in revenue passenger miles, an 8% decrease in capacity and an 8% decrease in passenger mile yield. These decreases reflect the continuing effects of the terrorist attacks on September 11 on our business. Had Comair’s operations not been suspended in the prior year, we estimate that revenue passenger miles would have decreased 8%, capacity would have decreased 10% and passenger mile yield would have decreased 11% for the six months ended June 30, 2002 compared to the corresponding period in the prior year.

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North American Passenger Revenues - North American passenger revenues fell 15% to $5.0 billion for the six months ended June 30, 2002. Revenue passenger miles decreased 5% on a capacity decrease of 7%, while passenger mile yield decreased 11%. The decline in passenger mile yield reflects the challenging revenue environment, including a significant reduction in business traffic after September 11. Had Comair’s operations not been suspended in the prior year, we estimate that revenue passenger miles would have decreased 8%, capacity would have decreased 9% and passenger mile yield would have decreased 13% for the six months ended June 30, 2002 compared to the corresponding period in the prior year.

International Passenger Revenues - International passenger revenues decreased 12% to $1.1 billion during the six months ended June 30, 2002. Revenue passenger miles decreased 11% on a capacity decrease of 14%. Passenger mile yield remained relatively flat.

Cargo and Other Revenues - Cargo revenues fell $51 million, or 19%, for the six months ended June 30, 2002 primarily due to the continuing effects of the September 11 terrorist attacks, including the implementation of FAA restrictions on cargo. Cargo ton miles decreased 13%, and cargo ton mile yield decreased 7%. Other revenues increased $50 million, or 24%, primarily due to an increase in mileage memberships, administrative service fees and codeshare revenues.

Operating Expenses

         Operating expenses for the six months ended June 30, 2002 totaled $7.1 billion, decreasing 9% from $7.8 billion for the six months ended June 30, 2001. Operating capacity fell 8% to 70 billion available seat miles. CASM fell 0.7% to 10.26¢, while fuel price neutralized CASM grew 1.2% to 10.45¢. Excluding unusual items, operating expenses decreased 9%, CASM decreased 0.8% to 10.17¢ and fuel price neutralized CASM increased 1.1% to 10.36¢.

         Salaries and related costs totaled $3.1 billion for the six months ended June 30, 2002, a 3% decrease from $3.2 billion recorded for the six months ended June 30, 2001. The six months ended June 30, 2002 reflect a $365 million decrease due to staffing reductions implemented as a result of the capacity reductions made after September 11, 2001, partially offset by a $160 million increase in pension expense and an increase in salary and benefit rates for certain workgroups. The six months ended June 30, 2001 reflect decreased salary and related costs at Comair resulting from the Comair pilot strike during that period.

         Aircraft fuel expense decreased 24% during the six months ended June 30, 2002. The average fuel price per gallon fell 15% to 60.00¢. Total gallons consumed decreased 11% mainly due to capacity reductions. Our fuel cost is shown net of fuel hedge gains of $64 million for the six months ended June 30, 2002 and $208 million for the six months ended June 30, 2001. Approximately 66% and 59% of our aircraft fuel requirements were hedged during the six months ended June 30, 2002 and 2001, respectively.

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         Depreciation and amortization expense fell 13% due to a lower asset base in the current year as well as our adoption on January 1, 2002 of SFAS 142, which requires that goodwill and certain other intangible assets no longer be amortized. For additional information regarding SFAS 142, see Note 2 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

         Contracted services expense decreased 1%, or $6 million, primarily due to capacity decreases, partially offset by a $40 million increase in security costs. Landing fees and other rents rose 6% due to increased airport and landing fee rates in the current period as well as higher year-over-year Comair costs due to the impact in 2001 of the Comair pilot strike. Aircraft maintenance materials and outside repairs expense fell 4%, or $14 million, due primarily to a $25 million reduction in maintenance volume and materials consumption, partially offset by higher year-over-year Comair costs due to the impact in 2001 of the Comair pilot strike. Aircraft rent expense decreased 5% due to a decrease in the number of leased aircraft resulting from our fleet simplification efforts. Other selling expenses decreased 17% due primarily to lower volumes of credit card and booking transactions resulting from lower revenues, as well as reduced advertising and promotion spending, partially offset by higher year-over-year Comair costs due to the effects in 2001 of the Comair pilot strike.

         Passenger commissions expense declined 31%, primarily due to the change in our commission rate structure and lower revenues, as well as the continued development of lower cost distribution channels such as delta.com. Internet sales accounted for approximately 18% of passenger revenues for the six months ended June 30, 2002 compared to 12% for the six months ended June 30, 2001.

         Passenger service expense decreased 20% due to meal service reductions and lower traffic. Other operating expenses decreased 17%, or $78 million, primarily due to higher costs in 2001 related to a company-wide rollout of new uniforms, and decreases in 2002 in interrupted trip expenses, professional fees and general supply and utility costs, partially offset by an $85 million increase in war and terrorism risk insurance.

Operating Income and Operating Margin

         We incurred an operating loss of $562 million for the six months ended June 30, 2002, compared to an operating loss of $229 million for the six months ended June 30, 2001. Operating margin, which is the ratio of operating income (loss) to operating revenues, was (9%) and (3%) for the six months ended June 30, 2002 and 2001, respectively.

         Excluding unusual items, we incurred an operating loss of $499 million for the six months ended June 30, 2002, compared to an operating loss of $169 million for the six months ended June 30, 2001. Operating margin excluding unusual items was (8%) and (2%) for the six months ended June 30, 2002 and 2001, respectively.

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Other Income (Expense)

         Other expense for the six months ended June 30, 2002 was $327 million, compared to other expense of $92 million for the six months ended June 30, 2001. As discussed previously, the six months ended June 30, 2002 includes a $43 million non-cash charge for fair value adjustments under SFAS 133, while the six months ended June 30, 2001 includes a $95 million non-cash gain for fair value adjustments under SFAS 133. In addition, the six months ended June 30, 2002 includes a $119 million increase in interest expense, net, due to higher levels of debt outstanding.

FINANCIAL CONDITION AND LIQUIDITY

         Cash, cash equivalents and short-term investments totaled $1.7 billion at June 30, 2002, compared to $2.2 billion at December 31, 2001. For the six months ended June 30, 2002, net cash from operations totaled $75 million, including $69 million in Air Transportation Safety and System Stabilization Act (Stabilization Act) compensation received during the June 2002 quarter, $160 million from a tax refund for 2001 received in the March 2002 quarter and a one-time $300 million tax refund resulting from a new tax law received in the March 2002 quarter. Our cash flows from major financing and investing activities are described below.

         Capital expenditures, including acquisitions made under seller financing arrangements, during the first six months of 2002 were $1.3 billion and included the acquisition of 24 CRJ-200s, three CRJ-700s, four B-737-800s, three B-767-400s and one B-777-200. Capital expenditures, including acquisitions made under seller financing arrangements, for the second half of the year are expected to be approximately $800 million, including approximately $500 million for the purchase of regional jet aircraft, $200 million for technology and ground equipment and $100 million for other items.

         Debt and capital lease obligations, including current maturities and short-term obligations, totaled $10.0 billion at June 30, 2002 compared to $9.4 billion at December 31, 2001. During the first six months of 2002, we took the following actions to increase our liquidity:

• On April 30, 2002, we issued in a public offering $1.1 billion aggregate principal amount of Pass Through Certificates, Series 2002-1 (Certificates), commonly referred to as an EETC financing. This financing is secured by 32 aircraft owned by Delta. Additionally, we issued in a private placement $90 million principal amount of a subordinated tranche of certificates to an affiliate of Delta. A portion of the proceeds from the public offering was used to repay the $625 million of borrowings outstanding under our 1997 Bank Credit Agreement, which terminated on May 1, 2002.

• On January 31, 2002, we entered into a facility under which we may borrow up to approximately $350 million, secured by previously delivered regional jet aircraft which we purchased for cash. This facility expires on February 1, 2003, except that amounts borrowed prior to that date are due between 366 days and 18 months after the date of borrowing (subject to earlier repayment if certain longer term financing is obtained for those regional jet aircraft). The interest rate under this facility is LIBOR plus a margin. At June 30, 2002, there were no outstanding borrowings under this facility.

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• Also on January 31, 2002, we entered into a facility to finance on a secured basis at the time of acquisition certain future deliveries of regional jet aircraft. During the June 2002 quarter, this facility was amended to increase the number of regional jet aircraft eligible for financing under this facility, which in turn increased the total borrowings available to us to $328 million from $157 million. Borrowings under this facility (1) are due between 366 days and 18 months after the date of borrowing (subject to earlier repayment if certain longer-term financing is obtained for these aircraft) and (2) bear interest at LIBOR plus a margin. At June 30, 2002, $248 million was outstanding under this facility.

• On January 25, 2002, we sold in a private placement to a third party $176 million principal amount of a new, subordinated tranche of the 2000-1 EETCs. The new Series D Certificates bear interest at 9.11% per year and are due on November 18, 2005.

         Subsequent to June 30, 2002, we borrowed $222 million which is due in installments through January 2017 and is secured by nine CRJ-200, two CRJ-700, and two B-737-800 aircraft. This debt bears interest at a floating rate. A portion of the proceeds from these borrowings was used to repay $153 million of outstanding interim financing for ten CRJ-200 aircraft.

         For additional information on our debt, see Notes 8 and 13 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

         Shareowners’ equity was $3.2 billion at June 30, 2002 and $3.8 billion at December 31, 2001. Our net debt-to-capital position, which includes implied debt from operating leases, was 83% at June 30, 2002 and 80% at December 31, 2001.

         We expect to meet our obligations as they come due through available cash and cash equivalents, investments, internally generated funds, borrowings and sale and leaseback transactions. We have unencumbered assets available for use in potential financing transactions. We expect to receive the remainder of our approximately $30 million of Stabilization Act compensation during the September 2002 quarter. While we expect there to be financing available to us on commercially reasonable terms, this cannot be assured.

Working Capital Position

         As of June 30, 2002, we had a negative working capital position of $2.4 billion, compared to negative working capital of $2.8 billion at December 31, 2001. A negative working capital position is normal for us, typically due to our air traffic liability. The change in our working capital position since December 31, 2001 was primarily the result of proceeds received from EETC financings and the repayment of $625 million of borrowings outstanding under the 1997 Bank Credit Agreement, partially offset by capital expenditures for aircraft and ground equipment (see Note 8 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q).

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Credit Ratings

         During the June 2002 quarter, Standard & Poor’s downgraded the credit rating on our senior unsecured long-term debt. At June 30, 2002, our senior unsecured long-term debt was rated Ba3 by Moody’s and BB- by Standard & Poor’s. Both Moody’s and Standard & Poor’s outlook for our long-term credit ratings is negative.

         The lowering of Delta’s credit ratings could negatively impact our ability to issue debt, to renew outstanding letters of credit which back certain of our obligations and to obtain certain financial instruments that we use in our fuel hedging program. It could also increase the cost of these transactions, the cost of obtaining additional financings and the cost of renewing our insurance, including workers compensation and director and officer liability. As discussed in Note 3 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q, we may be required to repurchase outstanding receivables that we sold to a third party if our senior unsecured long-term debt is rated either below Ba3 by Moody’s or below BB- by Standard & Poor’s. For additional information regarding our credit ratings, see page 19 of the Annual Report.

Commitments

         In accordance with U.S. GAAP, certain contractual commitments are included in our Consolidated Balance Sheets and discussed in the Notes to the Condensed Consolidated Financial Statements, while other contractual commitments are discussed in the Notes to the Condensed Consolidated Financial Statements. The following items are included in our Consolidated Balance Sheets at June 30, 2002:

• Debt, totaling $9.9 billion. A portion of this debt is backed by letters of credit totaling $729 million which expire during 2003. For information regarding Delta’s debt, see Note 8 of the Notes to the Consolidated Financial Statements in the Annual Report and Notes 8 and 13 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

• Capital lease obligations, totaling $91 million, discussed in Note 7 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

         The following contractual commitments are discussed only in the Notes to the Condensed Consolidated Financial Statements:

• Operating lease payments, totaling $13.4 billion, discussed in Note 7 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q. A portion of these obligations is backed by letters of credit totaling $104 million which expire during 2003, discussed in Note 8 of the Notes to the Consolidated Financial Statements in the Annual Report.

• Estimated future expenditures for aircraft and engines on order as of July 31, 2002, totaling $5.2 billion, discussed in Note 7 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

• Obligations under our contract carrier agreements with SkyWest Airlines, Atlantic Coast Airlines and Chautauqua Airlines, discussed in Note 7 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q, which we estimate will total approximately $280 million for the six months ending December 31, 2002.

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• Contingent repurchase obligations related to accounts receivable sold to a third party, discussed in Note 3 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

Critical Accounting Policies

         The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. We periodically evaluate these estimates and assumptions, which are based on historical experience, changes in the business environment and other factors that management believes to be reasonable under the circumstances. Actual results may differ materially from these estimates.

         Critical accounting policies are defined as those that are both important to the portrayal of the company’s financial condition and results, and require management to exercise significant judgments. Our most critical accounting policies are briefly described on page 21 of the Annual Report. As a result of our adoption of a new accounting standard, we have the following addition to our critical accounting policies:

Goodwill and Other Intangible Assets

         On January 1, 2002 we adopted SFAS 142, which addresses financial accounting and reporting for goodwill and other intangible assets. To complete the impairment tests required by SFAS 142, we make assumptions about certain variables used to estimate the fair market value of our goodwill and certain intangibles. We also estimate the useful lives of certain of our other intangible assets. Changes to assumptions made in our fair market value-based impairment tests or in the estimated useful lives of our intangible assets may have a material effect on our financial statements. For additional information regarding our adoption of SFAS 142, see Note 2 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

         Delta holds equity interests, including warrants and other similar rights, in certain companies, primarily Republic and priceline. Changes in the fair market value of our equity holdings could have a material impact on our earnings. For a discussion of our equity interests in priceline at June 30, 2002 and the acquisition of our equity interests in Republic, see Note 4 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

         At June 30, 2002, the fair market value of our priceline Series B Preferred Stock was $13 million, the fair market value of our priceline 2001 Warrant was $6 million and the fair market value of our priceline Amended 1999 Warrant was $2 million. The fair market value of the warrants is primarily related to the price of the underlying common stock (see “Equity Securities Risk” on page 22 in the Annual Report for our equity risk exposure at December 31, 2001). A 10% decline in the price of priceline common stock would have had a $1 million impact on the fair market value of the warrants, which would be reflected in our non-operating earnings.

         At June 30, 2002, the fair market value of our Republic 2002 Warrant was $11 million. The fair market value of the warrant is primarily related to the price of the underlying common stock. A 10% decline in the price of Republic common stock would have had a $2 million impact on the fair market value of the warrant, which would be reflected in our non-operating earnings.

         Delta is subject to price risk associated with its jet fuel purchases. We manage this risk with our fuel hedging program. For the six months ending December 31, 2002, we have hedged 48% of our projected aircraft fuel requirements at an average hedge price of 66.09 cents per gallon. For the three months ending September 30, 2002, we have hedged 49% of our projected aircraft fuel requirements at an average hedge price of 65.51 cents per gallon. We do not enter into fuel hedge contracts for speculative purposes. For additional information regarding our fuel hedging program, see Note 4 of the Notes to the Consolidated Financial Statements (pages 35-36) in the Annual Report as well as Note 5 of the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.

         To more effectively manage our interest rate exposure, on July 18, 2002, we entered into two interest rate hedging agreements relating to our (1) $300 million principal amount of Series C Medium Term Notes due March 15, 2004, which pay interest at a fixed rate of 6.65% per year and (2) $500 million principal amount of Notes due December 15, 2005, which pay interest at a fixed rate of 7.70% per year.

         Under the first interest rate hedging agreement, we are paying LIBOR plus a margin per year, and receiving 6.65% per year, on a notional amount of $300 million until March 15, 2004. Under the second agreement, we are paying LIBOR plus a margin per year, and receiving 7.70% per year, on a notional amount of $500 million until December 15, 2005. Each of these transactions qualifies for hedge accounting under SFAS 133 and will be accounted for as fair value hedges. We do not enter into interest rate hedge agreements for speculative purposes.

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         For additional information regarding Delta’s other exposures to market risks, see “Market Risks Associated With Financial Instruments” (pages 21-23), as well as Notes 3, 4 and 5 (pages 33-37) of the Notes to the Consolidated Financial Statements, in the Annual Report.

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INDEPENDENT ACCOUNTANTS’ REPORT

To the Board of Directors and Shareowners of
Delta Air Lines, Inc.
Atlanta, Georgia

We have reviewed the accompanying consolidated balance sheet of Delta Air Lines, Inc. (the “Company”) and subsidiaries as of June 30, 2002, and the related consolidated statements of operations for the three-month and six-month periods then ended and the condensed consolidated statement of cash flows for the six-month period then ended. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

The accompanying condensed financial information as of December 31, 2001, and for the three-month and six-month periods ended June 30, 2001, were not audited or reviewed by us and, accordingly, we do not express an opinion or any other form of assurance on them.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia
July 18, 2002

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

         As discussed on page 15 of its Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (Form 10-K), Delta, along with Northwest Airlines and US Airways, are defendants in purported class action antitrust lawsuits which allege violations of Sections 1 and 2 of the Sherman Act and which were filed in the U.S. District Court for the Eastern District of Michigan. In May 2002, the District Court granted the plaintiffs’ motion for class action certification and denied the airlines’ motions for summary judgment. The airline defendants have filed a petition for review of the District Court’s order granting class action certification with the U.S. Court of Appeals for the Sixth Circuit, which has not yet decided whether to permit this interlocutory appeal.

         As also discussed on page 15 of the Form 10-K, numerous airlines, including Delta, are defendants in a purported class action antitrust lawsuit pending in the U.S. District Court for the Eastern District of North Carolina on behalf of all travel agents in the United States which sold tickets from September 1, 1997 to the present on any of the defendant airlines. The lawsuit alleges that Delta and the other airline defendants conspired to fix travel agent commissions in violation of Section 1 of the Sherman Act. The District Court has not yet ruled on plaintiffs’ motion for class action certification. The trial of this lawsuit is now scheduled to begin on April 29, 2003. Similar litigation alleging violations under Canadian competition law is pending against Delta and other airlines in Canada.

         In April 2002, six travel agencies filed a purported class action lawsuit in the U.S. District Court for the Central District of California against Delta, American Airlines, United Airlines and Orbitz, LLC on behalf of an alleged nationwide class of traditional travel agents. The lawsuit alleges that the defendants violated Sections 1 and 2 of the Sherman Act by conspiring (1) to prevent travel agents from acting as effective competitors in the distribution of airline tickets to passengers; and (2) to monopolize the distribution of common carrier air travel in the United States. The plaintiffs, who have requested a jury trial, are seeking injunctive relief; costs and attorneys’ fees; and unspecified damages, to be trebled under the antitrust laws.

         Two travel agencies have filed a purported class action lawsuit against Delta in the U.S. District Court for the Central District of California on behalf of all travel agencies from which Delta has demanded payment for breach of the agencies’ contractual and fiduciary duties to Delta in connection with Delta ticket sale transactions during the period from September 20, 1997 to the present. The lawsuit alleges that Delta’s conduct (1) violates the Racketeer Influenced and Corrupt Organizations Act of 1970; and (2) creates liability for unjust enrichment. The plaintiffs, who have requested a jury trial, are seeking injunctive and declaratory relief; costs and attorneys fees; and unspecified treble damages. The trial is scheduled to begin on June 3, 2003.

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Item 4. Submission of Matters to a Vote of Security Holders

         At the Annual Meeting of Shareowners held on April 26, 2002, the owners of Delta Common Stock and Series B ESOP Convertible Preferred Stock, voting together as a single class, took the following actions:

1. Elected the persons named below to our Board of Directors by the following vote:

	FOR		WITHHELD
James L. Broadhead		120,308,815		3,232,941
Edward H. Budd		120,493,133		3,048,623
George M.C. Fisher		120,529,136		3,012,620
David R. Goode		120,552,910		2,988,846
Gerald Grinstein		120,045,094		3,496,662
Leo F. Mullin		120,323,846		3,217,910
John F. Smith, Jr.		120,524,834		3,016,922
Joan E. Spero		120,435,502		3,106,254
Andrew J. Young		119,672,541		3,869,215

	There were no broker non-votes on this matter.
2.	Ratified the appointment of Deloitte & Touche LLP as independent auditors for the year ending December 31, 2002 by a vote of 119,393,439 FOR; 3,507,755 AGAINST; and 640,562 ABSTENTIONS. There were no broker non-votes on this matter.
3.	Defeated a shareowner proposal relating to cumulative voting for directors by a vote of 20,676,777 FOR; 55,898,117 AGAINST; 30,417,715 ABSTENTIONS. There were 16,549,147 broker non-votes on this matter.
4.	Defeated a shareowner proposal relating to executive severance agreements by a vote of 33,484,475 FOR; 71,632,068 AGAINST; 1,876,066 ABSTENTIONS. There were 16,549,147 broker non-votes on this matter.

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Item 5. Other Information

Employee Matters

         Delta Flight Attendant Representation Election. On February 1, 2002, the National Mediation Board (NMB) announced that Delta’s approximately 19,000 flight attendants rejected union representation by a 71% to 29% margin. The NMB is investigating charges of interference filed against us by the Association of Flight Attendants. We believe these charges are without merit.

         Staffing Reduction Program. Due to the significant reduction in traffic following the September 11 terrorist attacks, Delta reduced its scheduled capacity by 16% effective November 1, 2001. As a result of these capacity reductions, Delta reduced its staffing levels by approximately 11,000 employees across all major work groups at December 31, 2001. Approximately 10,000 Delta employees participated in one of Delta’s voluntary programs, which include leaves of absence, severance and an early retirement program. Involuntary reductions are currently expected to affect approximately 1,700 employees, which includes the furlough of up to 1,400 pilots. Approximately 400 pilot furloughs occurred in 2001 and up to 1,000 are expected to occur in 2002 or 2003.

         On November 1, 2001, the Air Line Pilots Association, International (ALPA), the union representing Delta pilots, filed a grievance asserting that Delta’s plan to furlough up to 1,400 pilots is not permitted under the collective bargaining agreement between Delta and ALPA. The collective bargaining agreement generally provides that no pilot on the seniority list as of July 1, 2001 will be furloughed unless the furlough is caused by a circumstance beyond Delta’s control, as defined in that agreement. In accordance with the collective bargaining agreement, the grievance was presented to a neutral arbitrator for a decision. On April 12, 2002, the arbitrator denied the grievance, ruling that the pilot furloughs were caused by a circumstance beyond Delta’s control as set out in the collective bargaining agreement. The arbitrator retained jurisdiction of this matter to consider any issues that might arise regarding the Company’s plans to continue the furloughs, or its obligation to implement reasonable mechanisms for recalling furloughed pilots, if the conditions existing as of September 11 are ameliorated to an extent that exceeds Delta’s original expectations. ALPA sent Delta a letter dated July 16, 2002 asserting that there should be no further pilot furloughs and that Delta should commence recalling furloughed pilots to active service, based on the foregoing portion of the arbitrator’s ruling. Delta believes that ALPA’s assertions are without merit.

         Delta Pilot Ground Training Instructors. In June 2002, Delta’s approximately 150 pilot ground training instructors ratified a collective bargaining agreement between Delta and their collective bargaining representative, the Transport Workers Union of America. The new agreement becomes amendable on January 1, 2003. In response to an application filed by a ground training instructor, the NMB conducted a new representation election in the pilot ground training instructor group. On August 9, 2002, the NMB announced that less than 50% of the eligible voters cast a ballot setting the stage for the group to return to nonunion status. The NMB’s process is to wait seven days to certify the final results, pending any additional filings by the parties.

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         Comair Flight Attendants. In July 2002, Comair’s approximately 700 flight attendants ratified a collective bargaining agreement between Comair and their collective bargaining representative, the International Brotherhood of Teamsters. The new agreement becomes amendable in July 2007.

         Other Matters. For information regarding our other employee matters, see “Employee Matters” on page 23 of the Annual Report and pages 9-11 of the Annual Report on Form 10-K for the fiscal year ended December 31, 2001.

Change in Independent Public Accountant

         During the March 2002 quarter, we changed independent public accountants. Our new accountants issued a review report for the unaudited Condensed Consolidated Financial Statements as of June 30, 2002 and for the three months and six months then ended which is included in this Form 10-Q (page 36). Our prior independent public accountants issued an audit opinion for the Consolidated Financial Statements as of December 31, 2001 which is included in the Annual Report (page 55).

Other Matters

         On July 24, 2002, United Airlines and US Airways announced a new marketing alliance that will include codesharing and frequent flyer program reciprocity. These arrangements are subject to regulatory approvals and other conditions. We are evaluating our strategic options in response to this proposed transaction.

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Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

4.1	Credit Agreement dated as of May 19, 2000 by and among Delta, Certain Banks and Bayerische Hypo-Und Vereinsbank AG, New York Branch, as Letter of Credit Bank and Agent, as amended by the First Amendment dated as of August 29, 2001 and the Second Amendment dated as of November 9, 2001 thereto.
4.2	Reimbursement Agreement dated as of May 1, 2000 among Delta, Certain Banks and Commerzbank AG, New York Branch, as Agent and the Fronting Bank, as amended by the First Amendment dated as of November 9, 2001 thereto.
10.1	Delta Air Lines, Inc. 2002 Retention Program.
10.2	Form of Stock Option Award Agreement under the Delta 2000 Performance Compensation Plan.
10.3	Letter dated May 28, 2002 supplementing the letter dated September 17, 1998 between Delta and Robert L. Colman concerning Mr. Colman’s employment with Delta.
12.	Computation of ratio of earnings to fixed charges.
15.	Letter from Deloitte & Touche LLP regarding unaudited interim financial information.
99.1	Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code by Delta's Chief Executive Officer and Chief Financial Officer with respect to Delta's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.

(b) Reports on Form 8-K

         On April 16, 2002, Delta filed a Current Report on Form 8-K reporting, under Item 5 — Other Matters and Regulation FD Disclosure, its financial results for the quarter ended March 31, 2002.

         On April 23 and 25, 2002, Delta filed Current Reports on Form 8-K to incorporate into Delta’s Form S-3 Registration Statement certain audited financial statements of MBIA, Inc. and MBIA Insurance Corporation.

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SIGNATURE

         Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delta Air Lines, Inc. (Registrant)
By:	/s/ M. Michele Burns
M. Michele Burns Executive Vice President and Chief Financial Officer

August 13, 2002

43 EX-4.1 3 g77552exv4w1.txt EXHIBIT 4.1 CREDIT AGREEMENT EXHIBIT 4.1 ================================================================================ CREDIT AGREEMENT DATED AS OF MAY 19, 2000 BY AND AMONG DELTA AIR LINES, INC., EACH OF THE FINANCIAL INSTITUTIONS INITIALLY A SIGNATORY HERETO, TOGETHER WITH THOSE ASSIGNEES PURSUANT TO SECTION 10.6 HEREOF, BAYERISCHE HYPO- UND VEREINSBANK AG, NEW YORK BRANCH, as Letter of Credit Bank, AND BAYERISCHE HYPO- UND VEREINSBANK AG, NEW YORK BRANCH, as Agent ================================================================================ THE INDUSTRIAL BANK OF JAPAN, LIMITED, as Documentation Agent, CREDIT LYONNAIS, NEW YORK BRANCH as Syndication Agent AND BAYERISCHE HYPO- UND VEREINSBANK AG, NEW YORK BRANCH, as Arranger TABLE OF CONTENTS ARTICLE I DEFINITIONS............................................................................1 Section 1.1. Definitions............................................................................1 ARTICLE II AMOUNT AND TERMS OF CREDIT............................................................11 Section 2.1. Letter of Credit......................................................................11 Section 2.2. Method of Issuance of Amendments to the Letter of Credit..............................12 Section 2.3. Letter of Credit Reimbursement........................................................13 Section 2.4. Letter of Credit Bank.................................................................15 Section 2.5. Loans.................................................................................15 Section 2.6. Notice and Place of Borrowing for Loans...............................................16 Section 2.7. Evidence of Indebtedness..............................................................16 Section 2.8. Interest..............................................................................17 Section 2.9. Place of Payment......................................................................18 Section 2.10. Voluntary Prepayment..................................................................18 Section 2.11. Pro Rata Treatment....................................................................18 Section 2.12. Initial Determination of Interest Rate and Conversion of Loans Between Eurodollar Rate and Base Rate.........................................18 Section 2.13. Failure to Borrow.....................................................................19 Section 2.14. Fees..................................................................................19 Section 2.15. Termination of Credit Facility........................................................19 Section 2.16. Optional Reductions of Commitment.....................................................20 Section 2.17. Substitution of Banks.................................................................20 Section 2.18. Capital Requirements..................................................................23 Section 2.19. Change in Control.....................................................................24 Section 2.20. Administration Fees...................................................................24 ARTICLE III CONDITIONS TO EFFECTIVENESS OF AGREEMENT, FOR BORROWINGS AND ISSUANCE OF LETTER OF CREDIT...........................................24 Section 3.1. Effectiveness, Initial Borrowing and Issuance of Letter of Credit.....................24 Section 3.2. All Borrowings........................................................................26 ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................27 Section 4.1. Organization; Standing, Etc...........................................................27 Section 4.2. Authorization; No Violation...........................................................27 Section 4.3. Enforceability........................................................................27 Section 4.4. Financial Statements..................................................................27 Section 4.5. Litigation............................................................................28 Section 4.6. Business; Status as Air Carrier.......................................................28 Section 4.7. Funded Debt...........................................................................28 Section 4.8. Title to Properties, Etc..............................................................28 -i- Section 4.9. Tax Returns and Payments..............................................................28 Section 4.10. Use of Proceeds.......................................................................29 Section 4.11. Governmental Regulation...............................................................29 Section 4.12. Subsidiaries..........................................................................29 Section 4.13. ERISA.................................................................................29 Section 4.14. Environmental Matters.................................................................29 ARTICLE V AFFIRMATIVE COVENANTS.................................................................30 Section 5.1. Insurance.............................................................................30 Section 5.2. Payment of Taxes......................................................................30 Section 5.3. Financial Statements..................................................................30 Section 5.4. Maintenance of Equipment..............................................................31 Section 5.5. Inspection............................................................................31 Section 5.6. Security..............................................................................31 Section 5.7. Notice of Any Default or Event of Default.............................................31 Section 5.8. ERISA Reporting Requirements..........................................................32 Section 5.9. Ratings...............................................................................32 ARTICLE VI NEGATIVE COVENANTS....................................................................32 Section 6.1. Liens.................................................................................32 Section 6.2. Debt..................................................................................33 Section 6.3. Mergers; Disposition of Assets........................................................33 Section 6.4. Leases................................................................................33 ARTICLE VII DEFAULTS..............................................................................34 Section 7.1. Events of Default.....................................................................34 ARTICLE VIII YIELD PROTECTION......................................................................36 Section 8.1. Increased Cost of Eurodollar Rate Loans...............................................36 Section 8.2. Change of Law.........................................................................38 Section 8.3. Funding Losses........................................................................38 Section 8.4. Increased Cost of Maintaining Letter of Credit........................................38 Section 8.5. Mandatory Repayment or Conversion on Certain Events...................................39 Section 8.6. Survival..............................................................................39 ARTICLE IX THE AGENT.............................................................................39 Section 9.1. Authorization and Action..............................................................39 Section 9.2. Agent's Reliance, Etc.................................................................40 Section 9.3. Agent and Affiliates..................................................................40 Section 9.4. Representations of the Banks..........................................................40 Section 9.5. Events of Default.....................................................................41 Section 9.6. Right to Indemnity....................................................................41 Section 9.7. Indemnification.......................................................................41 Section 9.8. Successor Agent.......................................................................41 -ii- ARTICLE X MISCELLANEOUS.........................................................................42 Section 10.1. Rights and Remedies...................................................................42 Section 10.2. Notice................................................................................42 Section 10.3. Expenses, Indemnification, Etc........................................................43 Section 10.4. Amendments to This Agreement and the Notes............................................45 Section 10.5. Agreement as to Right of Set-off, Sharing of Losses...................................45 Section 10.6. Successors and Assigns; Participations................................................46 Section 10.7. Holidays..............................................................................47 Section 10.8. Governing Law; Submission to Jurisdiction; Venue......................................47 Section 10.9. Right of Setoff.......................................................................47 Section 10.10. Execution and Effective Date..........................................................47 Section 10.11. Representations of Banks..............................................................47 Section 10.12. Severability..........................................................................48 Section 10.13. Entire Agreement......................................................................48 Exhibit A Form of Note Exhibit B-1 Form of Notice and Agreement Regarding Addition of Bank Exhibit B-2 Form of Agreement of Existing Bank to Replace Replaced Bank Exhibit C Form of Assignment and Assumption Agreement Exhibit D Form of Letter of Credit Exhibit E-1 Form of Opinion of General, Associate or Assistant General Counsel Exhibit E-2 Form of Opinion of Davis Polk & Wardwell Schedule I Funded Debt of the Company Schedule II Subsidiaries of the Company Schedule III Certain Excluded Guaranty Liabilities -iii- CREDIT AGREEMENT THIS CREDIT AGREEMENT dated as of May 19, 2000 (as amended, supplemented or otherwise modified, this "Agreement") by and among DELTA AIR LINES, INC., a corporation organized under the laws of the State of Delaware (the "Company"), each of the financial institutions initially a signatory hereto together with those assignees pursuant to Section 10.6 hereof (collectively, the "Banks" and each individually, a "Bank"), BAYERISCHE HYPO- UND VEREINSBANK AG, New York Branch, as Letter of Credit Bank and BAYERISCHE HYPO- UND VEREINSBANK AG, New York Branch, in its capacity as agent for the Banks (the "Agent"). ARTICLE I DEFINITIONS Section 1.1. Definitions. In addition to terms defined elsewhere herein, the following terms shall have the following meanings for the purposes of this Agreement: "Agent" shall mean Bayerische Hypo- und Vereinsbank AG, New York Branch in its capacity as agent for the Banks; provided, however, that if Bayerische Hypo- und Vereinsbank AG, New York Branch shall have resigned or been removed as Agent, then "Agent" shall mean the bank selected as Agent pursuant to the provisions of Section 9.8 hereof. "Airline Subsidiary" shall mean Comair, Inc., Atlantic Southeast Airlines, Inc. and any other Subsidiary of the Company holding an airline operating certificate issued by the Federal Aviation Administration of the United States under FAR Part 121. "Applicable Letter of Credit Fee" shall mean, as of any date of determination, the percentage rate set forth below corresponding to the long term senior unsecured debt rating of the Company, as rated by S&P (the "S&P Rating") and Moody's (the "Moody's Rating"; each of the S&P Rating and the Moody's Rating referred to herein as a "Rating"): ---------------------- ----------------- --------------- ----------------- --------------- ---------------- Senior Unsecured Level 1 Level 2 Level 3 Level 4 Level 5 Debt Rating (S&P's BBB+ or higher BBB or Baa2 BBB- or Baa3 BB+ or Ba1 BB or lower or rating followed by or Baal or Ba2 or lower Moody's rating) higher ---------------------- ----------------- --------------- ----------------- --------------- ---------------- Applicable Letter of Credit Fee 0.625% 0.750% 0.875% 1.250% 1.500% ---------------------- ----------------- --------------- ----------------- --------------- ---------------- The Agent shall determine the Applicable Letter of Credit Fee from time to time in accordance with the above table and notify the Company and the Banks of such determination from time to time. In the event the S&P Rating and the Moody's Rating correspond to different levels on the above table resulting in different Applicable Letter of Credit Fee determinations, the following provisions shall apply. In the event the S&P Rating and the Moody's Rating differ by one level, the Applicable Letter of Credit Fee shall be that corresponding to the higher Rating. For example, a "BBB+" S&P Rating and a "Baa2" Moody's Rating would result in an Applicable Letter of Credit Fee equal to 0.625%. In the event the S&P Rating and the Moody's Rating differ by two levels, the Applicable Letter of Credit Fee shall be that corresponding to that level which is in between the two applicable levels. For example, a "BBB" S&P Rating and a "Ba1" Moody's Rating would result in an Applicable Letter of Credit Fee equal to 0.875%. In the event the S&P Rating and the Moody's Rating differ by three levels, the Applicable Letter of Credit Fee shall be that corresponding to the level immediately below the higher of such Ratings. For example, a "BBB+" S&P Rating and a "Ba1" Moody's Rating would result in an Applicable Letter of Credit Fee equal to 0.750%. In the event the S&P Rating and Moody's Rating differ by four levels (i.e. a ratings split between level 1 and level 5), the Applicable Letter of Credit Fee shall be that corresponding to level 4 (i.e. a "BBB+" S&P Rating and a "Ba2" Moody's Rating would result in an Applicable Letter of Credit Fee equal to 1.25%). In the event only one rating agency exists or continues rating the Company's long term senior unsecured debt, such agency's rating shall be used for purposes of the above table. In the event: (i) neither agency exists or continues rating the Company's long term senior unsecured debt or (ii) the Company no longer has any outstanding long term senior unsecured debt to be rated, the Applicable Letter of Credit Fee for the first 90 days after such occurrence shall be the Applicable Letter of Credit Fee in effect as determined above immediately prior to such occurrence. During such 90-day period, the Agent and the Company shall negotiate in good faith to agree upon a new pricing grid or other appropriate pricing terms. Any such new grid or pricing terms shall be approved by the Banks. In the event the Agent, the Company and the Banks cannot agree upon such new pricing grid or pricing terms by the end of such 90-day period, the Applicable Letter of Credit Fee shall be that corresponding to level 5 of the above table for the remainder of the term of the Agreement. Any necessary adjustment in the Applicable Letter of Credit Fee pursuant to the terms hereof shall become effective immediately upon any change in Rating. -2- "Applicable Margin" shall mean, with respect to any Loan and for any day during which such Loan is outstanding, the percentage amount set forth in the table below opposite the applicable period during which such day occurs and under the rating category applicable to the Company's S&P Rating and Moody's Rating for such day:

---------------------- ----------------- --------------- ----------------- ---------------- --------------- Senior Unsecured Level 1 Level 2 Level 3 Level 4 Level 5 Debt Ratings (S&P's rating followed by BBB+ or higher BBB or Baa2 BBB- or Baa3 BB+ or Ba1 BB or lower Moody's rating) or Baa1 or or Ba2 or higher lower ---------------------- ------------------------------------------------------------------------------------ For Eurodollar Rate Loans ---------------------- ------------------------------------------------------------------------------------ Up to and including .75% .875% 1.00% 1.375% 1.625% 90 days ---------------------- ----------------- --------------- ----------------- ---------------- --------------- 91 days to and 1.00% 1.125% 1.25% 1.625% 1.875% including 180 days ---------------------- ----------------- --------------- ----------------- ---------------- --------------- More than 180 days 1.25% 1.375% 1.50% 1.875% 2.125% ---------------------- ------------------------------------------------------------------------------------ For Base Rate Loans ---------------------- ------------------------------------------------------------------------------------ Up to and including 0% 0% 0% .375% .625% 90 days ---------------------- ----------------- --------------- ----------------- ---------------- --------------- 91 days to and 0% .125% .25% .625% .875% including 180 days ---------------------- ----------------- --------------- ----------------- ---------------- --------------- More than 180 days .25% .375% .50% .875% 1.125% ---------------------- ----------------- --------------- ----------------- ---------------- ---------------

The Agent shall determine the Applicable Margin from time to time in accordance with the above table and notify the Company and the Banks of such determination from time to time. In the event the S&P Rating and the Moody's Rating correspond to different levels on the above table resulting in different Applicable Margin determinations, the following provisions shall apply. In the event the S&P Rating and the Moody's Rating differ by one level, the Applicable Margin shall be that corresponding to the higher Rating. For example, a "BBB+" S&P Rating and a "Baa2" Moody's Rating would result in an Applicable Margin equal to 1.00% for a Loan that has been outstanding for 95 days and which is then bearing interest at a Eurodollar Rate. In the event the S&P Rating and the Moody's Rating differ by two levels, the Applicable Margin shall be that corresponding to that level which is in between the two applicable levels. For example, a "BBB" S&P Rating and a "Bal" Moody's Rating would result in an Applicable Margin equal to 1.25% for a Loan that has been outstanding for 95 days and which is then bearing interest at a Eurodollar Rate. In the event the S&P Rating and the Moody's Rating differ by three levels, the Applicable Margin shall be that corresponding to the level immediately below the higher of such Ratings. For example, a "BBB+" S&P Rating and a "Ba1" Moody's Rating -3- would result in an Applicable Margin equal to 1.125% for a Loan that has been outstanding for 95 days and which is then bearing interest at a Eurodollar Rate. In the event the S&P Rating and the Moody's Rating differ by four levels (i.e. a ratings split between level 1 and level 5), the Applicable Margin shall be that corresponding to level 4 (i.e. a "BBB+" S&P Rating and a "Ba2" Moody's Rating would result in an Applicable Margin equal to 1.625% for a Loan that has been outstanding for 95 days and which is then bearing interest at a Eurodollar Rate.) In the event only one rating agency exists or continues rating the Company's long term senior unsecured debt, such agency's rating shall be used for purposes of the above table. In the event: (i) neither agency exists or continues rating the Company's long-term senior unsecured debt or (ii) the Company no longer has any outstanding long term senior unsecured debt to be rated, the Applicable Margin for the first 90 days after such occurrence shall be the Applicable Margin in effect as determined using the foregoing provisions immediately prior to such occurrence. During such 90-day period, the Agent and the Company shall negotiate in good faith to agree upon a new pricing grid or other appropriate pricing terms. Any such new grid or pricing terms shall be approved by the Banks. In the event the Agent, the Company and the Banks cannot agree upon such new pricing grid or pricing terms by the end of such 90-day period, the Applicable Margin shall be that corresponding to level 5 of the above table for the remainder of the term of this Agreement. Any necessary adjustment in the Applicable Margin pursuant to the terms hereof shall become effective immediately upon any change in a Rating. "Available Commitment" shall mean, on any date, the Total Commitments of the Banks in effect on such date minus the sum of: (i) the Issued Amount of the Letter of Credit on such date, (ii) the aggregate outstanding principal amount of Loans on such date, and (iii) any Reimbursement Obligations unpaid on such date. "Base Rate" shall mean for any day the greater of: (i) the rate of interest announced by Bayerische Hypo- und Vereinsbank AG, New York Branch from time to time as its prime commercial rate, or equivalent, for United States Dollar loans to borrowers located in the United States, with any change in the Base Rate resulting from a change in such prime commercial rate to be effective as of the date of the relevant change in such prime commercial rate; and (ii) the sum of (x) the rate for that day set forth opposite the caption "Federal Fund (effective)" in the daily statistical release designated as "Composite 3:30 P.M. Quotations for U.S. Government Securities," or any successor publication, published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, the rate determined by the Agent (based on quotations received from two or more Federal funds dealers of recognized standing) to be the prevailing rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) at approximately 9:00 a.m. (New York time) (or as soon thereafter as is practicable) on such day for the purchase at face value of overnight Federal funds in an amount approximately equal to the principal amount owed to Bayerische Hypo- und Vereinsbank AG, New York Branch for which such rate is being determined, plus (y) 1/2 of 1% (0.50%). -4- "Base Rate Loan" shall mean any Loan which bears interest at the Base Rate plus the Applicable Margin. "Business Day" shall mean any day during which the Main Office of the Agent is scheduled to be open for the conduct of its banking business and during which banks located in New York, New York are open for the conduct of banking business. "Change in Control" shall be deemed to have occurred if (i) any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities and Exchange Act of 1934, as amended), directly or indirectly, of securities of the Company (or other securities convertible into such securities) representing fifty percent (50%) or more of the combined voting power of all securities of the Company entitled to vote in the election of directors, other than securities having such power only by reason of the happening of a contingency, or (ii) during any period of up to twelve (12) consecutive months, commencing before or after the date of this Agreement, individuals who at the beginning of such twelve (12) month period were directors of the Company shall cease for any reason (other than death, mental or physical disability, or retirement) to constitute a majority of the board of directors of the Company. "Change in Control Collateral" shall have the meaning set forth in Section 2.19. "Commitment" of any Bank shall mean the amount set forth opposite such Bank's name on the appropriate signature page hereof or, in the case of a Bank that becomes a Bank pursuant to an assignment, the amount of the assignor's Commitment assigned to such Bank, in either case as the same may be reduced or increased from time to time in accordance with the terms of this Agreement. "Convertible Subordinated Debt" shall mean any debt of the Company convertible into shares of any or all classes of stock of the Company and containing, or issued under agreements or indentures containing, provisions effectively subordinating the same to the debt created by this Agreement. "Credit Facility" shall mean the credit facility extended to the Company by the Banks pursuant hereto. "Current Debt" shall mean any obligation for borrowed money (including notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money) payable on demand or within a period of one year from the date of the creation thereof. "Default" shall mean any of the events specified in paragraphs (a) through (i) of Section 7.1 hereof, whether or not there has been satisfied any requirement for giving of notice, lapse of time or the happening of any other condition. "Dollar" and "$" shall mean lawful money of the United States of America. -5- "Downgrade Collateral Account" shall have the meaning set forth in Section 2.17.1. "Downgraded Bank" shall have the meaning set forth in Section 2.17.1(b). "Drawing" shall mean a drawing by the beneficiary under the Letter of Credit. "Effective Date" shall mean the date upon which: (i) all of the conditions of Section 3.1 hereof have been satisfied and (ii) the Company has paid to each Bank the fee required by Section 3.1(j) hereof. "Equity" shall mean the sum of: (i) the par value (or value stated on the books of the Company) of the capital stock of all classes of the Company (other than the Company's Series B ESOP Convertible Preferred Stock), (ii) the amount of additional paid-in capital and reinvested earnings of the Company, (iii) the amount of taxes deferred and unamortized investment tax credits under Sections 167 and 168 of the Internal Revenue Code or similar provisions of any applicable tax law and carried on the balance sheet under those captions, (iv) the amount of any gain on the sale and leaseback of assets which is deferred pursuant to GAAP, (v) the principal amount of any Convertible Subordinated Debt outstanding, (vi) the amount of any postretirement benefits (other than pensions) of the Company accrued in accordance with the Statement of Financial Accounting Standards No. 106 (Financial Accounting Standard Board 1990) and GAAP and classified as long term liabilities on the balance sheet of the Company, and (vii) the difference between (a) the stated and liquidation value of the Company's Series B ESOP Convertible Preferred Stock and (b) the unearned compensation under the Company's employee stock ownership plan; minus (viii) the unrealized loss on noncurrent marketable equity securities, net of any deferred tax benefits, and minus (ix) treasury stock at cost. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute. "ESOP Notes" shall mean the $290,194,981 original aggregate principal amount of Series C Guaranteed ESOP Notes due 2009 issued pursuant to the several Note Purchase Agreements, each dated February 22, 1990, and each as amended by Amendment No. 1 thereto dated as of July 27, 1999, among Fidelity Management Trust Company, a Massachusetts corporation, in its capacity as trustee of the Delta Family-Care Savings Plan and the trust established thereunder, as issuer, the Company, as Guarantor, and the respective purchasers named therein of which $290,194,981 in aggregate principal amount are outstanding on the Effective Date. "Eurodollar Business Day" shall mean any day on which banks are scheduled to be open for business and quoting interest rates for Dollar deposits on the London interbank market and which is also a Business Day. -6- "Eurodollar Lending Office" shall mean with respect to each Bank the office of such Bank identified as such from time to time to the Agent and the Company as the office of such Bank or of its affiliate at which the Eurodollar Rate Loans held by such Bank are to be maintained. "Eurodollar Rate" shall mean a rate per annum determined by Agent pursuant to the following formula: Eurodollar Rate = LIBOR plus Applicable Margin. "Eurodollar Rate Loan" shall mean any Loan which bears interest at the Eurodollar Rate. "Event of Default" shall mean any one of the events specified in paragraphs (a) through (i) of Section 7.1 hereof, provided that any requirement for notice or lapse of time or other condition contained therein has been satisfied. "Federal Funds Rate" shall mean the fluctuating interest rate per annum described in clause (ii) of the definition of Base Rate in Section 1.1 hereof. "Fee Letter" shall mean the letter from Bayerische Hypo- und Vereinsbank AG, New York Branch, to the Company dated April 28, 2000 as modified by the May 12, 2000 letter supplemental thereto. "Funded Debt" shall mean any obligation for borrowed money or the deferred purchase price of property, or any obligation arising under a capital lease, other than Convertible Subordinated Debt, payable more than one year from the date of the creation thereof which, under GAAP in effect from time to time, is shown on the balance sheet of the obligor as a liability; provided that any obligation shall be treated as Funded Debt, regardless of its term, if such obligation is renewable pursuant to the terms thereof or of a revolving credit or similar agreement effective for more than one (1) year after the date of the creation of such obligation or may be payable out of the proceeds of a similar obligation pursuant to the terms of such obligation or of any such agreement. "GAAP" shall mean generally accepted accounting principles in the United States of America applied on a consistent basis, as in effect from time to time. "Immediate Replacement Event" shall mean a change in any law, rule, or regulation, or any change in the interpretation or administration thereof, or, a new law, rule, or regulation, having any of the consequences specified in Section 8.1 hereof. "Indenture" shall mean the Indenture of Trust dated as of August 1, 1993 among the Trustee, the Company and Fidelity Management Trust Company, ESOP Trustee relating to the ESOP Notes, as amended or supplemented from time to time. -7- "Interest Period" shall mean for each Eurodollar Rate Loan, the period beginning on the date of such Loan and ending one month later and thereafter the period beginning on a date of conversion thereof or on the last day of an immediately preceding Interest Period for such Loan and ending one, two, three, or six months later, as specified in the notice given by the Company to the Agent; provided, however, that if the last day of any Interest Period would fall on a day which is not a Eurodollar Business Day that Interest Period shall be extended to the next succeeding day which is a Eurodollar Business Day, unless the result of such extension would be to carry such Interest Period to the next succeeding calendar month in which event such Interest Period shall end on the immediately preceding Eurodollar Business Day, further provided that any Interest Period that would extend beyond the Termination Date shall end on such date. "Interest Rate" shall mean: (a) With respect to a Eurodollar Rate Loan, the Eurodollar Rate; and (b) With respect to a Base Rate Loan, the Base Rate plus the Applicable Margin. "Issued Amount" shall mean the amount available to be drawn by the beneficiary under the Letter of Credit outstanding under this Agreement from time to time, as such amount may be increased or reduced from time to time in accordance with the terms of the Letter of Credit and this Agreement. "Letter of Credit" shall mean the irrevocable transferable direct pay letter of credit issued by the Letter of Credit Bank for the account of the Company in favor of the Trustee, in the form of Exhibit D hereto, as amended from time to time, and any letter of credit issued by the Letter of Credit Bank in substitution therefor, in each case in support of the ESOP Notes. "Letter of Credit Bank" shall mean Bayerische Hypo- und Vereinsbank AG, acting by and through its New York Branch or any other Bank under this Agreement approved by the Company that agrees, pursuant to documentation in form and substance satisfactory to the Agent and the Company, to issue the Letter of Credit hereunder. "LIBOR" shall mean, with respect to any Interest Period for Eurodollar Rate Loans, the offered rate in the London interbank market for deposits in United States dollars of amounts equal or comparable to the principal amount of such Eurodollar Rate Loans offered for a term comparable to such Interest Period, as currently shown on the Reuters Screen LIBO page as of 11:00 a.m., GMT, two Eurodollar Business Days prior to the first day of such Interest Period; provided, however, that (A) if more than one offered rate as described above appears on the Reuters Screen LIBO page, the rate used to determine LIBOR will be the arithmetic average (rounded upward, if necessary, to the next higher 1/1,000 of 1%) of such offered rates, or (B) if no such offered rates appear, the rate used for such Interest Period will be the arithmetic average (rounded upward, if necessary, to the next higher 1/1,000 of 1%) of rates quoted by the Reference Banks at -8- approximately 10:00 a.m., New York time, two Eurodollar Business Days prior to the first day of such Interest Period for deposits in United States dollars offered to leading European banks for a period comparable to such Interest Period in an amount comparable to the principal amount of such Eurodollar Rate Loans. If the Agent ceases to use the Reuters Screen LIBO page for determining interest rates based on eurodollar deposit rates, a comparable internationally recognized interest rate reporting service shall be used to determine such offered rates. "Loans" shall mean, collectively, the Eurodollar Rate Loans and the Base Rate Loans. "Main Office" of the Agent shall be 150 East 42nd Street, New York, New York 10017. "Majority Banks" shall mean, as of any date, Banks on such date having Credit Exposures (as defined below) aggregating more than 50% of the aggregate Credit Exposures of all the Banks on such date. For purposes of the preceding sentence, the amount of the "Credit Exposure" of each Bank shall be equal to: (i) prior to the maturity of the Loans or the occurrence of an Event of Default and the acceleration of the Loans pursuant to the terms hereof, the amount of such Bank's Commitment and (ii) after an Event of Default has occurred and the Loans have been accelerated or have matured pursuant to the terms hereof, the aggregate principal amount of Loans and Reimbursement Obligations (including through participation interests in Reimbursement Obligations) owing to such Bank. "Moody's" shall mean Moody's Investors Service, Inc. "Moody's Rating" has the meaning set forth in the definition of Applicable Letter of Credit Fee. "Notes" shall have the meaning set forth in Section 2.7 hereof. "Obligations" shall mean all fees payable hereunder, all obligations of the Company to pay principal or interest on Loans and Reimbursement Obligations, and all other payment obligations of the Company arising under or in relation to this Agreement or any Letter of Credit. "Officer's Certificate" shall mean a certificate signed by the Chairman of the Board, the President, the Chief Financial Officer, the Treasurer or any Vice President of Finance of the Company. "Orderly Replacement Event" shall mean as to any Eurodollar Rate Loan, the determination by the Agent not later than two (2) Eurodollar Business Days prior to the first day of any Interest Period that: (a) for any reason whatsoever rates are not quoted for the offering of Dollars in the London interbank market for deposit for a period comparable to such Interest Period; or (b) the quoted rate for purposes of computing the -9- rate of interest on the Eurodollar Rate Loans does not accurately reflect the funding cost to the Banks of making or maintaining such Loans. "Person" shall mean and include an individual, a partnership, a joint venture, an estate, a corporation, a trust, an unincorporated organization, a limited liability company, and a government or any department or agency or political subdivision thereof. "Rating" has the meaning set forth in the definition of Applicable Letter of Credit Fee. "Reference Banks" shall mean Bayerische Hypo- und Vereinsbank AG, New York Branch, The Chase Manhattan Bank and Citibank, N.A., and each of their respective successors. "Reimbursement Obligation" shall mean the obligation of the Company to reimburse the Agent for any Drawing pursuant to Section 2.3(c) hereof. "Required Number" shall mean in the case of notices to the Agent relating to Loans hereunder: (a) relative to borrowings, prepayments, elections of, and conversions into, the Eurodollar Rate, selections of Interest Periods and other transactions in respect of Eurodollar Rate Loans, not less than three (3) Eurodollar Business Days; and (b) relative to all transactions in respect to Base Rate Loans, not less than one Business Day. "S&P" shall mean Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. "S&P Rating" has the meaning set forth in the definition of Applicable Letter of Credit Fee. "Subsidiary" shall mean any corporation, association or other business entity, a majority (by number of votes) of the outstanding stock or other ownership interest of which is, at the time at which any determination is being made, owned by the Company either directly or through Subsidiaries. "Termination Date" shall mean May 19, 2003 unless the Credit Facility is earlier terminated pursuant to the applicable provisions of this Agreement. "Total Commitments of the Banks" shall mean the aggregate of each Bank's Commitment which on the date hereof total $420,963,733. "Trustee" shall mean Wilmington Trust Company, as Trustee under the Indenture. -10- ARTICLE II AMOUNT AND TERMS OF CREDIT Section 2.1. Letter of Credit. (a) Subject to the terms and conditions of this Agreement, the Letter of Credit Bank, on behalf of the Banks, agrees to issue and amend (including without limitation, to extend or renew) for the account of the Company, the Letter of Credit as may be requested from time to time by the Company, from and including the Effective Date to the Termination Date, up to a maximum Issued Amount at any one time outstanding equal to the Total Commitments of the Banks minus the sum of (i) the aggregate principal amount of Loans outstanding, plus (ii) the aggregate principal amount of Reimbursement Obligations outstanding; provided, however, that the expiration date of the Letter of Credit shall not extend beyond the Termination Date. (b) Each Bank severally agrees that it shall be absolutely, unconditionally and irrevocably liable, without regard to the occurrence of any Default or Event of Default or any condition precedent whatsoever, to the extent of such Bank's pro rata share of the Total Commitments of the Banks, to reimburse the Letter of Credit Bank for the amount of each Drawing paid by the Letter of Credit Bank under the Letter of Credit to the extent such amount is not reimbursed by the Company in accordance with Section 2.3 hereof. Each Bank's obligation to reimburse the Letter of Credit Bank pursuant to this Section 2.1(b) shall not be affected by any circumstances, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against the Letter of Credit Bank, the Company, any direct or indirect beneficiary of the Letter of Credit, the Agent or any other Person whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default; (iii) any adverse change in the condition (financial or otherwise) of the Company; (iv) any breach of this Agreement by the Company, the Agent, the Letter of Credit Bank or any other Bank; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; provided, however, that the Banks shall not be obligated to reimburse the Letter of Credit Bank pursuant to this Section 2.1(b) with respect to the Letter of Credit if (i) the Letter of Credit Bank has made payment pursuant to a Drawing with respect to the Letter of Credit and the making of such payment constituted gross negligence or willful misconduct on the part of the Letter of Credit Bank or (ii) the Letter of Credit Bank increases the Issued Amount of the Letter of Credit (other than as a result of the automatic reinstatement provisions contained therein) after an Event of Default has been declared by any Bank or the Majority Banks pursuant to Article VII hereof and written notice thereof has been received by the Letter of Credit Bank or after an Event of Default specified in Section 7.1(c) hereof has occurred. Each Bank's obligations to reimburse the Letter of Credit Bank shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Reimbursement Obligation of the Company is rescinded or must otherwise be restored or returned by the Letter of Credit Bank upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or upon or a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any substantial part of its property, or otherwise, all as though such payment had not been made. Upon receipt of a notice of its obligation to reimburse the Letter of Credit Bank prior to 11:00 a.m. (New York time) on a Business Day, a Bank shall make such reimbursement on such Business Day; if such notice is -11- received after 11:00 a.m. (New York time), reimbursement shall be due on the next Business Day. The failure of any Bank to honor its obligations hereunder shall not relieve any other Bank of its duty to honor its obligations hereunder. Upon the written request of a Bank, the Letter of Credit Bank shall promptly deliver to such Bank a copy of the Letter of Credit and copies of all material documents delivered to the Letter of Credit Bank in connection with any Drawing with respect to the Letter of Credit. (c) Each payment made by a Bank to the Letter of Credit Bank pursuant to paragraph (b) above shall be treated as the purchase by such Bank of a participating interest in the Company's Reimbursement Obligation under Section 2.3 hereof in an amount equal to such payment. Each Bank, so long as it has made the payment required to be made by it pursuant to Section 2.1(b) hereof, shall share in accordance with its pro rata share of the Total Commitments of the Banks in any interest which accrues pursuant to Section 2.3(b) hereof. All amounts recovered by the Agent hereunder and which are applied by the Agent to the Reimbursement Obligations of the Company under Section 2.3 hereof shall be distributed by the Agent to the Banks who have made the payments required to be made by them pursuant to Section 2.1(b) hereof pro rata in accordance with their respective share of the Total Commitments of the Banks. (d) If and to the extent that any Bank shall fail to make available to the Letter of Credit Bank the amount required to be paid by such Bank pursuant to Section 2.1(b) hereof, the Letter of Credit Bank shall be subrogated to the rights of such Bank under this Agreement to the extent of such failure and shall thereafter (until such Bank shall make such amount available to the Letter of Credit Bank) be entitled to receive all amounts owing to such Bank hereunder and to the percentage of voting rights of such Bank under this Agreement equal to the percentage the amount such Bank failed to pay bears to the Issued Amount of the Letter of Credit and the aggregate unpaid principal amount of all outstanding Reimbursement Obligations and Loans at such time. If any Bank fails to reimburse the Letter of Credit Bank as provided in Section 2.1(b) hereof or delays in making such payment, such unreimbursed amount shall bear interest at a rate per annum equal to (i) from the date due to the date three Business Days after such payment is due, the Federal Funds Rate and (ii) from the date three Business Days after the date such payment is due to the date such payment is made, the Base Rate in effect for each such day plus 2%. Section 2.2. Method of Issuance of Amendments to the Letter of Credit. (a) Notice of Amendment. The Company shall give the Agent written notice or telephonic notice confirmed in writing at least three Business Days prior to the requested date of an amendment to the Letter of Credit, and the Agent shall give immediate notice thereof to the Letter of Credit Bank and to each Bank. (b) Issuance. Provided the Company has given the notice prescribed by Section 2.2(a) and subject to the other terms and conditions of this Agreement including, without limitation, Section 2.1(a) hereof, the Letter of Credit Bank shall issue the requested amendment on the date requested by the Company on behalf of the Banks for the benefit of the stipulated beneficiary and shall deliver the original of such amendment to the beneficiary. The Letter of Credit Bank -12- shall deliver a copy of each amendment to the Letter of Credit to the Company within a reasonable time after the date of issuance thereof. (c) Reporting to Banks. The Agent shall provide such information concerning the Letter of Credit as any Bank shall reasonably request. The Agent shall promptly deliver to each Bank copies of the Letter of Credit as issued hereunder and any amendment thereto and notice of any change in the Issued Amount (other than a temporary decrease resulting from a Drawing thereunder to pay accrued interest on the ESOP Notes). Other than as set forth in this paragraph (c), the Agent shall have no duty to notify the Banks regarding the issuance or other matters regarding the Letter of Credit issued hereunder. The failure of the Agent to perform its requirements under this paragraph (c) shall not relieve the Banks' reimbursement obligations under Section 2.1(b) hereof. Section 2.3. Letter of Credit Reimbursement. (a) Notice of Drawing. The Letter of Credit Bank shall promptly notify the Company, the Agent and each Bank by telephone, telecopy, telex or other telecommunication of any Drawing under the Letter of Credit and of the anticipated payment date. On the payment date, the Letter of Credit Bank shall confirm to the Company, the Agent and each Bank by telephone or telecopy that payment of the Drawing is to be made by the Letter of Credit Bank on such date. (b) Payments. The Company hereby agrees absolutely and unconditionally to pay to the Agent for the account of the Letter of Credit Bank, in the manner provided in Section 2.3(c): (i) On each date a Drawing is paid, an amount equal to the amount paid by the Letter of Credit Bank under the Letter of Credit; and (ii) If any Drawing shall be reimbursed to the Agent after 2:00 p.m. (New York time) on the payment date, interest on any and all amounts required to be paid pursuant to clause (i) of this Section 2.3(b) from and after the due date thereof to the date five days after such payment is due, payable on demand, at an annual rate of interest equal to the Base Rate and from the date five days after the due date thereof until payment in full, payable on demand, at an annual rate of interest equal to the Base Rate plus 2.00%. (c) Method of Reimbursement. The Company shall reimburse the Agent (which shall immediately forward such funds, in the form received, to the Letter of Credit Bank) for each Drawing under the Letter of Credit in the following manner: (i) the Company shall immediately reimburse the Agent in accordance with Section 2.9 hereof; or (ii) (A) if the Company has not reimbursed the Agent pursuant to subparagraph (i) above and (B) the conditions set forth in Section 3.2 hereof have been fulfilled and (C) sufficient funds are available within the limits of the amount of Loans that may be borrowed as provided in Section 2.5 hereof, with the proceeds of Loans; or -13- (iii) if an Event of Default has occurred and is continuing, the Agent may debit any deposit account of the Company maintained with the Agent and appropriate and apply an amount of funds in such account equal to the Reimbursement Obligations outstanding at such time in satisfaction of the Company's obligations set forth in subparagraph (i) above. (d) Loans to Fund Drawings. Upon any Drawing, the Agent shall notify the Banks if the Company has elected to reimburse the Letter of Credit Bank using the proceeds of Loans. Upon receipt of such notice and if the conditions set forth in subparagraph (c)(ii) above have been satisfied, each Bank agrees to deliver to the Agent its pro rata share of the amount of Loans necessary to reimburse the Letter of Credit Bank for any payment made by the Letter of Credit Bank pursuant to such Drawing not later than one Business Day after receipt of such notice. Any funds delivered to the Agent under this paragraph (d) shall be delivered in the manner set forth in the fourth sentence of Section 2.6 hereof. (e) Obligations Absolute. The obligations of the Company under this Article II (and, if applicable in the event of the failure of the Company to so reimburse the Letter of Credit Bank, subject to the proviso in the second sentence of Section 2.1(b) hereof, the obligations of the Banks under this Article II) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of all or any of this Agreement, the Notes, the ESOP Notes, the Indenture and other related documents and any other agreements relating to the Letter of Credit (the "Related Documents"); (ii) any amendment or waiver of or any consent to or departure from the terms of the Related Documents; (iii) the existence of any claim, set-off, defense or other rights which the Company may have at any time against any direct or indirect beneficiary of the Letter of Credit, any Bank, the Letter of Credit Bank, the Agent or any other Person, whether in connection with the Related Documents or any unrelated transaction; (iv) any statement or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; (v) payment by the Letter of Credit Bank under the Letter of Credit against presentation of a sight draft or certificate which does not comply with the terms of the Letter of Credit, provided that such payment shall not have constituted gross negligence or willful misconduct of the Letter of Credit Bank; and (vi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, provided that such other circumstance or happening shall not -14- have been the result of gross negligence or willful misconduct of the Letter of Credit Bank. Section 2.4. Letter of Credit Bank. (a) Liability of Letter of Credit Bank to Other Banks. The Letter of Credit Bank shall not be liable to any Bank or to any other participant in the Letter of Credit for any error in judgment or for any action taken or omitted to be taken by the Letter of Credit Bank except for actions of the Letter of Credit Bank constituting gross negligence or willful misconduct. (b) Liability of the Letter of Credit Bank to Company/Banks. The Company assumes all risks of the acts or omissions of any beneficiary of the Letter of Credit with respect to its use of the Letter of Credit. Neither the Letter of Credit Bank, any Bank nor any of their respective officers or directors shall be liable or responsible to the Company or the Banks for: (i) the use which may be made of the Letter of Credit or for any acts or omissions of any beneficiary in connection therewith; (ii) the validity, sufficiency or genuineness of documents presented under the Letter of Credit even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged; (iii) payment by the Letter of Credit Bank against presentation of documents which do not comply with the terms of the Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (iv) any other circumstances whatsoever in making or failing to make payment under the Letter of Credit; except only that the Company (and, if applicable, the Banks) shall have a claim against the Letter of Credit Bank to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by the Company (and, if applicable, the Banks) which were caused by (i) the Letter of Credit Bank's willful misconduct or gross negligence in determining whether documents presented under the Letter of Credit comply with the terms of the Letter of Credit or (ii) the Letter of Credit Bank's willful misconduct or gross negligence in failing to pay under the Letter of Credit after the presentation to it by the beneficiary of the Letter of Credit of a sight draft and certificate strictly complying with the terms and conditions of the Letter of Credit. Section 2.5. Loans. (a) Subject to the terms and conditions hereof, during the period from the Effective Date to the Termination Date, each Bank severally and not jointly agrees to make Loans to the Company in an aggregate principal amount at any one time outstanding up to, but not exceeding, such Bank's Commitment; provided, however, that any given borrowing of Loans made pursuant to this Section 2.5 shall not exceed the Available Commitment at the time of such borrowing; provided, further that Loans shall only be available to the Company, and the -15- Company agrees that the proceeds of the Loans shall be applied solely, to pay concurrently with a Drawing under the Letter of Credit the related Reimbursement Obligation. (b) Each Loan shall mature and become due and payable by the Company on the date occurring one year after the date the related Drawing under the Letter of Credit was paid or, if earlier, on the Termination Date. Section 2.6. Notice and Place of Borrowing for Loans. The Company shall give written, facsimile or telephonic (confirmed immediately in writing) notice to the Agent, such notice to be given not later than 11:00 a.m. New York time on a Business Day which is at least the Required Number of days prior to each borrowing of Loans and to contain the date of such borrowing, the amount of such borrowing, the Interest Rate option selected, and, where applicable, the length of the Interest Period. Upon receiving notice from the Company, the Agent shall promptly give written or facsimile notice to each Bank, such notice to contain the date of such borrowing, the amount to be borrowed from such Bank, the Interest Rate option selected, and, where applicable, the length of the Interest Period. Funds are to be disbursed pursuant to this Agreement at the Main Office of the Agent. Not later than 11:00 a.m. New York time on the date of borrowing of Loans as specified in the notice from the Agent to the Banks, each Bank shall have made available at the Main Office of the Agent, in immediately available funds, the amount of Loans to be advanced by such Bank, and the Agent shall immediately pay such funds to the Letter of Credit Bank. Unless the Agent shall have received notice from a Bank prior to the date of any such borrowing that such Bank will not make available to the Agent such Bank's ratable portion of such borrowing, the Agent may assume that such Bank has made such portion available to the Agent on the date of such borrowing in accordance with this Section 2.6, and the Agent may, in reliance upon such assumption, make available to the Letter of Credit Bank on such date a corresponding amount. If and to the extent such Bank shall not have made such ratable portion available to the Agent, such Bank and the Company severally agree to repay to the Agent immediately upon demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Letter of Credit Bank and until the date such amount is repaid to the Agent, at (i) with respect to the Company, the interest rate applicable at the time to the type of Loan comprising such borrowing, or (ii) with respect to the Bank, at the applicable Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan as part of such borrowing for purposes of this Agreement. Section 2.7. Evidence of Indebtedness. (a) Each Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Company to such Bank resulting from the Reimbursement Obligations and each Loan made by such Bank from time to time, including the amounts of principal and interest payable and paid to such Bank from time to time hereunder. (b) The Agent shall also maintain accounts in which it will record (a) the amount of each Reimbursement Obligation and each Loan made hereunder, the type thereof and the Interest Period with respect thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Company to the Letter of Credit Bank and each Bank -16- hereunder and (c) the amount of any sum received by the Agent hereunder from the Company and each Bank's share thereof. (c) The entries maintained in the accounts maintained pursuant to paragraphs (i) and (ii) above shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of the Agent or any Bank to maintain such accounts or any error therein shall not in any manner affect the obligation of the Company to repay the Obligations in accordance with their terms. (d) Any Bank may request that its Loans be evidenced by a promissory note or notes in the form of Exhibit A hereto with blanks appropriately completed (each, a "Note"). In such event, the Company shall prepare, execute and deliver to such Bank a Note or Notes payable to the order of such Bank. Thereafter, the Loans evidenced by such Note or Notes and interest thereon shall at all times (including after any assignment pursuant to Section 10.6) be represented by one or more Notes payable to the order of the payee named therein or any assignee pursuant to Section 10.6, except to the extent that any such Bank or assignee subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in subsections (a) and (b) above. Section 2.8. Interest. The Company shall pay interest on the outstanding principal amount of each Loan for the period commencing on the date of such Loan until such Loan shall be paid in full pursuant to the terms of this Agreement at the rates and times set forth below. (a) Interest on Eurodollar Rate Loans. Subject to the provisions of subsection (c) below, interest on each Eurodollar Rate Loan shall be payable (i) on the last day of each Interest Period with respect thereto; provided, however, that if such Interest Period is for a period in excess of three months, then such interest shall also be payable on the date three months after the first day of such Interest Period, (ii) on the date of conversion of such Eurodollar Rate Loan to a Base Rate Loan and (iii) at maturity of such Loan, at an interest rate per annum during the Interest Period for such Loan equal to the Eurodollar Rate for the Interest Period in effect for such Eurodollar Rate Loan. Each determination by the Agent of an interest rate hereunder shall be conclusive and binding on the Banks and the Company for all purposes, absent manifest error. (b) Interest on Base Rate Loans. Subject to the provisions of subsection (c) immediately below, interest on each Base Rate Loan shall be payable monthly in arrears on the last Business Day of each calendar month and at maturity at an interest rate per annum equal to the Base Rate plus the Applicable Margin. (c) Interest Upon Event of Default. Any payment of principal or interest on any Loan which is not paid when due (whether by acceleration or otherwise), as herein provided, shall bear interest (to the extent permitted by law) at that rate which is two percent (2%) above the Base Rate in effect on each day thereafter until paid in full and such interest shall be payable on demand. -17- (d) Prepayment. Upon prepayment of any Loan hereunder, interest accrued and unpaid on the amount so prepaid shall become due on the date of such prepayment. (e) Computations. Interest on Base Rate Loans shall be computed on the basis of a year of 365/366 days and an actual day month. Interest on Eurodollar Rate Loans shall be computed on the basis of a year of 360 days and an actual day month. Section 2.9. Place of Payment. Each payment (whether required or voluntary and whether of principal or interest or both) on each Reimbursement Obligation and Loan and each payment of fees or other amounts owing by the Company hereunder shall be payable, on or before 11:00 a.m., New York time, on the due date of each payment, in immediately available funds, to the Agent at its Main Office at such account as the Agent shall from time to time notify the Company in writing. The Agent shall then immediately transmit the applicable pro rata share of such payment so received by the Agent in immediately available funds to the Letter of Credit Bank or each Bank entitled thereto, as the case may be, in the manner specified by the Letter of Credit Bank or such Bank. Any required payment which would otherwise be due on a day not a Business Day shall be made on the immediately succeeding Business Day. Section 2.10. Voluntary Prepayment. The Company may voluntarily prepay, at any time and from time to time prior to maturity on one Business Day's prior notice to the Agent, any part or the whole of the principal of the Loans; provided, however, that any voluntary prepayment shall be in a minimum amount of $5,000,000. Upon any such prepayment, the Company shall simultaneously pay all accrued and unpaid interest on the amount of principal voluntarily prepaid. However, any such prepayment of a Eurodollar Rate Loan shall be made only on the last day of the Interest Period therefor. All voluntary prepayments provided for in this Section 2.10 shall be without premium or penalty. Section 2.11. Pro Rata Treatment. Except for Section 2.17 hereof, and except with respect to payments to be made to a Bank pursuant to Sections 2.13, 2.18, 8.1, 8.3 or 10.3 and any other indemnity in favor of a Bank or Banks hereunder, each borrowing from, payment to, and utilization of and reduction of the Commitments of, the Banks hereunder shall be prorated among the Banks according to the respective Commitments of the Banks as the same may be adjusted from time to time under Section 2.16, 2.17 or 2.18 hereof. Each borrowing of Loans hereunder shall (in the aggregate) be in the amount necessary to reimburse the Agent for the account of the Letter of Credit Bank as provided in Section 2.3(c)(i). Except as otherwise provided herein, (i) payments with respect to the outstanding principal of, or accrued interest on, the Loans shall be made pro rata to only those Banks that funded such Loans and not to any defaulting Bank or a Bank not otherwise participating in such Loan and (ii) all payments to be made by the Company for the account of each of the Banks on account of principal, interest and fees shall be made without set-off or counterclaim. Section 2.12. Initial Determination of Interest Rate and Conversion of Loans Between Eurodollar Rate and Base Rate. Prior to the initial or any subsequent borrowing, the Company will specify the Interest Rate to be applicable to such borrowing, and on any Business Day or Eurodollar Business Day, as applicable, the Company may convert on a pro rata basis among -18- the Banks any outstanding Base Rate Loans or Eurodollar Rate Loans into the other type of Loans, subject to the following limitations: (a) No such conversion of any Eurodollar Rate Loan may be made except on the last day of an Interest Period with respect thereto; (b) The Company shall give the Agent the Required Number of days notice for such borrowing or conversion; and (c) The Company may not select an Interest Period for any Eurodollar Rate Loan that extends beyond its maturity date. If, at the end of an Interest Period of a Eurodollar Rate Loan, the Company has failed to specify in a timely manner the Interest Rate option applicable to such Loan for the period after the expiration of the then current Interest Period, the Company shall be deemed to have selected that such Loan shall be a Base Rate Loan and, at the end of such Interest Period, such Loan shall automatically convert to a Base Rate Loan. Section 2.13. Failure to Borrow. The Company shall indemnify and hold harmless each Bank in respect of any funding costs and/or losses in the event that any borrowing notified to the Banks pursuant to Section 2.6, relative to Eurodollar Rate Loans, shall not be consummated because of the Company's failure to satisfy one or more of the applicable conditions precedent in Article III or because the Company fails to borrow such Loans at the specified time. Section 2.14. Fees (a) Letter of Credit Fees. The Company hereby agrees to pay to the Agent, for the account of the Banks, to be distributed to the Banks pro rata in accordance with their respective Commitments, a letter of credit fee on the Issued Amount of the Letter of Credit at a per annum rate equal to the Applicable Letter of Credit Fee in effect from time to time (as calculated in accordance with the definition thereof), such fee to be calculated on the Issued Amount from the date of issuance to the earlier of (x) the date of expiration or termination of the Letter of Credit or (y) the date of the final Drawing with respect to the Letter of Credit, based on a year of 360 days and an actual day month, and payable quarterly in arrears on the last day of each March, June, September and December during the term of this Agreement and on the Termination Date, commencing on June 30, 2000. (b) Arrangement Fee. The Company shall pay to the Agent for its own account an arrangement fee and, if applicable, closing fee as set forth in the Fee Letter. (c) Fronting Fee. The Company agrees to pay to the Agent, for the account of the Letter of Credit Bank, a fronting fee as set forth in the Fee Letter. Section 2.15. Termination of Credit Facility. Unless earlier terminated pursuant to the terms hereof, the Commitments of the Banks, and the Credit Facility, shall terminate on the Termination Date. Accordingly, the Company shall pay the entire outstanding principal amount -19- of, and all accrued but unpaid interest on, the Reimbursement Obligations, the Loans and Notes, together with any and all other amounts owing by the Company to the Banks, the Letter of Credit Bank and the Agent hereunder or under the Notes, on the Termination Date. Section 2.16. Reductions of Commitments. (a) Optional. The Company shall have the right at any time or from time to time upon not less than two Business Days' prior written notice to the Agent to reduce the Total Commitments of the Banks, in whole or in part, provided that each partial reduction shall be in an aggregate amount of not less than $1,000,000 and an integral multiple of $500,000, and shall reduce the respective Commitments of all the Banks proportionately; provided, however, that the Company shall not reduce the Total Commitments of the Banks to an amount which is less than the aggregate of (i) the aggregate principal amount of all Eurodollar Rate Loans having Interest Periods ending after the effective date of the reduction plus (ii) the Issued Amount of the Letter of Credit plus (iii) the aggregate outstanding Reimbursement Obligations; and further, provided, that in no event shall the Total Commitments of the Banks be reduced to an amount less than $100,000,000, unless the Total Commitments of the Banks are terminated in full. The Agent shall give prompt written notice to each Bank of each such reduction. Upon any optional reduction of the Total Commitments of the Banks, the Company shall prepay such amount of each Bank's outstanding Loans, if any, as may be necessary so that after such prepayment the sum of the aggregate unpaid principal amount of such Bank's Loans, such Bank's pro rata share of unpaid Reimbursement Obligations, and such Bank's liability in respect of the Letter of Credit does not exceed the amount of such Bank's Commitment as then reduced. The Company shall not terminate the Total Commitments of the Banks unless concurrent with such termination, the Company shall repay all outstanding Loans, Reimbursement Obligations, Letter of Credit Fees, accrued interest and other amounts owing hereunder and shall return or cause to be returned to the Letter of Credit Bank the Letter of Credit marked "cancelled." The Agent shall give prompt written notice to each Bank of such termination. (b) Mandatory. On each date that the Company repays or prepays a Loan or Reimbursement Obligation (other than a Reimbursement Obligation incurred in connection with a "B Drawing" (as defined in the Letter of Credit)), the Total Commitments of the Banks shall automatically reduce by an aggregate amount equal to the aggregate principal amount of such Loan being repaid or prepaid, and shall automatically reduce the respective Commitments of all the Banks proportionately. On each date on which the Issued Amount of the Letter of Credit is permanently reduced (other than in connection with a Reimbursement Obligation that is converted into a Loan), the Total Commitments of the Banks shall automatically reduce in an amount equal to the amount of such reduction in the Issued Amount, and shall automatically reduce the respective Commitments of all the Banks proportionately. Section 2.17. Substitution of Banks. Section 2.17.1. (a) If any Bank shall default in the performance of its Commitment, whether in whole or in part, or shall have appointed for it a receiver or conservator at the direction or request of any regulatory agency or authority, then: (i) such default shall not relieve any other Bank of its Commitment; and -20- (ii) the Company may, with the prior written approval of the Agent (such approval not to be unreasonably withheld) and the Letter of Credit Bank and shall, at the written request of the Letter of Credit Bank, with the prior written approval of the Agent (such approval not to be unreasonably withheld), terminate the Commitment of such defaulting Bank and arrange for the Commitment of the defaulting Bank to be assigned to one or more of the other Banks, and to the extent that such other Banks will not take over such Commitment, arrange for its assumption by one or more banks which are not at that time parties hereto, each of which banks shall, except as otherwise provided herein, upon execution and delivery to the Company of a counterpart hereof, become a Bank hereto to the extent of the Commitment taken over by it. (b) If any Bank shall cease to have a long-term debt rating of BBB- or higher by S&P and Baa3 or higher by Moody's (each, a "Downgraded Bank") such Downgraded Bank shall immediately notify the Agent and Letter of Credit Bank thereof and the Letter of Credit Bank may (i) with the prior written approval of the Agent and the Company (such approvals not to be unreasonably withheld), terminate the Commitment of such Downgraded Bank and arrange for the Commitment of such Downgraded Bank to be assigned to one or more of the other Banks, and to the extent that such other Banks will not take over such Commitment, arrange for its assumption by one or more banks which are not at that time parties hereto, each of which banks shall, except as otherwise provided herein, upon execution and delivery to the Company of a counterpart hereof, become a Bank hereto to the extent of the Commitment taken over by it or (ii) if such Downgraded Bank's Commitment has not been assigned pursuant to clause (i) above, immediately require such Downgraded Bank to fund (and each Downgraded Bank hereby agrees in such event to fund) any unused portion of its Commitment by payment of such amount to the Agent for deposit in an account in the name of the Letter of Credit Bank, maintained at the Main Office or such other office as the Agent may specify by notice to such Downgraded Bank and the Letter of Credit Bank (each, a "Downgrade Collateral Account"). Section 2.17.2. Loans previously made hereunder by a Downgraded Bank, defaulting or withdrawing Bank, or any portion thereof, which are included in the Commitment taken over by any other Bank or Banks or by a bank or banks not then parties hereto, shall be prepaid by the Company without penalty or premium. Section 2.17.3. From time to time, the Company may with the written consent of the Letter of Credit Bank replace a non-defaulting Bank (the "Replaced Bank") with another financial institution (or institutions) desiring to be a Bank hereunder (the "New Bank(s)") and/or with one or more Banks already a party hereto ("Existing Bank(s)") so long as (a) the Replaced Bank consents in writing to such replacement and receives all amounts owing to such Replaced Bank hereunder on the effective date of such replacement, (b) the New Bank(s) and/or Existing Bank(s), as the case may be, assume(s) all of the obligations of a Bank hereunder having a Commitment equal to the Replaced Bank's by executing, in the case of a New Bank(s), a letter agreement in substantially the form of Exhibit B-1 attached hereto or, in the case of an Existing Bank(s), a letter agreement in substantially the form of Exhibit B-2 hereto, (c) the Commitment(s) of the New Bank(s), together with the additional Commitment(s) of the Existing Bank(s) assumed by the Existing Bank(s) pursuant hereto, is equal to the Commitment of the Replaced Bank and (d) the Company and the Letter of Credit Bank acknowledge and consent -21- that the New Bank(s) shall become a Bank hereunder (and/or that the Existing Bank(s) shall have an additional Commitment hereunder equal to that of the Replaced Bank) by signing the respective acknowledgments contained in the appropriate letter agreement referred to in subparagraph (c) above. Section 2.17.4. Upon the increase in any Bank's Commitment or any bank or banks becoming a party to this Agreement as herein provided, the Company shall immediately furnish to all Banks which are then parties hereto notice of (a) the increased Commitment of such Bank, or (b) the names and addresses of such bank or banks together with the amount of the Commitment of each such bank or banks. Section 2.17.5. The respective amounts of the Commitments hereunder shall be adjusted from time to time to reflect any changes made pursuant to this Section 2.17 and notice of such adjustments shall be given by the Company at the time thereof to each Bank or bank then a party hereto. Such adjusted amounts of Commitments shall thereupon become the basis for pro rata treatment under Section 2.11 of this Agreement. Section 2.17.6. Upon the termination in whole of the Commitment of any Bank, and the prepayment of all Loans previously made under such Commitment, all as provided in this Section 2.17, such Bank shall cease to be a party to this Agreement except as otherwise provided herein. Section 2.17.7. If any Downgraded Bank shall be required pursuant to 2.17.1(b) above to fund the unused portion of its Commitment into a Downgrade Collateral Account, then the Agent shall apply the monies in the Downgrade Collateral Account applicable to the Loans and Reimbursement Obligations payable by such Downgraded Bank pursuant to Article II at the times for, in the manner required in respect of and subject to the conditions precedent to such Loan or Reimbursement Obligation, as applicable. The deposit of monies in such Downgrade Collateral Account by any Downgraded Bank shall not constitute a Loan pursuant to Section 2.5 (and such Downgraded Bank shall not be entitled to interest on such monies except as provided below in this Section 2.17.7) unless and until (and then only to the extent that) such monies are used to make Loans or fund Reimbursement Obligations. Proceeds in such Downgrade Collateral Account shall be invested in Permitted Investments, as directed by the applicable Downgraded Bank by written notice to the Letter of Credit Bank and the Agent, the income of which shall be for the account of such Downgraded Bank. The income that has accrued from such investments and received by the Letter of Credit Bank shall be released to such Downgraded Bank on the last Business Day of each month. Unless required to be released by the following sentence, any amounts received by the Agent in respect of the Commitment of a Downgraded Bank (whether as a repayment of Loans or Reimbursement Obligations or otherwise) shall be deposited in the Downgrade Collateral Account for such Downgraded Bank. All amounts remaining in such Downgrade Collateral Account shall be released to such Downgraded Bank no later than the Business Day immediately following the earliest of (x) the effective date of any replacement of such Downgraded Bank or removal of such Downgraded Bank as a party to this Agreement, (y) the date on which such Downgraded Bank shall furnish the Agent and the Letter of Credit Bank with confirmation that such Downgraded Bank shall have long-term debt ratings at least equal to the Required Ratings and (z) the Business Day -22- immediately following the expiration of the Termination Date. As used in this Section 2.17 "Permitted Investments" means investments in direct obligations of the United States of America or of any agency or instrumentality thereof whose obligations constitute full faith and credit obligations of the United State of America provided that any such obligation matures within thirty days from the date of purchase. Section 2.18. Capital Requirements. If, as a result of the adoption after the date of this Agreement, of any applicable law, rule or regulation affecting capital adequacy or capital maintenance, or any change after the date of this Agreement in the interpretation or administration of any law, rule or regulation affecting capital adequacy or capital maintenance in existence as of the date hereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Bank or the Letter of Credit Bank with any request or directive affecting capital adequacy or capital maintenance (whether or not having the force of law) of any such authority, central bank or comparable agency, any Bank or the Letter of Credit Bank determines that such adoption, change or compliance has or would have the effect of reducing the rate of return on such Bank's or the Letter of Credit Bank's capital as a consequence of its Commitment or Loans or its commitment to issue, participate in or maintain the Letter of Credit to a level below that which such Bank or the Letter of Credit Bank could have achieved but for such adoption, change or compliance (taking into consideration such Bank's or the Letter of Credit Bank's policies with respect to capital adequacy) by an amount deemed by such Bank or the Letter of Credit Bank to be material, such Bank or the Letter of Credit Bank shall give prompt notice to the Company and the Agent, and then from time to time, within 15 days after submission by such Bank or the Letter of Credit Bank to the Company (with a copy to the Agent) of a written request therefor, the Company shall pay to such Bank or the Letter of Credit Bank such additional amount or amounts as will compensate such Bank or the Letter of Credit Bank for such reduction. Any request submitted by a Bank or the Letter of Credit Bank to the Company pursuant to this Section 2.18 shall contain such calculations of the amounts requested therein as such Bank or the Letter of Credit Bank shall deem reasonable in view of its customary practices, and shall be submitted as soon as practicable, but in any event the initial request shall be submitted not more than 90 days after such Bank or the Letter of Credit Bank becomes aware of the event by reason of which such request is being submitted. Subsequent requests by such Bank shall be submitted quarterly. If any Bank requests payment of any amount from the Company pursuant to this Section 2.18, the Company may, pursuant to arrangements and documentation satisfactory to the Company and the Agent, prepay the outstanding Loans, fees, and any other amounts due to such Bank in full and terminate the Commitment of such Bank and the Company shall, with the prior written consent of the Letter of Credit Bank at its option, either arrange for all or part of the Commitment of such Bank to be taken over by one or more of the other Banks or, to the extent such other Banks do not take over such Commitment or part thereof, arrange for it to be taken over in whole or in part by a bank or banks not a party hereto, each of which banks shall, except as otherwise provided herein upon execution and delivery to the Company of a counterpart hereof, become a full party hereto to the extent of the Commitment taken over by it. Upon any bank or banks becoming a party to this Agreement as herein provided, the Company shall immediately furnish to all Banks which are then parties hereto the names and addresses of such bank or banks together with the amount of the Commitment of each such bank or banks. The respective amounts of the Commitments hereof shall be adjusted from time to time to reflect -23- any changes made pursuant to this Section 2.18 and notice of such adjustments shall be given by the Company at the time thereof to each Bank then a party hereto. Such adjusted amounts of Commitments shall thereupon become the basis for pro rata treatment under Section 2.11 of this Agreement. Upon the termination in whole of the Commitment of any Bank, and the prepayment of all Loans previously made under such Commitment, all as provided in this Section 2.18, such Bank shall cease to be a party to this Agreement except as otherwise provided herein. Section 2.19. Change in Control. Upon the occurrence of a Change in Control and at any time during the ninety (90) day period thereafter, the Company shall, upon the written request of the Agent, deposit with the Agent, in an interest bearing account, as collateral, Dollars in an amount equal to the sum of the Issued Amount, outstanding Reimbursement Obligations and the aggregate outstanding principal amount of any Loans owing under this Agreement (the "Change in Control Collateral"). The Change in Control Collateral shall be applied against amounts due to the Agent, the Letter of Credit Bank and the Banks resulting from any Drawing. All Change in Control Collateral shall be held in the account with the Agent until the expiration of the Letter of Credit and payment of all Reimbursement Obligations and Loans in connection therewith, at which time the remaining Change in Control Collateral and any interest accrued thereon shall be returned to the Company. Section 2.20. Administration Fees. The Company agrees to pay to the Agent an annual administrative fee to compensate the Agent for the administration of the Credit Facility and for other services, as set forth in the Fee Letter. ARTICLE III CONDITIONS TO EFFECTIVENESS OF AGREEMENT, FOR BORROWINGS AND ISSUANCE OF LETTER OF CREDIT Section 3.1. Effectiveness, Initial Borrowing and Issuance of Letter of Credit. This Agreement shall not become effective and the Letter of Credit Bank shall not be obligated to issue the Letter of Credit hereunder until the Company shall have furnished to the Agent the following, each dated (unless otherwise indicated) the date of this Agreement: (a) Agreement. The Agent shall have received counterparts of this Agreement duly executed and delivered by the Company, the Letter of Credit Bank and each Bank listed on the signature pages hereto. (b) Opinion. The Agent shall have received from (i) the General Counsel, an Associate General Counsel or an Assistant General Counsel of the Company, an opinion dated the Effective Date and addressed to the Agent, the Letter of Credit Bank and the Banks in substantially the form of Exhibit E-1 hereto and (ii) Davis Polk & Wardwell, New York counsel to the Company, an opinion dated the Effective Date and addressed to the Agent, the Letter of Credit Bank and the Banks in substantially the form of Exhibit E-2 hereto. -24- (c) Corporate Proceedings. The Letter of Credit Bank and the Banks shall be satisfied that all corporate proceedings of the Company taken in connection with the transactions contemplated by this Agreement shall be in form and substance reasonably satisfactory to the Letter of Credit Bank and the Banks. (d) Financial Statements. The Agent shall have received a copy of the Company's (i) annual report on Form 10-K for the year ended June 30, 1999, as filed with the U.S. Securities and Exchange Commission, and (ii) quarterly report on Form 10-Q for the quarter ended March 31, 2000, as filed with the U.S. Securities and Exchange Commission. (e) Consents. The Letter of Credit Bank and the Banks shall be reasonably satisfied that all necessary governmental and third party approvals, if any, required to be obtained by the Company in connection with the transactions contemplated by this Agreement and otherwise referred to herein shall have been obtained and remain in full force and effect. (f) No Adverse Change. Nothing shall have occurred since March 31, 2000 (and the Letter of Credit Bank and the Banks shall have become aware of no facts or conditions not previously known) which the Letter of Credit Bank or the Banks shall determine, in their reasonable good faith judgment, could have a material adverse effect on their rights or remedies hereunder, or on the business, financial condition or results of operations of the Company and its Subsidiaries taken as a whole. (g) No Litigation. The Letter of Credit Bank and the Banks shall be reasonably satisfied that, on the Effective Date, no judgment, order, injunction or other restraint shall have been issued or filed which restrains, and no hearing seeking injunctive relief or other restraint is pending or has been noticed which seeks to restrain, the Letter of Credit Bank from issuing the Letter of Credit or the Company from consummating the transactions described herein. (h) No Default; Representations and Warranties. The Letter of Credit Bank and the Banks shall be reasonably satisfied that on the Effective Date: (a) there shall exist no Default or Event of Default and (b) all representations and warranties of the Company contained herein shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the Effective Date, except to the extent such representations and warranties relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. (i) Notes. If requested by a Bank, a Note, payable to the order of such requesting Bank in the amount of its Commitment, duly executed and delivered by the Company; and -25- (j) Fees. The up-front fees for the account of the Banks as set forth in the letter from Bayerische Hypo- und Vereinsbank AG, New York Branch to the Banks dated April 28, 2000; and (k) Existing Credit Agreement. Evidence of arrangements reasonably satisfactory to the Agent for the contemporaneous termination of the Credit Agreement dated as of June 6, 1996 and as amended to date, by and among the Company, the financial institutions from time to time party thereto, ABN AMRO Bank N.V., as Letter of Credit Bank and ABN AMRO Bank N.V., as Agent, payment in full of any outstanding reimbursement obligations or loans thereunder and cancellation of the "Letter of Credit" issued thereunder. All agreements, certificates, legal opinions and other documents and papers referred to in this Section 3.1, unless otherwise specified, shall (x) be delivered to the Agent for the account of the Letter of Credit Bank and each Bank and, in the case of this Agreement, in sufficient counterparts for each Bank and (y) be reasonably satisfactory in form and substance to the Letter of Credit Bank and the Banks. Section 3.2. All Borrowings. The Banks shall not be obligated to make any Loan, including the initial Loan, and the Letter of Credit Bank shall not be obligated to issue or amend the Letter of Credit, unless at the time thereof the Company shall have furnished to the Agent an Officer's Certificate bearing that date, and stating that: (a) There exists on that date no Default or Event of Default; (b) There exists on that date no event of default or default under any instrument evidencing or any agreement given in connection with Funded Debt of the Company; (c) Such borrowing or amendment or issuance of the Letter of Credit will not contravene any agreement, indenture or instrument to which the Company is a party or by which it may be bound and which is material to the financial condition of the Company; (d) The representations and warranties contained in Sections 4.1, 4.2, 4.3, 4.5, 4.6, 4.9(a), 4.9(c), 4.10, 4.11, 4.13, and 4.14 hereof are true on and as of such date; (e) No Change in Control shall have occurred; and (f) The extension(s) of credit being made on such date are legal, valid and binding obligations of the Company and the officers of the Company requesting such advances are duly authorized and empowered to do so. Further, any conversion of a Loan from one type to another as contemplated by Section 2.12 hereof shall be deemed to be a representation by the Company that the matters referred to in paragraphs (a) through (f) above continue to be true and correct. -26- ARTICLE IV REPRESENTATIONS AND WARRANTIES The Company hereby represents, covenants and warrants to the Agent, the Letter of Credit Bank and each of the Banks as follows: Section 4.1. Organization; Standing, Etc. The Company is a corporation duly organized and existing under the laws of the State of Delaware, has the corporate power to own its property and carry on its business as being conducted, and is duly qualified to do business as a foreign corporation and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary. Section 4.2. Authorization; No Violation. The execution, delivery and performance by the Company of this Agreement (i) has been duly authorized by all necessary corporate action and does not require any consent or approval, authorization, permit or license from any federal, state or other regulatory authority which has not been obtained, or violate any law, regulation, order, judgment, decree or determination having applicability to the Company or its organizational documents, or result in a breach of, or constitute a default under any existing indenture or credit agreement or any other agreement or instrument to which the Company is a party or by which its properties may be bound or affected except where the failure to have such consent or approval or such violation, breach or default could not reasonably be expected to result in a material adverse effect on the business, financial condition or results of operations of the Company and its Subsidiaries taken as a whole, and (ii) will not conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, the Certificate of Incorporation or Bylaws of the Company or of any agreement or instrument to which the Company is now a party, which breach would have a material adverse effect on the business, financial condition or results of operations of the Company and its Subsidiaries taken as a whole. Section 4.3. Enforceability. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). Section 4.4. Financial Statements. The Company has furnished the Banks with the following financial statements, identified by the certificate of a principal financial officer of the Company: (i) balance sheets of the Company as at June 30, 1999 and March 31, 2000, and income and reinvested earnings statements of the Company for the fiscal year or fiscal quarter, as the case may be, ended on such dates, respectively, certified, in the case of financial statements for the year ended June 30, 1999, by Arthur Andersen LLP. Such financial statements are true and correct and have been prepared in accordance with GAAP (except, in the case of the quarterly financial statements, the absence of complete footnotes and subject to normal year-end audit adjustments). The balance sheets and their accompanying notes present fairly the condition of the Company as of the dates thereof, and the income and reinvested -27- earnings statements present fairly the results of the operations of the Company for the periods indicated. There has been no material adverse change in the business, financial condition or results of operations of the Company and its Subsidiaries taken as a whole since March 31, 2000. Section 4.5. Litigation. There is no action or proceeding pending or threatened against the Company before any court or administrative agency which, in the reasonable opinion of the Company, is likely to be determined in a manner which would result in any material adverse change in the business, financial condition or results of operations of the Company and its Subsidiaries taken as a whole and the Company is not in default with respect to any order, writ, injunction or decree of any court or administrative agency, which would have a material adverse effect on the Company and its Subsidiaries taken as a whole. Section 4.6. Business; Status as Air Carrier. (a) The Company is a duly certificated air carrier and there are in force any certificates or other appropriate authority issued by appropriate governmental authorities necessary to authorize the Company to engage in intrastate, interstate, overseas and foreign air transportation of persons, property and mail over the routes operated by the Company; and (b) no proceedings are pending or threatened, by or before any public body, agency or authority, domestic or foreign, including but not limited to proceedings to alter, amend, modify, suspend or revoke such certificates in whole or in part, which might seriously affect adversely the income from, title to, or possession of, any of the properties of the Company, to an extent which would constitute a material adverse change in the business or condition of the Company. Section 4.7. Funded Debt. The Company does not have outstanding any Funded Debt except as set forth on Schedule I to this Agreement; and there exists no default under the provisions of any instrument evidencing such indebtedness or agreement relating thereto. Section 4.8. Title to Properties, Etc.. The Company and its Subsidiaries have good and marketable title to their properties and assets, including the properties and assets reflected in the balance sheets described in Section 5.3 hereof, subject to no mortgage, pledge, encumbrance, lien or charge of any kind except mortgages, pledges, encumbrances, liens or charges permitted by Section 6.1 hereof. Section 4.9. Tax Returns and Payments. (a) The Company has filed all federal income tax returns which are required to be filed, and has paid all taxes as shown on said returns and on all assessments received by it to the extent that such taxes (other than those which the Company is contesting in good faith by appropriate proceedings being diligently conducted) have become due. (b) The federal income tax liability of the Company has been finally determined by the Internal Revenue Service and satisfied for all fiscal years prior to and including the fiscal year ended June 30, 1992. -28- (c) All other tax returns and reports of the Company which are required to be filed have been duly filed, and all taxes and government charges (other than those for which payment may be withheld without penalty or those which the Company is contesting in good faith by appropriate proceedings being diligently conducted) upon the Company, its assets, income or franchises which are due and payable have been paid. Section 4.10. Use of Proceeds. The proceeds of a Drawing under the Letter of Credit are intended to be used solely to pay the principal of and interest and premium on the ESOP Notes and the proceeds of any Loan will be used solely to repay any Reimbursement Obligation. The Company is not engaged, principally or as one of the Company's important activities, in the business of purchasing or carrying any "margin stock" as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System. Section 4.11. Governmental Regulation. No consent, approval, authorization, permit or license from any federal, state or other regulatory authority is required in connection with the making, delivery or performance of this Agreement or the Notes by the Company. Section 4.12. Subsidiaries. Schedule II is a complete and correct list of all Subsidiaries as of the date hereof, all of which are corporations duly incorporated, in good standing and with corporate power to transact the business presently conducted by them. Except as disclosed in Schedule II, the Company owns, directly or indirectly through one or more Subsidiaries, all the shares of each of the Subsidiaries (except directors' qualifying shares, if any), and all such shares are validly issued, fully paid and non-assessable and are free and clear of all liens and rights of others whatsoever. Section 4.13. ERISA. The Company and each Subsidiary have met their minimum funding requirements under ERISA with respect to all their employee benefit plans covered by the minimum funding requirements of ERISA, and have not incurred any material liability to the Pension Benefit Guaranty Corporation (or any entity succeeding to any or all of said Corporation's functions under ERISA) under ERISA in connection with any such plan. Section 4.14. Environmental Matters. The Company and its Subsidiaries are in substantial compliance with all applicable federal, state and local environmental laws, regulations and ordinances governing their respective business, properties or assets with respect to discharges into the ground and surface water, emissions into the ambient air and generation, storage, transportation and disposal of waste materials or process by-products, except such noncompliances as are not likely to have a material adverse effect on the property, assets, business, operations or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole. All licenses, permits or registrations required for the business of the Company and its Subsidiaries under any federal, state or local environmental laws, regulations or ordinances have been secured, and the Company and each Subsidiary are in substantial compliance therewith, except such licenses, permits or registrations the failure to secure or to comply therewith are not likely to have a material adverse effect on the property, assets, business, operations or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole. -29- ARTICLE V AFFIRMATIVE COVENANTS The Company covenants and agrees with the Agent, the Letter of Credit Bank and each Bank that until all of its obligations hereunder have been discharged and the obligations of the Letter of Credit Bank to issue or amend the Letter of Credit and the Banks to make Loans terminated and the Letter of Credit has expired or otherwise terminated: Section 5.1. Insurance. The Company will, and cause each of its Airline Subsidiaries to, keep adequately insured, by financially sound and reputable insurers, all property of the character usually insured by corporations engaged in the same or similar businesses similarly situated, against loss or damage of the kind customarily insured against by such corporations, and carry adequate liability insurance and other insurance of a kind generally carried by corporations engaged in the same or similar businesses similarly situated; provided, however, that nothing herein contained shall be construed to mean that a deductibility clause in any such insurance, which, in effect, results in self-insurance of a level or portion of losses considered reasonable by the Company's management, shall render such insurance inadequate; and provided, further, that in the case of a lease to the United States Government or an agency thereof of any aircraft or other property, indemnity therefrom by the United States Government will be considered adequate insurance against the risks that are the subject of any such indemnity. Section 5.2. Payment of Taxes. The Company will, and will cause each of its Airline Subsidiaries to, duly file all federal income tax returns and all other tax returns and reports which, to the knowledge of the officers of the Company are required to be filed and pay when due all taxes and governmental charges assessed against it, its assets, income or franchises, except to the extent and so long as contested in good faith. Section 5.3. Financial Statements. The Company will deliver to the Agent, the Letter of Credit Bank and the Banks: (a) As soon as practicable (and in any event within two (2) months after the end of each quarterly period (other than the last quarterly period) in each fiscal year) an income statement of the Company for the period from the beginning of the current fiscal year to the end of such quarterly period, and a balance sheet of the Company as at the end of such quarterly period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and certified by a principal financial officer of the Company, subject to changes resulting from year-end adjustments; and a statement as of the end of such quarterly period of the calculations made by the Company establishing its compliance with the provisions of Sections 6.1, 6.2 and 6.4 hereof, in sufficient detail to permit the Banks to determine how the conclusions on such statement were arrived at, certified by an authorized financial officer of the Company as accurate in all material respects; -30- (b) As soon as practicable and in any event within three (3) months after the end of each fiscal year, an income statement and a statement of reinvested earnings of the Company for such year, and a balance sheet of the Company as at the end of such year, setting forth in each case in comparative form corresponding figures from the preceding annual audit, all in reasonable detail and satisfactory in scope to the Banks and certified by independent certified public accountants of national standing selected by the Company; and a statement as of the end of such fiscal year of the calculations made by the Company establishing compliance with the provisions of Sections 6.1, 6.2 and 6.4 hereof, in sufficient detail to permit the Banks to determine how the conclusions on such statement were arrived at, certified by an authorized financial officer of the Company as accurate in all material respects; (c) Copies of all financial statements, reports and returns which it shall send to its stockholders; (d) Promptly after the sending or filing thereof, copies of all periodic reports, if any, which the Company shall have filed with the Securities and Exchange Commission (or any governmental agency or agencies substituted therefor) under Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, or with any national securities exchange; and (e) With reasonable promptness such other financial data as any Bank may reasonably request through the Agent. Section 5.4. Maintenance of Equipment. The Company will, and will cause each of its Airline Subsidiaries to, maintain substantially all of its equipment (except surplus or obsolete equipment) in good operating order. Section 5.5. Inspection. The Borrower will permit any Person designated by any of the Letter of Credit Bank or any Bank in writing, to visit and inspect any of the properties, corporate books and financial records of the Company and its Subsidiaries at the Letter of Credit Bank's or such Bank's expense, and to discuss the affairs, finances, and accounts of any such corporation with the principal officers of the Company, all at such reasonable times and as often as such Bank may reasonably request. This covenant shall be subject to applicable governmental and industrial security regulations. Section 5.6. Security. In the event the Company secures by mortgage, pledge, encumbrance, lien or other charge any debt other than as permitted by Section 6.1 hereof, the Company shall secure equally and ratably the indebtedness incurred hereunder. Section 5.7. Notice of Any Default or Event of Default. As soon as practicable (but in any event not more than five (5) days) after the Chairman of the Board, the President, or a principal financial officer of the Company obtains knowledge of a Default or an Event of Default as specified in Article VII hereof, the Company will deliver to the Agent, the Letter of Credit Bank and each Bank an Officer's Certificate specifying the nature thereof, the period of -31- existence thereof and what action the Company has taken or proposes to take with respect thereto. Section 5.8. ERISA Reporting Requirements. With respect to any employee benefit plan subject to Title IV of ERISA, the Company shall, if requested by the Agent, provide the Agent with copies of the most recent annual reports or returns (IRS Form 5500), audited or unaudited financial statements and actuarial valuations with respect to such plans. In addition, the Company shall provide the Agent copies of any notice filed with the Pension Benefit Guaranty Corporation with respect to any "Reportable Event" as defined in Section 4043 of ERISA, and the Agent shall forward copies of any such notice to the Letter of Credit Bank and the Banks. Section 5.9. Ratings. The Company will notify the Agent promptly after the Company becomes aware of any public announcement of the occurrence of any change in the S&P Rating or the Moody's Rating. ARTICLE VI NEGATIVE COVENANTS Until all of its obligations hereunder have been discharged and the obligations of the Letter of Credit Bank to issue or amend the Letter of Credit and the Banks to make Loans terminated and the Letter of Credit has expired or otherwise terminated, the Company covenants that it will not and will not permit any Subsidiary to: Section 6.1. Liens. Create, assume or suffer to exist any mortgage, pledge, encumbrance, lien or charge of any kind upon any of its property or assets, whether now owned or hereafter acquired, except: (i) mortgages, pledges, encumbrances, liens or charges where the aggregate indebtedness secured by such mortgages, pledges, encumbrances, liens or charges at any time does not exceed the sum of (a) the greater of $3,000,000,000 (USD Three Billion) or fifteen percent (15%) of Equity plus (b) the amount outstanding under the obligations described on Schedule I hereof as "Secured"; (ii) liens for taxes not yet due or which are being contested in good faith; (iii) other liens, charges and encumbrances incidental to the conduct of its business or the ownership of its property and assets which were not incurred to secure the repayment of borrowed money or other advances or credit, and which do not in the aggregate materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business; (iv) liens imposed by law, such as carriers', warehousemen's, mechanics', materialmen's and vendors' liens, for sums not yet due or already due but the validity of which is being contested in good faith; (v) mortgages, pledges, encumbrances, liens or other charges on property or assets of a Subsidiary to secure obligations of such Subsidiary to the Company or another Subsidiary; (vi) any mortgage, pledge, encumbrance, lien or other charge required by Section 5.6 hereof; (vii) any mortgage, pledge, encumbrance, lien or other charge existing at the date hereof on any property owned or leased by the Company or any Subsidiary at that date securing obligations outstanding on that date; (viii) any mortgage, pledge, encumbrance, lien or other charge on any property, shares of stock or obligation existing at the time of acquisition thereof (including acquisition through merger or consolidation) or -32- (ix) any mortgage, pledge, encumbrance, lien or other charge on aircraft or aircraft engines (but no other assets) now owned or acquired by the Company or any Subsidiary after the date hereof to secure the payment of all or any part of the purchase price thereof or to secure any obligation incurred or for which a firm commitment is obtained prior to, at the time of, or after, the acquisition of such property for the purpose of financing all or any part of the purchase price thereof. Section 6.2. Debt. Create, incur, assume or suffer to exist, for the Company and the Subsidiaries taken together, (a) Current Debt in an aggregate principal amount at any one time outstanding in excess of 100% of all accounts receivable of the Company and its Subsidiaries outstanding as of the last day of the second calendar month next preceding the month in which such calculation of Current Debt is made, all computed in accordance with GAAP; or (b) Convertible Subordinated Debt in excess of 33.3% of Equity; or (c) Funded Debt, Current Debt (other than Convertible Subordinated Debt) and all Guaranty Liabilities (as defined below) in an amount at any one time which exceeds 150% of Equity at such time. For purposes of this Section 6.2, "Guaranty Liabilities" shall mean all liabilities of the Company and any Subsidiary of the Company as guarantor, surety, accommodation endorser or other accommodation party on behalf of any Person where the underlying obligation of such Person covered by, or the subject of, such guaranty or contingent undertaking would constitute Current Debt or Funded Debt, as defined herein, if such Person were the Company; provided, however, that (x) guarantees or other contingent undertakings by the Company on behalf of any Subsidiary, by any Subsidiary on behalf of any other Subsidiary, or by any Subsidiary on behalf of the Company and (y) the contingent undertakings as set forth on Schedule III hereto, shall not constitute Guaranty Liabilities. Section 6.3. Mergers; Disposition of Assets. Merge or consolidate with any corporation or sell, lease or transfer or otherwise dispose of all or substantially all of its assets in any transaction or series of related transactions, except that (i) any Subsidiary may merge or consolidate with the Company or any one or more other Subsidiaries; (ii) any Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to the Company or another Subsidiary; (iii) any Subsidiary may sell or otherwise dispose of all or substantially all of its assets, provided that (a) such sale or other disposition is for a consideration which represents fair value (as determined in good faith by the Company) at the time of such sale or disposition, and (b) the assets so disposed of do not constitute all or substantially all of the aggregate assets of the Company and the Subsidiaries; (iv) the Company may dispose of aircraft in the ordinary course of its business, provided that such sale or other disposition is for a consideration which represents fair value (as determined in good faith by the Company) at the time of such sale or disposition; and (v) the Company may merge or consolidate with another corporation, provided that (a) the Company shall be the continuing or surviving corporation, (b) a majority of the board of directors of the Company for a period of six (6) months after the effective date of such merger consists of individuals who were directors of the Company twelve (12) months prior to such effective date, and (c) immediately after such merger or consolidation there shall exist no Event of Default as defined in Article VII hereof. Section 6.4. Leases. Enter into or permit to remain in effect any flight equipment lease agreements which, as of the close of any fiscal year, cause the Company's consolidated aircraft -33- rentals for such fiscal year, as determined in accordance with GAAP, to exceed eight percent (8%) of the Company's consolidated operating revenues for such fiscal year, provided that any such lease agreements as may be necessary in connection with interchange agreements between the Company and other airline related businesses shall not be included in such calculation. ARTICLE VII DEFAULTS Section 7.1. Events of Default. Upon the occurrence of any one of the following Events of Default: (a) Default in any interest payment or principal payment or mandatory prepayment on any Loan, any Reimbursement Obligation or any Letter of Credit Fee when due and the continuance thereof for five (5) days; or (b) Default in the payment of any fee or charge (other than those specified in (a) above), when the same is due hereunder and the continuance thereof for ten (10) days after the Company's receipt of written notice that any such amount is past due; or (c) The Company shall institute a voluntary case seeking liquidation or reorganization under Chapter 7 or Chapter 11, respectively, of the United States Bankruptcy Code, or shall consent to the institution of an involuntary case thereunder against it; or the Company shall otherwise institute any similar proceeding under any other applicable federal or state law, or shall consent thereto; or the Company shall apply for, or by consent or acquiescence there shall be an appointment of, a custodian, receiver, liquidator, sequestrator, trustee or other officer with similar powers, for the Company, or for all or a material part of its properties; or the Company shall make an assignment for the benefit of creditors; or the Company shall have ceased to pay its debts generally as they become due; or if an involuntary case shall be commenced seeking the liquidation or reorganization of the Company under Chapter 7 or Chapter 11, respectively, of the United States Bankruptcy Code or any similar proceeding shall be commenced against the Company under any other applicable federal or state law and (i) the petition commencing the involuntary case is not timely controverted, (ii) the petition commencing the involuntary case is not dismissed within forty-five (45) days of its filing, (iii) an interim trustee is appointed to take possession of all or a portion of the property and/or to operate all or any part of the business of the Company, or (iv) an order for relief (other than the petition itself) shall have been issued or entered therein; or a decree or order of a court having jurisdiction in the premises for the appointment of a custodian, receiver, liquidator, sequestrator, trustee or other officer having similar powers for the Company or for all or a part of its properties, shall have been entered; or any other similar relief shall be granted against the Company under any applicable federal or state law; or -34- (d) Default in the due observance or performance by the Company or any Subsidiary of any covenant, condition or agreement contained in Sections 6.1, 6.2, 6.3 and 6.4; or (e) Default in the due observance or performance by the Company or any Subsidiary (to the extent applicable to the Subsidiary) of any covenant contained in this Agreement (other than those specified in (a), (b) and (d) above) and such default remains unremedied for a period of 30 days after written notice thereof from the Agent, the Letter of Credit Bank or any Bank to the Company; or (f) Any representation or warranty made by the Company herein or in any certificate furnished to the Letter of Credit Bank or the Banks hereunder proves to have been false or breached in any material respect on the date as of which made, or any statement or certificate furnished by the Company pursuant hereto shall prove to have been false in any material respect at any date as of which the facts therein set forth were stated or certified; or (g) Seizure under any legal process of a substantial share of the assets of the Company if release is not obtained within thirty (30) days of such seizure; or (h) (i) Default in any payment of principal or interest on any other obligation for borrowed money or the deferred purchase price of property beyond any period of grace provided with respect thereto, or in the payment of any capital leases, or (ii) default in the performance or observance of any other agreement, term or condition contained in any agreement under which any such obligation is created, if the effect of such default is to cause, or permit the holder or holders of such obligation (or a trustee acting on behalf of such holder or holders) to cause, such obligation to become due prior to its stated maturity, provided in each case such obligations or agreements have aggregate outstanding amounts of $75,000,000 or more; or (i) The Company shall have failed to meet its minimum funding requirements under ERISA with respect to any of its employee benefit plans which are covered by Title IV of ERISA (or to which Section 412 of the Internal Revenue Code of 1986, as amended, applies), which failure has resulted in a material liability for excise tax under Section 4971 of said Code; or any of its plans aforesaid shall be the subject of voluntary or involuntary termination proceedings which may result in an uninsured payment or repayment liability of the respective corporation to the Pension Benefit Guaranty Corporation (or any entity succeeding to any or all of its functions under said Act) in an amount which is material in relation to the net worth of the Company; then, in the event that an Event of Default under (a) or (b) above should occur, any Bank may, at its option, by a written notice to the Company with copies to the Agent and to each other Bank, if such Event of Default be continuing at the time such notice is received by the Company, either: (i) declare the obligation of such Bank to extend credit to the Company hereunder to be immediately terminated, whereupon such obligation shall terminate (provided that any such termination shall not affect such Bank's obligations under Section 2.1 hereof); or (ii) declare -35- any Loan and Reimbursement Obligations held by it to be forthwith due and payable whereupon such Loans and Reimbursement Obligations, with accrued interest thereon, shall become forthwith due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Company; or (iii) demand that the Company immediately deposit as cash collateral with the Agent, for such Bank's account, an amount equal to such Bank's pro rata share of the Issued Amount of the Letter of Credit; or (iv) all of the foregoing. In the event that an Event of Default under (a), (b), or (d) through (i) above should occur, if such Event of Default be continuing, the Majority Banks may, at their option, by written notice to the Company, exercise the remedies listed in (i), (ii), (iii) and/or (iv) above and may direct the Letter of Credit Bank to deliver the Notice of Non-Reinstatement as provided in the Letter of Credit on behalf of all the Banks. In the event that an Event of Default under (c) above should occur, the Total Commitments of the Banks shall automatically terminate and the principal of and accrued interest on the Loans then outstanding, all unpaid Reimbursement Obligations and any accrued fees, together with an amount equal to the Issued Amount of the Letter of Credit (without regard to whether a draft has been presented under the Letter of Credit) to be held as cash collateral by the Agent for the Reimbursement Obligations of the Company with respect to the Letter of Credit, shall automatically become due and payable, without protest, presentment, notice or demand, all of which are expressly waived by the Company and the Majority Banks may direct the Letter of Credit Bank to deliver the Notice of Non-Reinstatement as provided in the Letter of Credit. ARTICLE VIII YIELD PROTECTION Section 8.1. Increased Cost of Eurodollar Rate Loans. (a) If, as a result of any change after the date of this Agreement in (including the introduction of any new) applicable United States, state or foreign laws or regulations or the adoption or making of any interpretations, directives or requests thereof or thereunder by any court or governmental authority charged with the interpretation or administration thereof, one or more of the following events occur (herein called "Increased Cost Changes"): (i) the basis of taxation of payments to any Bank of the principal of or interest on any Eurodollar Rate Loan or any other amounts payable under this Agreement in respect thereof (other than taxes imposed on the aggregate net income of such Bank or of its Eurodollar Lending Office by the jurisdiction in which the Bank has its principal office or such Eurodollar Lending Office) is changed; or (ii) any reserve, special deposit or similar requirements against the assets of, deposits with or for the account of, or credit extended by, any Bank are imposed, modified or deemed applicable; or (iii) any other condition affecting this Agreement or any Eurodollar Rate Loan is imposed on any Bank or (in the case of Eurodollar Rate Loans) the London interbank market; -36- and such Bank determines that, by reason thereof, the cost to such Bank of making or maintaining any of the Eurodollar Rate Loans is increased by an amount reasonably determined by such Bank, or any amount receivable by such Bank hereunder in respect of any of the Eurodollar Rate Loans is reduced by an amount reasonably determined by such Bank (such increases in cost and reductions in amounts receivable being herein called "Increased Costs"), then the Company shall pay to such Bank on the next interest payment date for the affected Eurodollar Rate Loans such additional amount or amounts (which shall be set forth in a notice from such Bank to the Company stating the cause and amount of such Increased Costs) as will compensate such Bank for such Increased Costs. Each Bank will immediately notify the Company of any event of which such Bank has knowledge that will entitle such Bank to compensation pursuant to this Section 8.1(a) and will exercise reasonable diligence to designate a different Eurodollar Lending Office, and/or take other measures which will avoid the need for such compensation for Increased Costs and will not result in material cost to such Bank, or be otherwise disadvantageous (in such Bank's sole determination) to such Bank. (b) Without limiting the effect of the foregoing, the Company shall pay (without duplication as to amounts paid under Section 8.1(a) hereof) to any Bank on each interest payment date as to Eurodollar Rate Loans so long as such Bank may be required to maintain reserves against "Eurocurrency liabilities" under Regulation D of the Board of Governors of the Federal Reserve System an additional amount (determined by such Bank and notified to the Company through the Agent) equal to the sum of the products of the following for each Eurodollar Rate Loan for each day on which such Bank is required to maintain such reserve during the Interest Period for such Loan for which interest is being paid: (i) the principal amount of such Eurodollar Rate Loan outstanding on such day; times (ii) the remainder of (x) a fraction the numerator of which is LIBOR (expressed as a decimal) used to determine the Eurodollar Rate for such Eurodollar Rate Loan for such Interest Period as provided in this Agreement and the denominator of which is one minus the effective rate (expressed as a decimal) at which such reserve requirements are imposed on such Bank on such day minus (y) such numerator; times (iii) 1/360. (c) Determination by any Bank for purposes of this Section 8.1 of the effect of any Increased Cost Changes on such Bank's costs of making or maintaining Eurodollar Rate Loans or on amounts receivable by it in respect of Eurodollar Rate Loans, and of the additional amounts required to compensate such Bank in respect thereof, shall be conclusive, provided that such determinations are made reasonably and in good faith. (d) If the Company is required to pay additional amounts to any Bank under paragraph (a) or (b) of this Section 8.1, the Company may (in addition to paying such additional amounts to such Bank) at the Company's option at any time, subject to the provisions of Section 8.3 hereof, convert all of the Eurodollar Rate Loans of such Bank which are affected by such Increased Costs to Base Rate Loans in accordance with this Agreement. -37- Section 8.2. Change of Law. Notwithstanding any other provision herein, in the event that any change in applicable law, rule or regulation or in the interpretation or administration thereof (including the issuance of any new law, rule, regulation or interpretation, or any new administration thereof), of or in any jurisdiction whatsoever, shall make it unlawful for any Bank to make or maintain a Eurodollar Rate Loan (or to convert Base Rate Loans into Eurodollar Rate Loans), or shall materially restrict the authority of any Bank to purchase or sell, or to take deposits of, Eurodollars, then the obligation of such Bank to make Eurodollar Rate Loans (and the right of the Company to convert Base Rate Loans of such Bank into Eurodollar Rate Loans) shall be suspended for the duration of such illegality or restriction and the Company shall forthwith convert all Eurodollar Rate Loans of such Bank then outstanding to Base Rate Loans in accordance with the terms of this Agreement. Section 8.3. Funding Losses. The Company shall indemnify each Bank against, and reimburse such Bank on demand for, any loss or expense incurred or sustained by such Bank, as reasonably determined by such Bank, as a result of any payment or prepayment (whether by reason of a voluntary prepayment by the Company or by reason of a mandatory prepayment of the Loans by reason of an Event of Default or other mandatory prepayment provision relating to all outstanding Loans set forth herein) or conversion of a Eurodollar Rate Loan made by such Bank on a day other than the last day of an Interest Period for such Loan. Section 8.4. Increased Cost of Maintaining Letter of Credit. (a) If, as a result of any change after the date of this Agreement in (including the introduction of any new) applicable United States, state or foreign laws or regulations or the adoption or making of any interpretations, directives or requests thereof or thereunder by any court or governmental authority charged with the interpretation or administration thereof, one or more of the following events occur (herein called "Increased Letter of Credit Cost Changes"): (i) any reserve, special deposit or similar requirements against the Letter of Credit are imposed, modified or deemed applicable; or (ii) any other condition regarding the issuance, maintenance of, or participation in the Letter of Credit are imposed upon the Letter of Credit Bank or any other Bank, and the result of any such event shall be to increase the cost to the Letter of Credit Bank or such other Bank of issuing, maintaining, or participating in the Letter of Credit; and the Letter of Credit Bank or such other Bank determines that, by reason thereof, the cost to the Letter of Credit Bank or such Bank of issuing, maintaining, or participating in the Letter of Credit is increased by an amount reasonably determined by the Letter of Credit Bank or such Bank, then, within fifteen (15) days of the Letter of Credit Bank or such Bank obtaining knowledge of such change in law, regulation or interpretation thereof, the Letter of Credit Bank or such Bank shall so notify the Company, and upon receipt of such notice from the Letter of Credit Bank or such Bank, the Company shall promptly pay to the Letter of Credit Bank or the Bank, from time to time as specified by the Letter of Credit Bank or the Bank, additional amounts which shall be sufficient to compensate the Letter of Credit Bank or such Bank for such increased cost. -38- (b) Determinations by the Letter of Credit Bank or any Bank for purposes of this Section 8.4 of the effect of any Increased Letter of Credit Cost Change, and of the additional amounts required to compensate the Letter of Credit Bank or such Bank in respect thereof, shall be conclusive, provided that such determinations are made reasonably and in good faith. Section 8.5. Mandatory Repayment or Conversion on Certain Events. On the last day of an Interest Period during which any Orderly Replacement Event occurs (which relates to all Banks) and no later than four Eurodollar Business Days after any Immediate Replacement Event relating to one or more Banks, all outstanding Eurodollar Rate Loans of such Banks shall, at the option of the Company, be either: (a) prepaid in full by the Company, together with any accrued and unpaid interest thereon, or (b) converted to Base Rate Loans. Each Bank shall promptly notify the Company and Agent of any Immediate Replacement Event and any Orderly Replacement Event known to such Bank. Section 8.6. Survival. The obligations of the Company under Sections 8.1 through 8.4 of this Agreement shall survive the repayment of the Loans and all Reimbursement Obligations and the cancellation of the Notes. ARTICLE IX THE AGENT Section 9.1. Authorization and Action. Each Bank hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to it as Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto, and the Agent hereby accepts such authorization and appointment. As to any matters not expressly provided for by this Agreement and the Notes or provided for with specific reference to this Section 9.1 (including, without limitation, enforcement or collection of the Obligations), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from action) upon the instructions of the Majority Banks and such instructions shall be binding upon all Banks and all holders of the Notes; provided, however, that the Agent shall not be required to take any action which exposes the Agent to liability or which is contrary to this Agreement or the Notes or applicable law. As to any provisions of this Agreement under which action may be taken or approval given by the Majority Banks, the action taken or approval given by the Majority Banks shall be binding upon all Banks to the same extent and with the same effect as if each Bank had joined therein. The Agent shall be entitled to rely upon any note, notice, consent, certificate, affidavit, letter, teletype message, facsimile transmission, statement, order or other document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons and, in respect of legal matters, upon the opinion of counsel selected by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Agent. Any request, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any Note shall be conclusive and binding on any -39- subsequent holder, transferee or assignee of such Note or of any note or notes issued in exchange therefor. The relationship between the Agent and the Banks is and shall be that of agent and principal only, and nothing contained in this Agreement or any other Loan Document shall be construed to constitute the Agent as a trustee or fiduciary for any Bank or the Company. Section 9.2. Agent's Reliance, Etc. Neither the Agent nor any of its directors, officers, agents or employees shall be liable to any Bank for any action taken or omitted to be taken by it or by such directors, officers, agents or employees under or in connection with this Agreement or the Notes, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent: (i) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable to any Bank for any action taken or omitted to be taken in good faith by it in accordance with the advice of such experts; (ii) makes no warranty or representation to any Bank and shall not be responsible to any Bank for any statements, warranties or representations made in or in connection with this Agreement or the Notes; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the Notes on the part of the Company or to inspect the property (including the books and records) of the Company; (iv) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the Notes, or any other instrument or document furnished pursuant thereto; and (v) shall incur no liability under or in respect to this Agreement or the Notes by acting upon any notice, consent, certificate or other instrument or writing (which may be by facsimile transmission, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. Section 9.3. Agent and Affiliates. With respect to its Commitment, the Loans made by it and the Notes issued to it, if any, the Agent shall have the same rights and powers under this Agreement as any other Bank and may exercise the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not the Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly indicated, include the Agent in its individual capacity. Unrelated to its role as Agent as set forth herein, the Agent and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with, the Company, and any Person who may do business with or own securities of the Company, all as if it were not the Agent and without any duty to account therefor to the Banks. Section 9.4. Representations of the Banks. Each Bank acknowledges that it has, independently and without reliance upon the Agent, or any affiliate or subsidiary of the Agent, the Letter of Credit Bank, or any other Bank and based on the financial statements referred to in Section 4.4 hereof and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement; and that such Bank has actively engaged in the negotiation of all of the terms of this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent, the Letter of Credit Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement or the Notes. The Agent has no duty or responsibility, either initially or on a continuing basis, to provide any Bank with any credit or other information with respect to the Company whether coming into its possession as of the date of this Agreement or at any time -40- thereafter, or to notify any Bank of any Event of Default except as provided in Section 9.5 hereof. This Agreement and all instruments or documents delivered in connection with this Agreement have been reviewed and approved by such Bank and such Bank has not relied on the Agent as to any legal or factual matter in connection therewith or in connection with the transactions contemplated thereunder. Section 9.5. Events of Default. In the event of the occurrence of any Default or Event of Default, any Bank knowing of such event may (but shall have no duty to), or the Company pursuant to Section 5.7 hereof shall, give the Agent and Letter of Credit Bank written notice specifying such Event of Default or other event and expressly stating that such notice is a "notice of default". Neither the Agent nor the Letter of Credit Bank shall be deemed to have knowledge of such events unless the Agent or Letter of Credit Bank, as applicable, has received such notice. In the event that the Agent receives such a notice of the occurrence of an Event of Default, the Agent shall give written notice thereof to the Banks. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed in writing by the Majority Banks; provided, however, that, unless and until the Agent shall have received such directions, the Agent may take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable and in the best interest of the Banks. Section 9.6. Right to Indemnity. Except for action expressly required of the Agent hereunder, the Agent shall be fully justified in failing or refusing to take any action hereunder unless it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Section 9.7. Indemnification. The Banks hereby agree to indemnify the Agent and the Letter of Credit Bank (to the extent not reimbursed by the Company), ratably according to their respective Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Agent and/or the Letter of Credit Bank in any way relating to or arising out of this Agreement, the Notes and/or the Letter of Credit or any action taken or omitted by the Agent and/or the Letter of Credit Bank under this Agreement, the Notes and/or the Letter of Credit; provided, however, that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's or the Letter of Credit Bank's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank agrees to reimburse the Agent and/or the Letter of Credit Bank promptly upon demand for its ratable share of any reasonable out-of-pocket expenses (including reasonable counsel fees) incurred by the Agent and/or the Letter of Credit Bank in connection with the administration, or enforcement of, or the preservation of any rights under, this Agreement, the Notes and/or the Letter of Credit, to the extent that the Agent or the Letter of Credit Bank is not reimbursed for such expenses by the Company. Section 9.8. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Banks and the Company and may be removed at any time with or without cause by the Majority Banks. Upon any such resignation or removal, the Company shall have the right to appoint a successor Agent, subject to confirmation by the Majority Banks. If no -41- successor Agent shall have accepted such appointment within 30 days after the retiring Agent's giving of notice of resignation or the Majority Banks' removal of the Agent, the Agent may, on behalf of the Banks, appoint a successor Agent who shall be willing to accept such appointment. In any event, such successor Agent shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and shall have a combined capital and surplus of at least $1,000,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Agent, and the retiring or removed Agent shall be discharged from its duties and obligations as agent under this Agreement. After any Agent's resignation or removal hereunder as Agent, the provisions of this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. ARTICLE X MISCELLANEOUS Section 10.1. Rights and Remedies. No delay or failure of the Banks, the Letter of Credit Bank or the Agent or any one of them or of the Company in exercising any rights, powers or privileges hereunder shall affect such right, power or privilege, nor shall any single or partial exercise thereof preclude any further exercise thereof, or the exercise of any other right, power or privilege. The rights and remedies of the Banks, the Letter of Credit Bank and the Agent or any one of them and of the Company under this Agreement are cumulative and not exclusive of any rights or remedies which they would otherwise have. Failure on the part of any Bank, the Letter of Credit Bank, the Agent or the Company to exercise any right, power or privilege given it hereunder shall not be the breach of any obligation of the Bank or the Company to any other party to this Agreement or to any other Person. Section 10.2. Notices. Except as otherwise expressly provided for herein, notices, which may be given or are required to be given hereunder, shall be in writing and may be mailed, postage prepaid, addressed as follows or sent by telex or facsimile: (a) If to the Company, both to: Delta Air Lines, Inc. Hartsfield Atlanta International Airport Atlanta, Georgia 30320 Attention: Treasurer Facsimile: (404) 715-2817 And to: Delta Air Lines, Inc. Hartsfield Atlanta International Airport Atlanta, Georgia 30320 Attention: General Counsel, Law Department Facsimile: (404) 773-1657 -42- (b) If to Agent: Bayerische Hypo- und Vereinsbank AG, New York Branch 150 East 42nd Street, 29th Floor New York, New York 10017 Attention: Marianne Weinzinger Facsimile: (212) 672-5530 And to: Bayerische Hypo- und Vereinsbank AG, New York Branch 150 East 42nd Street, 28th Floor New York, New York 10017 Attention: Letter of Credit Department Facsimile: (212) 672-5506 Bayerische Hypo- und Vereinsbank AG, New York Branch 150 East 42nd Street, 30th Floor New York, New York 10017 Attention: Agency Services Facsimile: (212) 672-5523 (c) If to any Bank or the Letter of Credit Bank other than the Agent at that address or facsimile number designated in writing to the Company and the Agent from time to time. A party may specify a different address or facsimile number by furnishing such change in writing to all other parties hereto. Additionally, notice may, in lieu of being given by mail or facsimile, be delivered personally to any officer of any party to whose attention it could have been addressed. Section 10.3. Expenses, Indemnification, Etc. (a) The Company shall pay all reasonable costs, expenses, taxes and fees (i) incurred by the Agent in connection with the preparation, execution and delivery of this Agreement, the Notes and all other documents incident hereto or thereto (collectively, the "Loan Documents") including, without limitation (but subject to the provisions of the Fee Letter), the reasonable costs and professional fees of Chapman and Cutler, Chicago, Illinois, whether or not any transaction contemplated hereby shall be consummated, and any and all stamp, intangible or other taxes that may be payable or determined in the future to be payable in connection therewith, (ii) incurred by the Agent in connection with the preparation, execution and delivery of any waiver, amendment or consent by the Banks, the Letter of Credit Bank or the Agent relating to the Loan Documents including, without limitation, reasonable costs and professional fees of counsel for the Agent; and (iii) actually incurred by the Agent, the Letter of Credit Bank or any of the Banks in enforcing the Loan Documents including, without limitation, reasonable attorneys' fees of counsel for the Agent, the Letter of Credit Bank or the Banks. -43- (b) The Company shall indemnify the Agent, the Letter of Credit Bank and each Bank and hold the Agent, the Letter of Credit Bank and each Bank (and all directors, officers, employees and agents of any of the foregoing (the Agent, the Letter of Credit Bank, the Banks and such directors, officers, employees and agent each referred to as an "Indemnified Party")) harmless against, any and all costs, losses, liabilities, claims, damages or expenses incurred by an Indemnified Party, whether jointly or severally, and whether or not such Indemnified Party is designated a party thereto, arising out of or by reason of, or relating directly or indirectly to, (i) any investigation, litigation or other proceeding, pending or threatened, regarding any actions or failure to act by the Company involving this Agreement or any transaction contemplated hereby, (ii) any actual or proposed use by the Company or any of its Subsidiaries of the proceeds from any borrowing hereunder or the Letter of Credit, or (iii) the Agent's, any Bank's, the Letter of Credit Bank's or the Company's entering into and complying with this Agreement or in issuing or delivering the Notes or the Letter of Credit and including, without limitation, the reasonable fees and disbursements of such Indemnified Party's separate counsel incurred in connection with any such investigation, litigation or other proceeding (which shall be advanced by the Company on request notwithstanding any claim or assertion that the Indemnified Party is not entitled to indemnification hereunder upon receipt of an undertaking to reimburse the Company if it is actually and finally determined by a court of competent jurisdiction that the party is not so entitled). However, the indemnity of the Company set forth herein shall not cover the costs, losses, liabilities, claims, damages or expenses (x) incurred by an Indemnified Party arising out of the bad faith or willful misconduct of such Indemnified Party (as actually and finally determined by a court of competent jurisdiction) or (y) incurred by the Agent in connection with a suit, claim or cause of action brought against the Agent by a Bank pursuant to which such Bank alleges that the Agent has failed to perform the ministerial duties of the Agent as expressly set forth herein (such as administering the funding and collection of Loans, determining interest rates and the like). (c) The Agent, the Letter of Credit Bank and each Bank agree that in the event that any investigation, litigation, suit, action or proceeding is asserted or threatened in writing or instituted against it or any other Indemnified Party for which the Agent, the Letter of Credit Bank or any Bank may desire indemnity or defense hereunder, the Agent, the Letter of Credit Bank or such Bank shall promptly notify the Company thereof in writing and agree, to the extent appropriate, to consult with the Company with a view to minimizing the cost to the Company of its obligations under this Section 10.3. (d) No action taken by legal counsel chosen by an Indemnified Party in defending against any such investigation, litigation, suit, action or proceeding or requested remedial, removal or response action shall vitiate or in any way impair the obligations and duties of the Company hereunder to indemnify and hold harmless each Indemnified Party; provided, however, that if the Company is required to indemnify any Indemnified Party pursuant hereto, such Indemnified Party shall not settle or compromise any such investigation, litigation, suit, action or proceeding without the prior written consent of the Company (which consent shall not be unreasonably withheld or delayed) so long as the Company has provided evidence reasonably satisfactory to such Indemnified Party that the Equity of the Company and its Subsidiaries on a consolidated basis is not less than zero. -44- (e) The obligations of the Company under this Section 10.3 shall survive transfer, payment or satisfaction of any Loan, Reimbursement Obligation and Note and any amendment, supplementation, modification or termination of this Agreement. Section 10.4. Amendments to This Agreement and the Notes. Any provisions of this Agreement and the Notes may be amended, terminated, waived or otherwise modified in writing by the Company and the Majority Banks, and any such amendment, termination, waiver or other modification shall be binding upon all of the Banks to the same extent and with the same effect as if each Bank had joined therein; provided, however, that, notwithstanding the foregoing: (a) any provisions of this Agreement and the Notes with respect to any change in (i) the expressed maturity date of the whole or any portion of principal or interest payable hereunder or on any Loan or under any Note, (ii) the rate of interest payable on any Loan or on the Reimbursement Obligations, (iii) the amount of any Commitment (except as permitted in Sections 2.17 and 10.6), (iv) the amount or due date of any fees payable hereunder, or (v) the due date of any principal of, or interest on, any Loan, or the date on which any Reimbursement Obligation is due and payable, or (vi) this Section 10.4, may be amended or otherwise modified only in a writing signed by the Company and all of the Banks; (b) any Event of Default described in Sections 7.1(a), 7.1(b) or 7.1(c) may be waived only in a writing signed by all of the Banks; (c) no provisions of Article IX shall be amended, modified, or waived without the consent of the Agent and Letter of Credit Bank; and (d) no provisions of Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7 or 2.8 shall be amended, modified or waived without the consent of the Letter of Credit Bank. The definition of "Majority Banks" as set forth herein shall not be changed without the unanimous consent of the Banks. Section 10.5. Agreement as to Right of Set-off, Sharing of Losses. So long as any Loan or Reimbursement Obligation is outstanding, each Bank agrees that, if it has received payment on any Loan or Reimbursement Obligation, whether by set-off or otherwise, including, but not limited to, any payment received by such Bank under any applicable bankruptcy, insolvency or similar laws, in a greater proportion than payments made on all such Obligations then outstanding to the Banks, the Bank so receiving such greater proportionate payment agrees to purchase a portion of the Loans or Reimbursement Obligations or participations therein held by the other Banks, so that after such purchase each Bank will hold an unpaid balance on its Loans or Reimbursement Obligations or participations therein bearing the same proportion to the then outstanding aggregate principal amount of the Loans and Reimbursement Obligations as such Bank's Commitment bears to the Banks' aggregate Commitments; provided that if any amount so received by any Bank in payment of the Loans or Reimbursement Obligations or participations therein held by it shall be, as a result of the reversal of the exercise of any such right (whether by court order or voluntary action on the part of such Bank), returned to the Company or other Subsidiary or paid as directed by such court order by such Bank, then each other Bank which shall have theretofore received its share of any such payment pursuant to this Section 10.5 shall, upon demand, promptly repay, without interest, the amount of such share to such Bank, or, if the Bank exercising such right shall not have made the purchases provided for in this Section 10.5 prior to such reversal, the other Banks shall have no further rights under this Section 10.5 in respect to such amount. Except as provided in this Section and in Sections 9.6 and 9.7, no Bank shall be responsible to any other Bank for losses or claims which such Bank may incur in connection with the transactions contemplated by this Agreement. The Company -45- agrees that any Bank so purchasing a participation from another Bank pursuant to this Section 10.5 may exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Bank were the direct creditor of the Company in the amount of such participation. Section 10.6. Successors and Assigns; Participations. (a) This Agreement shall be binding upon the Company, the Agent, the Letter of Credit Bank and the Banks and their respective successors and assigns, and shall inure to the benefit of the Company and the Banks and their respective successors and assigns. The Company may not assign its rights or obligations hereunder, except as permitted by Section 6.3 hereof. Other than by virtue of operation of law, no Bank shall assign any portion of its Commitment hereunder unless (a) if the assignee is not a Bank hereunder nor an affiliate of such assigning Bank, the portion of the Bank's Commitment to be assigned is equal to or greater than $5,000,000 (or such lesser amount as the Company may approve in its sole discretion), (b) the assigning Bank has received the prior written approval of the Company, the Agent and the Letter of Credit Bank to the proposed assignment (which consents of the Company and the Agent shall not be unreasonably withheld); (c) the Agent has been paid an assignment fee of $3,500 by the assigning Bank; and (d) the bank which has received the assignment of the Commitment, the assigning Bank, the Company and the Agent shall have executed an Assumption Agreement substantially in the form of Exhibit C hereto. Upon compliance with the provisions set forth above, such financial institution shall thereupon and thereafter be deemed to be a Bank for all purposes hereunder, and the Agent shall give notice to all of the Banks of the assignment. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans or Reimbursement Obligations. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Company and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Company and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Company hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii), (iv) or (v) of Section 10.4 without the consent of the Participant. The Company agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article VIII with respect to its participating interest; provided that no Participant shall be entitled to receive any greater payment thereunder than the Bank which granted it a participating interest would be entitled to receive. An assignment or other transfer which is not permitted by subsection (a) above or (c) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection. (c) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. -46- Section 10.7. Holidays. When any payment hereunder falls due on a day that is not a Business Day, such payment shall be made as herein provided on the next succeeding Business Day. Interest shall continue to accrue on the principal to be paid until it is paid. Section 10.8. Governing Law; Submission to Jurisdiction; Venue. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. (b) Any legal action or proceeding against the Company with respect to this Agreement may be brought in any court of the State of New York sitting in the Borough of Manhattan or in the United States District Court for the Southern District of New York, and, by execution and delivery of this Agreement, the Company hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts for such purposes. (c) The Company hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement brought in the courts referred to in clause (b) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. Section 10.9. Right of Setoff. If an Event of Default shall have occurred and be continuing, the Agent, on behalf of itself, the Letter of Credit Bank and each Bank, is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held any other indebtedness at any time owing by the Agent to or for the credit or the account of the Company against any and all of the obligations of the Company then existing under this Agreement held by the Agent. The right of the Agent under this Section 10.9 is in addition to other rights and remedies which the Agent, the Letter of Credit Bank or such Bank may have. Promptly following any exercise of the right of setoff, the Agent shall give the Company written notice thereof. Section 10.10. Execution and Effective Date. This Agreement may be executed in any number of counterparts, and any party hereto may execute this Agreement by signing any such counterpart. The Company shall deliver one such executed counterpart to the Agent and the Letter of Credit Bank and each Bank shall deliver one such executed counterpart to the Agent for further delivery to the Company. This Agreement shall be effective as of the Effective Date. Section 10.11. Representations of Banks. Each Bank represents for itself only that it is acquiring the Loans, Reimbursement Obligations and Notes to be acquired by it hereunder for its own account in the ordinary course of extending credit as a banking institution and not with a view to the distribution or resale thereof, subject, nevertheless, to any requirement of law that the disposition of the property of a Bank shall at all times be within its control. -47- Section 10.12. Severability. Any provision of this Agreement or of the Notes which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof or affecting the validity or enforceability of such provisions in any other jurisdiction. Section 10.13. Entire Agreement. This Agreement and the Notes express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Agreement, the Notes nor any term hereof or thereof may be changed, waived, discharged or terminated orally or in writing, except as provided in Section 10.4 hereof. -48- IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed. DELTA AIR LINES, INC. By: /s/ M. Michele Burns ----------------------------------------- Title: Senior Vice President - -------------------------------------- Finance and Treasurer ------------------------------------- -49- Commitment: $50,963,733 BAYERISCHE HYPO- UND VEREINSBANK AG, New York Branch, in its individual capacity as a Bank and as Agent and Letter of Credit Bank By: /s/ Marianne Weinzinger ----------------------------------------- Title: Director -------------------------------------- By: /s/ Felicia Pierson ----------------------------------------- Title: Associate Director -------------------------------------- -50- Commitment: $23,000,000 ABN AMRO BANK N.V. By: /s/ Claudia C. Heldring ----------------------------------------- Title: Group Vice President ----------------------------------- By: /s/ Carla S. Waggoner ----------------------------------------- Title: Assistant Vice President ----------------------------------- -51- Commitment: $23,000,000 BANK ONE, NA By: /s/ Kenneth Kramer ----------------------------------------- Title: Managing Director ----------------------------------- -52- Commitment: $23,000,000 BANQUE NATIONALE DE PARIS By: /s/ John Stacy ----------------------------------------- Title: Senior Vice President ----------------------------------- -53- Commitment: $23,000,000 CREDIT INDUSTRIEL ET COMMERCIAL By: /s/ Eric Longuet ----------------------------------------- Title: Vice President ----------------------------------- By: /s/ Albert Calo ----------------------------------------- Title: Vice President ----------------------------------- -54- Commitment: $23,000,000 CREDIT LYONNAIS, New York Branch By: /s/ Pascal Poupelle ----------------------------------------- Title: President and COO ----------------------------------- -55- Commitment: $11,500,000 DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG By: /s/ J.W. Somers ----------------------------------------- Title: Senior Vice President ----------------------------------- By: /s/ Gary Franke ----------------------------------------- Title: Vice President ----------------------------------- -56- Commitment: $23,000,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED By: /s/ Minami Miure ----------------------------------------- Title: Senior Vice President ----------------------------------- -57- Commitment: $23,000,000 THE MITSUBISHI TRUST & BANKING CORPORATION By: /s/ Scott J. Paige ----------------------------------------- Title: Senior Vice President ----------------------------------- -58- Commitment: $23,000,000 THE SANWA BANK, LIMITED By: /s/ Michael J. Lawrence ----------------------------------------- Title: Senior Vice President ----------------------------------- -59- Commitment: $17,000,000 BANCA COMMERCIALE ITALIANA, New York Branch By: /s/ Charles Dougherty ----------------------------------------- Title: Vice President ----------------------------------- By: /s/ J. Dickerhof ----------------------------------------- Title: Vice President ----------------------------------- -60- Commitment: $17,000,000 THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By: /s/ Fiona O'Connor ----------------------------------------- Title: Senior Manager ----------------------------------- By: /s/ Conor Barrett ----------------------------------------- Title: Assistant Manager ----------------------------------- -61- Commitment: $17,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD. -- New York Branch By: /s/ Joseph P. Devoe ----------------------------------------- Title: Attorney-in-fact ----------------------------------- -62- Commitment: $17,000,000 THE CHASE MANHATTAN BANK By: /s/ Richard C. Smith ----------------------------------------- Title: Vice President ----------------------------------- -63- Commitment: $17,000,000 CITIBANK, N.A. By: /s/ Henry J. Matthews ----------------------------------------- Title: Vice President ----------------------------------- -64- Commitment: $17,000,000 COMMERZBANK AG By: /s/ Harry Yergey ----------------------------------------- Title: Senior Vice President and Manager ---------------------------------- By: /s/ Subash Viswanathan ----------------------------------------- Title: Vice President ----------------------------------- -65- Commitment: $17,000,000 LANDESBANK SACHSEN GIROZENTRALE By: /s/ Stefan Pfisterer ----------------------------------------- Title: Assistant Director ----------------------------------- By: /s/ Hermann Stengel ----------------------------------------- Title: Assistant Director ----------------------------------- -66- Commitment: $17,000,000 NORDDEUTSCHE LANDESBANK GIRZENTRALE, New York Branch and/or Cayman Islands Branch By: /s/ Stephanie Finnen ----------------------------------------- Title: Vice President ----------------------------------- By: /s/ Stephen K. Hunter ----------------------------------------- Title: Senior Vice President ----------------------------------- -67- Commitment: $17,000,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE, New York Branch By: /s/ Alan S. Bookspan ----------------------------------------- Title: Director ----------------------------------- By: /s/ Walter T. Duffy III ----------------------------------------- Title: Associate Director ----------------------------------- -68- Commitment: $10,000,000 THE DAI ICHI KANGYO BANK, LIMITED By: /s/ Robert P. Gallagher, Jr. ----------------------------------------- Title: Vice President ----------------------------------- -69- Commitment: $11,500,000 DEUTSCHE VERKEHRSBANK AG By: /s/ Constance Laudenschlager ----------------------------------------- Title: Assistant Vice President ----------------------------------- By: /s/ Christian Wulf ----------------------------------------- Title: Assistant Vice President ----------------------------------- -70- EXHIBIT A FORM OF NOTE $----------------- ------------, ------- FOR VALUE RECEIVED, DELTA AIR LINES, INC., a Delaware corporation (the "Maker"), promises to pay to the order of ____________________________ (together with any successor and assign thereof or any subsequent holder hereof referred to herein as the "Holder") in lawful money of the United States the lesser of (a) _________________ Dollars or (b) the aggregate unpaid principal amount of all Loans which are still outstanding and which were made to the Maker by the Holder pursuant to that certain Credit Agreement dated as of May 19, 2000 (as the same may be amended, modified or supplemented from time to time, the "Credit Agreement"; terms used herein and not defined herein have their respective defined meanings as set forth in the Credit Agreement) by and among the Maker, the Banks party thereto and Bayerische Hypo- und Vereinsbank AG, New York Branch, as Agent, at the Main Office of the Agent, or at such other place as is otherwise specified in the Credit Agreement. The Maker shall repay the principal amount of this Note on the dates and at the times set forth in the Credit Agreement. The outstanding principal amount hereof shall bear interest at the rates and shall be payable at the times set forth in the Credit Agreement. This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Credit Agreement. To the extent provided in the Credit Agreement, this Note is subject to voluntary prepayment, in whole or in part, without premium or penalty. Upon the occurrence of an Event of Default, the aggregate unpaid principal amount of all Loans evidenced hereby which are still outstanding and accrued interest thereon may become due and payable in the manner and with the effect provided in the Credit Agreement. Time is of the essence of this Note, and in case this Note is not paid when due, and is subsequently collected by law or through an attorney at law, or under advice therefrom, the Maker agrees to pay all costs of collection incurred by the Holder including, without limitation, the reasonable fees and disbursements of counsel to the Holder. The undersigned and all endorsers or other parties to this Note hereby waive presentment, demand for payment, protest and notice of nonpayment. This Note shall be construed and performance thereof shall be determined according to the laws of the State of New York. IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Note as of the date first written above. DELTA AIR LINES, INC. By ------------------------------------------ Name: ------------------------------------- Title: ------------------------------------ A-2 EXHIBIT B-1 FORM OF NOTICE AND AGREEMENT REGARDING ADDITION OF BANK [Date] Bayerische Hypo- und Vereinsbank AG, New York Branch, as Agent 150 East 42nd Street, 30th Floor New York, New York 10017 Attention: Agency Services Delta Air Lines, Inc. Administrative Center Hartsfield Atlanta International Airport Atlanta, Georgia 30320 Attention: Treasurer Ladies and Gentlemen: Reference is made to that certain Credit Agreement dated as of May 19, 2000 (as amended, modified or supplemented from time to time, the "Credit Agreement") by and among Delta Air Lines, Inc. (the "Company"), the Banks party thereto and Bayerische Hypo- und Vereinsbank AG, New York, as Agent. Terms used herein and not defined herein have their respective defined meanings as set forth in the Credit Agreement. 1. Pursuant to Section 2.17.3 of the Credit Agreement, the undersigned hereby requests that it become a Bank under the Credit Agreement. The proposed Commitment of the undersigned as a Bank under the Credit Agreement would equal $___________. The undersigned proposes that the undersigned shall become a Bank under the Credit Agreement on the later of (a) the date of consent by the Company and the Letter of Credit Bank and (b) ___________________ (the "Effective Date"). 2. Effective upon the Effective Date, the undersigned hereby assumes all of the obligations of a Bank having a Commitment of $______________ under the Credit Agreement as if the undersigned were an original Bank and signatory under the Credit Agreement including, but not limited to, the obligation of a Bank to make Loans to the Company thereunder and to reimburse the Agent, for the account of the Letter of Credit Bank, for Drawings under the Letter of Credit to the extent of the Commitment of the undersigned, and to indemnify the Agent as provided therein. In this connection, the undersigned hereby represents that it has received and reviewed a copy of the Credit Agreement and hereby ratifies and approves all of the terms and conditions of the Credit Agreement and the other documents executed and delivered in connection therewith. B-1-1 3. For purposes of delivering any notice to the undersigned as a Bank under the Credit Agreement, the following sets forth the address of the undersigned for such purpose: ----------------------------- ----------------------------- ----------------------------- Telecopy No. ----------------- Attention: ------------------- 4. The undersigned acknowledges that it has, independently and without reliance upon the Agent, or on any affiliate or subsidiary thereof, or any other Bank and based on the financial statements supplied by the Company and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to become a Bank under the Credit Agreement. The undersigned also acknowledges that it will, independently and without reliance upon the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement or its respective Note. The Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide the undersigned with any credit or other information with respect to the Company or to notify the undersigned of an Event of Default except as provided in Section 9.5 of the Credit Agreement. The undersigned has not relied on the Agent as to any legal or factual matter in connection therewith or in connection with the transactions contemplated thereunder. 5. This letter agreement shall not be binding against the undersigned unless and until the Company and the Agent have executed their consent to the foregoing at the space provided below. 6. THIS LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 7. This letter agreement may be executed in any number of counterparts each of which, when taken together, shall constitute one and the same agreement. Very truly yours, [FINANCIAL INSTITUTION] By: ----------------------------------------- Name ------------------------------------ Title: ---------------------------------- The Company hereby agrees that, on the Effective Date, _____________________ ("______________") shall be a Bank under the Credit Agreement having a Commitment equal to B-1-2 $________________ pursuant to the terms and conditions set forth above. The Company agrees that ____________________________ shall have all of the rights and remedies of a Bank under the Credit Agreement as if __________________ were an original Bank signatory under the Credit Agreement including, but not limited to, the right of a Bank to receive payments of principal and interest with respect to the Loans made by the Banks and to receive the commitment and other fees payable to the Banks as provided in the Credit Agreement. Further, _______________________ shall be entitled to the indemnification provisions from the Company in favor of the Banks as provided in the Credit Agreement. DELTA AIR LINES, INC. By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- The Agent hereby consents to ___________________ becoming a Bank under the Credit Agreement pursuant to the foregoing terms and conditions [and confirms that each of the Banks also consent thereto]. BAYERISCHE HYPO- UND VEREINSBANK AG, New York Branch, as Agent By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- The Letter of Credit Bank hereby consents to ___________________ becoming a Bank under the Credit Agreement pursuant to the foregoing terms and conditions. B-1-3 BAYERISCHE HYPO- UND VEREINSBANK AG, New York Branch, as Letter of Credit Bank By: ----------------------------------------- Title: ----------------------------------- By: ----------------------------------------- Title: ----------------------------------- B-1-4 EXHIBIT B-2 FORM OF AGREEMENT OF EXISTING BANK TO REPLACE REPLACED BANK Bayerische Hypo- und Vereinsbank AG, New York Branch, as Agent 150 East 42nd Street, 30th Floor New York, New York 10017 Attention: Agency Services Ladies and Gentlemen: Reference is made to that certain Credit Agreement dated as of May 19, 2000 (as amended, modified or supplemented from time to time, the "Credit Agreement") by and among Delta Air Lines, Inc. (the "Company"), the Banks party thereto and Bayerische Hypo- und Vereinsbank AG, New York Branch, as Agent. Terms used herein and not defined herein have their respective defined meanings as set forth in the Credit Agreement. Pursuant to Section 2.17.3 of the Credit Agreement, the undersigned Bank (the "Existing Bank") hereby agrees to assume [$___________] of the obligations and Commitment of ________________________________ (the "Replaced Bank") under the Credit Agreement. Accordingly, the Commitment of the Existing Bank shall be increased from $_______________ to $________________. Except for the increase in the Commitment contemplated hereby, the Existing Bank shall continue to have all of the rights, remedies, duties and obligations of a Bank under the Credit Agreement. Very truly yours, [EXISTING BANK] By: ----------------------------------------- Title: ----------------------------------- B-2-1 The Company hereby consents to the above-described increase in the Commitment of [Insert Bank] under the Credit Agreement. DELTA AIR LINES, INC. By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- The Letter of Credit Bank hereby consents to the above-described increase in the Commitment of [Insert Bank] under the Credit Agreement. BAYERISCHE HYPO- UND VEREINSBANK AG, New York Branch, as Letter of Credit Bank By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- B-2-2 EXHIBIT C FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of __________, ______, among _______________________ (the "Assignor"), _______________________ (the "Assignee"), DELTA AIR LINES, INC., (the "Company") and BAYERISCHE HYPO- UND VEREINSBANK AG, NEW YORK BRANCH, as Agent (the "Agent"). WITNESSETH: WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Credit Agreement dated as of May 19, 2000 among the Company, the Assignor and the other Banks party thereto, as Banks, Bayerische Hypo- und Vereinsbank AG, New York Branch, as Letter of Credit Bank and the Agent (as amended, modified or supplemented from time to time, the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Company and participate in Drawings made under the Letter of Credit in an aggregate principal amount at any time outstanding not to exceed $______________. WHEREAS, Loans made to the Company by the Assignor and Reimbursement Obligations owed to the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof and a description of the interest rates and interest periods of such Loans and Reimbursement Obligations is attached as Schedule 1 hereto; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $ __________ (the "Assigned Amount"), together with a corresponding portion of the outstanding Loans and Reimbursement Obligations owed to Assignor, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: Section 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. Section 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Loans made by the Assignor outstanding at the date hereof and Reimbursement Obligations owed to Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Company and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. Section 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.* It is understood that fees accrued to the date hereof with respect to the Assigned Amount are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. Section 4. Consent of the Company. This Agreement is conditioned upon the consent of the Company, Agent and Letter of Credit Bank pursuant to Section 10.6(a) of the Credit Agreement. The execution of this Agreement by the Company, Agent and Letter of Credit Bank is evidence of this consent. Pursuant to Section 10.6(a) the Company agrees to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein. Section 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Company, or the validity and enforceability of the obligations of the Company in respect of the Credit Agreement or any Note. The Assignee (i) acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Company and (ii) designates as its address for notices the office set forth beneath its name on the signature page hereof. Section 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. - -------- * Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. -2- Section 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. , as Assignor ------------------------ By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- , as Assignee ------------------------ By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Address for Notices: ---------------------- ---------------------- ---------------------- Attention: ------------------------------- Telephone: ------------------------------- Telecopy: -------------------------------- The undersigned consent to the foregoing assignment. DELTA AIR LINES, INC. By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- -3- BAYERISCH HYPO- UND VEREINSBANK AG, NEW YORK BRANCH, as Agent By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- BAYERISCH HYPO- UND VEREINSBANK AG, NEW YORK BRANCH, as Letter of Credit Bank By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- -4- THE AGENT: BAYERISCHE HYPO- UND VEREINSBANK AG, New York Branch, as Agent By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- THE LETTER OF CREDIT BANK: BAYERISCHE HYPO- UND VEREINSBANK AG, New York Branch, as Letter of Credit Bank By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- -5- EXHIBIT D IRREVOCABLE DIRECT-PAY LETTER OF CREDIT May 19, 2000 IRREVOCABLE LETTER OF CREDIT NO. SB103387 Wilmington Trust Company, as Trustee Rodney Square North 1100 N. Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration At the request and for the account of our customer, Delta Air Lines, Inc., a Delaware corporation (the "Company"), we hereby establish in your favor, as Trustee (the "Trustee") under the Indenture of Trust dated as of August 1, 1993 (the "Indenture") among the Company, the Trustee and Fidelity Management Trust Company, as ESOP Trustee, relating to $290,194,981 in aggregate original and outstanding principal amount of Series C Guaranteed Serial ESOP Notes Due 2009 (the "Series C Notes"), issued by the Delta Family-Care Savings Plan and the trust established thereunder (together, the "ESOP") pursuant to several Note Purchase Agreements, each dated February 22, 1990 and each as amended by Amendment No. 1 thereto dated as of July 27, 1999, among the ESOP, as issuer, the Company, as guarantor, and the respective purchasers named therein (collectively, the "Note Purchase Agreements"), our direct-pay Irrevocable Letter of Credit No. SB103387 (the "Letter of Credit") in the initial amount of $420,963,733 (as reduced or reinstated from time to time in accordance with the provisions hereof, the "Stated Amount"), of which (i) an amount not exceeding $290,194,981 (as reduced from time to time in accordance with the terms hereof, the "Principal Component"), may be drawn upon with respect to payment of the unpaid principal amount of the Series C Notes or the portion of the Purchase Price (as defined in the Indenture) of the Series C Notes equal to the principal amount of Series C Notes tendered for purchase pursuant to Section 3.01 of the Indenture (hereinafter referred to as "Tendered Series C Notes"), Page 1 of 20 (ii) (x) an amount not exceeding $32,506,675 (as reduced or reinstated from time to time in accordance with the terms hereof, the "Interest Component") may be drawn upon with respect to payment of interest accrued on the Series C Notes, or the portion of the Purchase Price of Tendered Series C Notes representing interest on such Series C Notes, on or prior to their stated maturity date, and (iii) an amount not exceeding $98,262,077 (as reduced from time to time in accordance with the terms hereof, the "Premium Component") may be drawn upon with respect to payment of the Make Whole Premium Amount (as defined in the Note Purchase Agreements) payable in connection with a redemption of Series C Notes or the portion of the Purchase Price of Tendered Series C Notes representing the Make Whole Premium Amount on the principal amount of such Tendered Series C Notes. The Stated Amount, and the Principal Component, Interest Component and Premium Component, which components constitute the Stated Amount, shall be reduced from time to time, effective upon our receipt of notice from the Trustee in the form of Exhibit D, Exhibit E or Exhibit F attached hereto, by the applicable amounts specified in such notice. This Letter of Credit shall be effective immediately and shall expire on May 19, 2003 (the "Scheduled Expiration Date") unless terminated earlier in accordance with the provisions hereof or unless renewed or extended. All drawings under this Letter of Credit will be paid with our own funds. Funds under this Letter of Credit will be made available to you against receipt by us of the following items at the times required below: (A) your sight draft payable on the date such draft is drawn on us, stating on its face: "Drawn under Bayerische Hypo- und Vereinsbank AG, New York Branch, Irrevocable Letter of Credit No. SB103387" and (B) (i) if the drawing is being made with respect to the payment of principal of the Series C Notes or the portion of the Purchase Price of Tendered Series C Notes equal to the principal amount of such Tendered Series C Notes (an "A Drawing"), receipt by us of your written certificate in the form of Exhibit A attached hereto appropriately completed and signed by your Authorized Officer; (ii) if the drawing is a drawing contemplated by the second sentence of Section 2.05(a) of the Indenture (a "B Drawing"), receipt by us of your written certificate in form of Exhibit B-1 attached hereto appropriately completed and signed by your Authorized Officer; (iii) if the drawing is not a drawing referred to in clause (ii) above and is being made with respect to the payment of Interest or the portion of any Purchase Price of Tendered Series C Notes representing Interest (also a "B Drawing"), receipt by us of your written certificate in the form of Exhibit B-2 attached hereto appropriately completed and signed by your Authorized Officer; or (iv) if the drawing is being made with respect to the payment of the Make Whole Premium Amount on any Series C Notes or the portion of any Purchase Price of Tendered Series C Notes representing the Make Whole Premium Amount (a "C Page 2 of 20 Drawing"), receipt by us of your written certificate in the form of Exhibit C attached hereto appropriately completed and signed by your Authorized Officer. Presentation of such draft(s) and certificate(s) shall be made at our office located at 150 East 42nd Street, 28th Floor, New York, New York 10017, Attention: Letter of Credit Department, or at any other office which may be designated by us by written notice delivered to you. If a drawing is made by you hereunder at or prior to 10:00 A.M., Eastern time, on a business day, and provided that the requirement set forth above has been strictly satisfied and that such drawing and the documents presented in connection therewith conform to the terms and conditions hereof, payment shall be made to you, or to your designee, of the amount specified in immediately available funds, not later than 4:00 P.M., Eastern time, on the same business day or not later than 10:00 A.M., Eastern time, on such later business day as you may specify. If a drawing is made by you hereunder at or prior to 4:00 P.M., Eastern time, on a business day, and provided that the requirement set forth above has been strictly satisfied and that such drawing and the documents presented in connection therewith conform to the terms and conditions hereof, payment shall be made to you, or to your designee, of the amount specified in immediately available funds, not later than 10:00 A.M., Eastern time, on the next succeeding business day or not later than 10:00 A.M., Eastern time, on such later business day as you may specify. If a demand for payment made by you hereunder does not, in any instance, conform to the terms and conditions of this Letter of Credit, we shall give you prompt notice that the demand for payment was not effected in accordance with the terms and conditions of this Letter of Credit, stating the reasons therefor and that we will upon your instructions hold any documents at your disposal or return the same to you. Upon being notified that the demand for payment was not effected in conformity with this Letter of Credit, you may attempt to correct any such non-conforming demand for payment to the extent that you are entitled to do so. Demands for payments hereunder honored by us shall not, in the aggregate, exceed the Stated Amount, as the Stated Amount may have been reinstated by us as provided in the next paragraph. Each (x) "A Drawing" honored by the Bank hereunder shall pro tanto reduce the Principal Component by the amount in the related certificate, (y) "B Drawing" honored by the Bank hereunder shall pro tanto reduce the Interest Component by the amount thereof stated in the related certificate in the form of Exhibit B-1 or Exhibit B-2, as the case may be, and (z) "C Drawing" honored by the Bank hereunder shall pro tanto reduce the Premium Component. In addition, upon our honoring of any "A Drawing" in connection with the payment of principal of Notes or the portion of the Purchase Price of Tendered Series C Notes equal to the principal amount of such Tendered Series C Notes, the Interest Component shall be reduced by an amount that bears the same proportion to $32,506,675 as the principal amount of Series C Notes paid or purchased with the funds so drawn bears to $290,194,981. Each reduction referred to in this paragraph shall result in a corresponding reduction in the Stated Amount and the amount available to be drawn under this Letter of Credit. Page 3 of 20 All amounts drawn under this Letter of Credit and paid by us which are identified in a Certificate for "B Drawing" in the form of Exhibit B-1 or Exhibit B-2 accompanying the draft pursuant to which such payment was made shall be automatically reinstated on the tenth calendar day following the date of payment by us of the amount so drawn and shall not result in a reduction in the Stated Amount of this Letter of Credit or the Interest Component of this Letter of Credit unless, prior to the expiration of such ten day period, we shall have delivered to you at your address to which this Letter of Credit is addressed (or to such other address as you shall have specified in writing to us) a Notice of Non-Reinstatement in the form attached as Exhibit I. Only you or your successor as Trustee may make a drawing under this Letter of Credit. Upon the payment to you, your designee or your account of the amount demanded hereunder, we shall be fully discharged of our obligation under this Letter of Credit with respect to such demand for payment and we shall not thereafter be obligated to make any further payments under this Letter of Credit in respect of such demand for payment to you or any other person who may have made to you or makes to you a demand for payment of principal of, interest or Make Whole Premium Amount on, any Series C Note. By paying to you an amount demanded in accordance herewith, we make no representation as to the correctness of the amount demanded in any sight draft(s) or your calculations or your representations in any certificate required under this Letter of Credit. This Letter of Credit applies only to the payment of principal of and Make Whole Premium Amount, if any, and up to 390 days' interest accruing on the Series C Notes. Upon the earliest of (i) the Scheduled Expiration Date, (ii) the honoring by us of (x) a drawing hereunder with respect to the Purchase Price of any Series C Notes or (y) the final drawing otherwise available hereunder, and (iii) our receipt of a certificate signed by your Authorized Officer in the form of Exhibit G attached hereto, this Letter of Credit shall automatically terminate and shall be delivered to us for cancellation. Communications with respect to this Letter of Credit shall be in writing and shall be addressed to us at the address set forth in the seventh preceding paragraph, specifically referring thereon to this Letter of Credit by number. Notwithstanding anything to the contrary contained in Rule 6 of the ISP 98 (as defined below), this Letter of Credit is transferable in its entirety (but not in part) to any transferee who has succeeded you as Trustee under the Indenture and may be successively so transferred. Transfer of this Letter of Credit to such transferee shall be effected by the presentation to us of this Letter of Credit accompanied by a certificate in the form of Exhibit H attached hereto appropriately completed. As used herein (a) "Authorized Officer" shall mean any person signing as one of your Vice Presidents, Assistant Vice Presidents, Senior Financial Services Officers or Financial Services Officers and (b) "business day" shall mean any day other than (i) a Saturday, Sunday Page 4 of 20 or legal holiday in the State of New York or (ii) a day on which banks in New York, New York are authorized or required to close. Page 5 of 20 This Letter of Credit sets forth in full our undertaking, and such undertaking shall not in any way be modified, amended, amplified or limited by reference to any document, instrument or agreement referred to herein (including, without limitation, the Series C Notes), except only the drafts(s) and certificate(s) referred to herein; and any such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement except for such draft(s) and certificate(s). This Letter of Credit is subject to the International Standby Practices 1998, published by the Institute of International Banking Law and Practice, Inc. (the "ISP 98"). This Letter of Credit shall be deemed to be a contract made under the laws of the State of New York and shall, as to matters not governed by the ISP 98, be governed by and construed in accordance with the laws of such State. Very truly yours, BAYERISCHE HYPO- UND VEREINSBANK AG, New York Branch By: ----------------------------------------- Title: ----------------------------------- By: ----------------------------------------- Title: ----------------------------------- Page 6 of 20 EXHIBIT A CERTIFICATE FOR "A DRAWING" The undersigned, a duly authorized officer of _________________________ (the "Trustee"), hereby certifies to Bayerische Hypo- und Vereinsbank AG, New York Branch (the "Bank"), with reference to Irrevocable Letter of Credit No. SB103387 (the "Letter of Credit"; any capitalized term used herein and not defined herein shall have its respective meaning as set forth in the Letter of Credit) issued by the Bank in favor of the Trustee, that: (1) The Trustee is the Trustee under the Indenture for the holders of the Series C Notes. (2) The Trustee is making a drawing under the Letter of Credit with respect to the payment of (check one) [ ] principal of the Series C Notes [ ] the portion of the Purchase Price of the Tendered Series C Notes equal to the principal amount of such Tendered Series C Notes. (3) The amount of the payment identified in paragraph (2) above, that is, or within two business days of the date hereof will be, due and payable is $____________ and the amount of the draft accompanying this Certificate does not exceed such amount and such amount does not exceed the amount available on the date hereof to be drawn under the Letter of Credit in respect of the payment identified in paragraph (2) above. (4) The amount of the draft accompanying this Certificate was computed in accordance with the terms and conditions of the Series C Notes, the Note Purchase Agreements, the Indenture and the Letter of Credit. (5) Upon receipt by the undersigned of the amount demanded hereby, (a) the undersigned will apply the same directly to the payment when due of the principal of the Series C Notes or the portion of the Purchase Price of Tendered Series C Notes representing the principal amount of such Tendered Series C Notes, as indicated in paragraph (2) above, (b) no portion of said amount shall be applied by the undersigned for any other purpose and (c) no portion of said amount shall be commingled with other funds held by the undersigned. Page 7 of 20 IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the _______ day of __________________, ______. [NAME OF TRUSTEE] By Title: Page 8 of 20 EXHIBIT B-1 CERTIFICATE FOR "B DRAWING" The undersigned, a duly authorized officer of _____________________________ (the "Trustee"), hereby certifies to Bayerische Hypo- und Vereinsbank AG, New York Branch (the "Bank"), with reference to Irrevocable Letter of Credit No. SB103387 (the "Letter of Credit"; any capitalized term used herein and not defined herein shall have its respective meaning as set forth in the Letter of Credit) issued by the Bank in favor of the Trustee, that: (1) The Trustee is the Trustee under the Indenture for the holders of the Notes. (2) The Trustee is making a drawing under the Letter of Credit with respect to the payment of (check one) [ ] interest accrued on the Series C Notes since the most recent Interest Payment Date (as defined in the Indenture) [ ] the Monthly Interest Drawing Amount (as defined in the Indenture). (3) The amount of the payment identified in paragraph (2) above that has so accrued in accordance with the terms of the Series C Notes is: $____________, and the amount of the draft accompanying this Certificate does not exceed such amount and such amount does not exceed the amount available on the date hereof to be drawn under the Letter of Credit in respect of the payment identified in paragraph (2) above. (4) The amount of the draft accompanying this Certificate was computed in accordance with the terms and conditions of the Series C Notes, the Note Purchase Agreements, the Indenture and the Letter of Credit. (5) Upon receipt by the undersigned of the amount demanded hereby, (a) the undersigned will deposit the same in the Interest Reserve Account (as defined in the Indenture), (b) no portion of said amount shall be applied by the undersigned for any other purpose and (c) no portion of said amount shall be commingled with other funds held by the undersigned. Page 9 of 20 IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the _______ day of __________________, ____. [NAME OF TRUSTEE] By Title: Page 10 of 20 EXHIBIT B-2 CERTIFICATE FOR "B DRAWING" The undersigned, a duly authorized officer of __________ (the "Trustee"), hereby certifies to Bayerische Hypo- und Vereinsbank AG, New York Branch (the "Bank"), with reference to Irrevocable Letter of Credit No. SB103387 (the "Letter of Credit"; any capitalized term used herein and not defined herein shall have its respective meaning as set forth in the Letter of Credit) issued by the Bank in favor of the Trustee, that: (1) The Trustee is the Trustee under the Indenture for the holders of the Series C Notes. (2) The Trustee is making a drawing under the Letter of Credit with respect to the payment of (check one) [ ] Interest accrued on the Series C Notes [ ] the portion of the Purchase Price of Tendered Series C Notes representing Interest on such Notes. (3) The amount of the payment identified in paragraph (2) above that is, or within two business days of the date hereof will be, due and payable is: $__________, and the amount of the draft accompanying this Certificate does not exceed such amount and such amount does not exceed the amount available on the date hereof to be drawn under the Letter of Credit in respect of the payment identified in paragraph (2) above. (4) The amount of the draft accompanying this Certificate was computed in accordance with the terms and conditions of the Series C Notes, the Note Purchase Agreements, the Indenture and the Letter of Credit. Page 11 of 20 (5) Upon receipt by the undersigned of the amount demanded hereby, (a) the undersigned will apply the same directly to the payment when due of interest on the Series C Notes or the portion of the Purchase Price representing interest on Tendered Series C Notes, as indicated in paragraph (2) above, (b) no portion of said amount shall be applied by the undersigned for any other purpose and (c) no portion of said amount shall be commingled with other funds held by the undersigned. IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the ________ day of ____________ ______. [NAME OF TRUSTEE] By: ----------------------------------------- Title: ----------------------------------- Page 12 of 20 EXHIBIT C CERTIFICATE FOR "C DRAWING" The undersigned, a duly authorized officer of __________ (the "Trustee"), hereby certifies to Bayerische Hypo- und Vereinsbank AG, New York Branch (the "Bank"), with reference to Irrevocable Letter of Credit No. SB103387 (the "Letter of Credit"; any capitalized term used herein and not defined herein shall have its respective meaning as set forth in the Letter of Credit) issued by the Bank in favor of the Trustee, that: (1) The Trustee is the Trustee under the Indenture for the holders of the Series C Notes. (2) The Trustee is making a drawing under the Letter of Credit with respect to the payment of (check one) [ ] the Make Whole Premium Amount payable in connection with a redemption or repurchase of Series C Notes [ ] the portion of the Purchase Price of Tendered Series C Notes representing the Make Whole Premium Amount on the principal amount of such Tendered Series C Notes. (3) The amount of the payment identified in paragraph (2) above, that is, or within two business days of the date hereof will be, due and payable is $_________, and the amount of the draft accompanying this Certificate does not exceed such amount. (4) The amount being drawn under the draft accompanying this Certificate is $___________, and such amount does not exceed the amount available on the date hereof to be drawn under the Letter of Credit in respect of the payment identified in paragraph (2) above. (5) The amount of the draft accompanying this Certificate was computed in accordance with the terms and conditions of the Series C Notes, the Note Purchase Agreements, the Indenture and the Letter of Credit. Page 13 of 20 (6) Upon receipt by the undersigned of the amount demanded hereby, (a) the undersigned will apply the same directly to the payment when due of the Make Whole Premium Amount on the Series C Notes or the portion of the Purchase Price of Tendered Series C Notes representing the Make Whole Premium Amount on the principal amount of such Tendered Series C Notes, as indicated in paragraph (2) above, (b) no portion of said amount shall be applied by the undersigned for any other purpose and (c) no portion of said amount shall be commingled with other funds held by the undersigned. IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the _________ day of ____________ ______. [NAME OF TRUSTEE] By: ----------------------------------------- Title: ----------------------------------- Page 14 of 20 EXHIBIT D INSTRUCTION TO REDUCE STATED AMOUNT AND PREMIUM COMPONENT -------------, ---- Bayerische Hypo- und Vereinsbank AG, New York Branch 150 East 42nd Street, 28th Floor New York, New York 10017 Attention: Letter of Credit Department Re: Irrevocable Letter of Credit No. SB103387 Gentlemen: We refer to the above-referenced Irrevocable Letter of Credit (the "Letter of Credit"), issued to us in our capacity as Trustee under the Indenture of Trust (the "Indenture") dated as of August 1, 1993 among Delta Air Lines, Inc. (the "Company"), Fidelity Management Trust Company and Wilmington Trust Company. Terms used herein and not otherwise defined herein are used herein as defined in the Letter of Credit. Pursuant to Section 2.04(b) of the Indenture, we hereby authorize and instruct you to reduce each of the Stated Amount and the Premium Component by $__________(1) Very truly yours, [Name of Trustee] By: ----------------------------------------- Title: ----------------------------------- - ---------------- (1) Insert amount of Premium Component reduction specified in the Officer's Certificate delivered pursuant to Section 2.04(b) of the Indenture. Page 15 of 20 EXHIBIT E INSTRUCTION TO REDUCE STATED AMOUNT AND PRINCIPAL AND INTEREST COMPONENTS -------------, ---- Bayerische Hypo- und Vereinsbank AG, New York Branch 150 East 42nd Street, 28th Floor New York, New York 10017 Attention: Letter of Credit Department Re: Irrevocable Letter of Credit No. SB103387 Gentlemen: We refer to the above-referenced Irrevocable Letter of Credit (the "Letter of Credit"), issued to us in our capacity as Trustee under the Indenture of Trust (the "Indenture") dated as of August 1, 1993 among Delta Air Lines, Inc. (the "Company"), Fidelity Management Trust Company and Wilmington Trust Company. Terms used herein and not otherwise defined herein are used herein as defined in the Letter of Credit. Pursuant to Section 2.04[(c)] [(d)] of the Indenture, we hereby authorize and instruct you to reduce the Stated Amount by $__________,(1) and to reduce (i) the Principal Component by $__________,(2) and - ---------------- (1) Insert sum of component reductions set forth below. (2) Insert, as appropriate, (x) aggregate principal amount of Notes specified as having been purchased by the Company or one or more of its Subsidiaries or Affiliates (as such terms are defined in the Note Purchase Agreements (as defined in the Indenture)), or the ESOP, in the Officer's Certificate delivered pursuant to Section 2.04(c) or (y) aggregate principal amount of Notes specified as covered by an Approved Credit Enhancement (as defined in the Note Purchase Agreements) other than the Letter of Credit in the Officer's Certificate delivered pursuant to Section 2.04(d). Page 16 of 20 (ii) the Interest Component by $___________.(3) Very truly yours, [NAME OF TRUSTEE] By: ----------------------------------------- Title: ----------------------------------- - --------------- (3) Insert an amount that bears the same proportion to $32,506,675 as the principal amount of Series C Notes specified in the Officer's Certificate referred to above bears to $290,194,981. Page 17 of 20 EXHIBIT F INSTRUCTION TO REDUCE INTEREST COMPONENT -------------, ---- Bayerische Hypo- und Vereinsbank AG, New York Branch 150 East 42nd Street, 28th Floor New York, New York 10017 Attention: Letter of Credit Department Re: Irrevocable Letter of Credit No. SB103387 Gentlemen: We refer to the above-referenced Irrevocable Letter of Credit (the "Letter of Credit"), issued to us in our capacity as Trustee under the Indenture of Trust (the "Indenture") dated as of August 1, 1993 among Delta Air Lines, Inc. (the "Company"), Fidelity Management Trust Company and Wilmington Trust Company. Terms used herein and not otherwise defined herein are used herein as defined in the Letter of Credit. Pursuant to Section 2.05(a) of the Indenture, we hereby authorize and instruct you to reduce the Stated Amount by $__________(1), and to reduce the Interest Component by $__________. Very truly yours, [NAME OF TRUSTEE] By: ----------------------------------------- Title: ----------------------------------- - -------------- (1) Insert amount of Interest Component reduction specified in the Officer's Certificate delivered pursuant to Section 2.05(a) of the Indenture. Page 18 of 20 EXHIBIT G INSTRUCTION TO TERMINATE LETTER OF CREDIT -------------, ------ Bayerische Hypo- und Vereinsbank AG, New York Branch 150 East 42nd Street, 28th Floor New York, New York 10017 Attention: Letter of Credit Department Re: Irrevocable Letter of Credit No. SB103387 Gentlemen: We refer to the above-referenced Irrevocable Letter of Credit, issued to us in our capacity as Trustee under the Indenture of Trust (the "Indenture") dated as of August 1, 1993, among Delta Air Lines, Inc., Fidelity Management Trust Company and Wilmington Trust Company. [An event described in clause [(i)] [(ii)] [(iii)] [(iv)] [(v)] of Section 2.04(a) of the Indenture has occurred] [ We have received an Officer's Certificate (as defined in the Indenture) pursuant to clause (vi) of Section 2.04(a) of the Indenture to the effect that the Letter of Credit is to be terminated on the date hereof]1 and we are returning the Letter of Credit herewith marked canceled. Very truly yours, [NAME OF TRUSTEE] By: ----------------------------------------- Title: ----------------------------------- - -------------- (1) Bracketed language to be inserted as appropriate. Page 19 of 20 EXHIBIT H INSTRUCTION TO TRANSFER Bayerische Hypo- und Vereinsbank AG, New York Branch 150 East 42nd Street, 28th Floor New York, New York 10017 Attention: Letter of Credit Department Re: Irrevocable Letter of Credit No. SB103387 Gentlemen: For value received, the undersigned beneficiary hereby irrevocably instructs you to transfer to: (Name of Transferee) ----------------------------- (Address) all rights of the undersigned beneficiary to draw under the above-captioned Letter of Credit (the "Letter of Credit"). The transferee has succeeded the undersigned as Trustee under the Indenture of Trust between Delta Air Lines, Inc., Fidelity Management Trust Company, as ESOP Trustee, and Wilmington Trust Company, as Trustee, dated as of August 1, 1993. By this transfer, all rights of the undersigned beneficiary in the Letter of Credit are transferred to the transferee and the transferee shall hereafter have the sole rights as beneficiary thereof. The Letter of Credit is returned herewith and in according therewith we ask that this transfer be effected. Very truly yours, [ ] ----------------- By: ----------------------------------------- [Name and Title] Page 20 of 20 EXHIBIT I NOTICE OF NON-REINSTATEMENT [Name and address of Trustee] Re: Irrevocable Letter of Credit No. SB103387 The undersigned, duly authorized officers of Bayerische Hypo-und Vereinsbank, AG, New York Branch ("HypoVereinsbank"), with respect to the Irrevocable Letter of Credit referred to above (the "Credit"), (a) hereby notify you that an Event of Default (as therein defined) under the Credit Agreement (as defined in the Indenture (as defined in the Credit)) has been declared by the Majority Banks (as defined in the Credit Agreement) pursuant to Article VII of the Credit Agreement and written notice thereof has been received by HypoVereinsbank or an Event of Default specified in Section 7.1(c) of the Credit Agreement has occurred and (b) hereby direct you to declare a Purchase Date in accordance with the terms of the Indenture. Sincerely, BAYERISCHE HYPO- UND VEREINSBANK AG, New York Branch By: ----------------------------------------- Title: ----------------------------------- Date: -------------------------- By: ----------------------------------------- Title: ----------------------------------- Page 21 of 20 EXHIBIT E-1 FORM OF OPINION OF ASSOCIATE GENERAL COUNSEL OF DELTA May 19, 2000 To the Banks, the Letter of Credit Bank and Agent Referred to Below c/o Bayerische Hypo- und Vereinsbank AG, New York Branch, as Agent 150 East 42nd Street, 30th Floor New York, New York 10017 Ladies and Gentlemen: This opinion is delivered to you in connection with the Credit Agreement dated as of May 19, 2000 (the "Credit Agreement") among Delta Air Lines, Inc., a Delaware corporation (the "Company"), each of the financial institutions initially a signatory thereto, together with those assignees pursuant to Section 10.6 thereof (the "Banks"), and Bayerische Hypo- und Vereinsbank AG, New York Branch, as Letter of Credit Bank and Agent. This opinion is given pursuant to clause (b) of Section 3.1 of the Credit Agreement. Capitalized terms used herein and not otherwise defined herein have the same meaning as ascribed to them in the Credit Agreement. In connection with the opinions expressed below, I or counsel under my general supervision have examined the Credit Agreement and originals or copies, certified or otherwise identified to my satisfaction, of such other agreements, documents, certificates and statements of government officials and other papers as I deemed necessary or advisable as a basis for such opinions. In all such examinations, I have assumed the genuineness of all signatures (other than those on behalf of the Company), the legal capacity of natural persons, the authenticity of all documents submitted to me as originals and the conformity to original documents of all documents submitted to me as certified or photostatic copies, and as to certificates and telegraphic and telephonic confirmations given by public officials, I have assumed the same to have been properly given and to be accurate. I have also assumed that all documents and instruments executed by the parties to this transaction (other than the Company) have been duly and validly executed and delivered by such parties; that the agreements entered into as part of this transaction are the legal, valid and binding obligations of such parties, enforceable against such parties in accordance with their terms; and that such parties have obtained all required consents, permits and approvals required to enter into and perform such documents and instruments. Based on the foregoing, and subject to any exceptions or qualifications expressly noted herein, I am of the opinion that: 1. The Company is a corporation duly organized, existing, and in good standing under the laws of the State of Delaware, and the execution, delivery and performance of the Credit Agreement is within the Company's corporate powers. 2. The Company has the necessary corporate power to carry on its business as now being conducted. 3. The Company is an "air carrier" within the meaning of the Federal Aviation Act of 1958, as amended, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each jurisdiction in the United States of America (other than that of its incorporation) in which it has intrastate routes or has a principal office or major overhaul facility and where the failure to so qualify would have a material adverse effect on the financial condition or operations of the Company and its subsidiaries, taken as a whole. 4. The Company has title to all of the flight equipment which it owns free and clear of all liens and encumbrances except as permitted by the Credit Agreement. 5. To my knowledge without independent inquiry, all leases of flight equipment to which the Company is a party are valid and binding upon the lessors. 6. No consent of stockholders of the Company to the mortgages, pledges, encumbrances, liens or other charges referred to in Section 5.6 of the Credit Agreement is required by law or by the Certificate of Incorporation or By-laws of the Company or otherwise. 7. All corporate steps necessary to authorize the execution and delivery of the Credit Agreement and the Company's performance thereunder have been taken, and no consent, approval, authorization, permit or license from any federal, state or other regulatory authority is required in connection therewith. The Credit Agreement has been duly executed and delivered by the Company. 8. The borrowings pursuant to the Credit Agreement, the issuance of the Letter of Credit for the account of the Company and the execution and delivery of the Credit Agreement by the Company will not violate any provision of the General Corporation Law of the State of Delaware or the Company's Certificate of Incorporation or By-laws or any material agreement, -2- indenture, note or other instrument evidencing any indebtedness for money borrowed to which the Company is a party or by which the Company or its assets is bound. The foregoing opinions are subject to the qualification that I am qualified to practice law in the State of Georgia and I do not purport to be an expert on, or to express any opinion herein concerning, any laws other than the laws of the State of Georgia, the General Corporation Laws of the State of Delaware and the federal laws of the United States. The opinions expressed herein are furnished to you in connection with the above matter, are for your sole benefit, and may not be relied upon by any other person without my prior written consent. Sincerely, -3- EXHIBIT E-2 FORM OF OPINION OF DAVIS POLK & WARDWELL May 19, 2000 To the Banks, the Letter of Credit Bank and Agent Referred to Below c/o Bayerische Hypo- undVereinsbank AG, New York Branch, as Agent 150 East 42nd Street, 30th Floor New York, New York 10017 Ladies and Gentlemen: We have acted as counsel for Delta Air Lines, Inc., a Delaware corporation (the "Company"), in connection with the Credit Agreement dated as of May 19, 2000 (the "Credit Agreement"), among the Company, each of the financial institutions initially a signatory thereto, together with those assignees pursuant to Section 10.6 thereof (the "Banks"), and Bayerische Hypo- under Vereinsbank AG, New York Branch, as Letter of Credit Bank and Agent. This opinion is being rendered to you at the request of our client pursuant to clause (b) of Section 3.1 of the Credit Agreement. Capitalized terms used herein and not otherwise defined herein have the meanings given to them in the Credit Agreement. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and of the Company and other instruments, and have conducted such other investigations of fact and law as we have deemed necessary for the purposes of rendering this opinion. For purposes of this opinion, we have assumed the authenticity of all documents submitted to us as originals, the conformity to originals of all documents submitted to us as copies, the capacity of all natural persons and the genuineness of all signatures. Based upon the foregoing, we are of the opinion that: (i) The execution, delivery and performance by the Company of the Credit Agreement are within the Company's corporate powers and the Credit Agreement has been duly executed and delivered by the Company pursuant to due authorization. (ii) The Credit Agreement constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). We express no opinion, however, as to the validity, priority or perfection of any security interest contemplated to be created pursuant to Section 2.19, Section 5.6 or clause (iii) of the first sentence of Section 7.1 of the Credit Agreement. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. Insofar as the foregoing opinion involves matters governed by the laws of the State of Georgia, we have, with your consent, relied, without independent verification, on the opinion of Leslie P. Klemperer, Esq., Associate General Counsel of the Company, dated the date hereof and delivered to you. This opinion is rendered solely to you in connection with the above matter at the request of the Company. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person without our prior written consent. Very truly yours, -2- SCHEDULE I FUNDED DEBT(1) 1. 6.65-9.15% Notes with maturities ranging from 2000 to 2004 2. [INTENTIONALLY OMITTED] 3. 8.50% Notes due March 15, 2002 4. 8.125% Notes due July 1, 2039 5. 7.7% Notes due December 15, 2005 6. 7.9% Notes due December 15, 2009 7. 8.3% Notes due December 15, 2029 8. 8.10% Guaranteed Serial ESOP Notes, payable in installments between 2002 and 2009 9. 10.125% Debentures due May 15, 2010 10. 10.375% Debentures due February 1, 2011 11. 9.00% Debentures due May 15, 2016 12. 9.75% Debentures due May 15, 2021 13. 9.25% Debentures due March 15, 2022 14. 10.375% Debentures due December 15, 2022 15. Development Authority of Fulton County Loan Agreement dated May 1, 1998 16. Development Authority of Fulton County Loan Agreement dated September 1, 1992 17. Development Authority of Clayton County Loan Agreement dated January 1, 1988 - -------------- (1) All of which is unsecured except Item 18(b). 18. Capital Leasees: (a) Forty-One B737-200 Aircraft Leases (b) nine Western Aircraft Leases (4 B737-200; 3 B737-300 and 2 B727-200) 19. Credit Agreement, dated as of May 2, 1997, among the Company, the several financial institutions which are parties hereto and Nationsbank, N.A. (South) as Agent Bank. 20. Credit Agreement, dated as of March 22, 1999, among the Company, the several financial institutions party thereto, The Chase Manhattan Bank and Citibank, N.A. SECURED OBLIGATIONS 1. $96,500,000 The Port Authority of New York and New Jersey Special Project Bonds, Series 1R, Delta Air Lines, Inc. Project 2. Nine Western Air Lines Capital Leases (4 B737-200; 3 B737-300 and 2 B727-200) 3. SATO Guaranty (pledge of Company's government receivables to provide collateral for SATO credit agreement) 4. $58,000,000 Various Credit Agreements by 27 EMB-120 Brasilias at Atlantic Southeast Airlines, Inc. 5. $100,600,000 Various Credit Agreements by 10 CJRs and 8 Brasilias at Comair Airlines, Inc. 6. JFK Financing* 7. Boston Financing* - -------------- * As of the Effective Date of this Agreement, the Company is considering various means for financing proposed airport facilities projects at Boston Logan International Airport (BOS) and John F. Kennedy International Airport (JFK). Since the Company has not yet determined the structure for such financings, the intent of these provisions is to include such financings in the lists set forth in these schedules once such financings occur, if ever, and to the extent applicable to the structures ultimately selected by the Company. -2- SCHEDULE II SUBSIDIARIES OF DELTA AIR LINES, INC. Aero Assurance Ltd. ASA Holdings, Inc. (wholly-owned subsidiary of Delta Air Lines Holdings, Inc.) ASA Investments, Inc. (wholly-owned subsidiary of ASA Holdings, Inc.) Atlantic Southeast Airlines, Inc. (wholly-owned subsidiary of ASA Holdings, Inc.) CMD, Inc. (wholly-owned subsidiary of Comair Services, Inc.) Comair Acquisition Co., Inc. (wholly-owned subsidiary of Comair Holdings, Inc.) Comair Holdings, Inc. (wholly-owned subsidiary of Delta Air Lines Holdings, Inc.) Comair, Inc. (wholly-owned subsidiary of Comair Holdings, Inc.) Comair Investment Co., Inc. (wholly-owned subsidiary of Comair Holdings, Inc.) Comair Services, Inc. (wholly-owned subsidiary of Comair Holdings, Inc.) Comair Aviation Academy, Inc. (wholly-owned subsidiary of Comair Services, Inc.) Crown Rooms, Inc. Crown Rooms of Texas, Inc. (wholly-owned subsidiary of Crown Rooms, Inc.) CVG Aviation, Inc. (wholly-owned subsidiary of Comair Services, Inc.) DAL Aircraft Trading, Inc. DAL Foreign Sales, Inc. DAL Moscow, Inc. (wholly-owned subsidiary of Delta Air Lines Holdings, Inc.) DAL Receivables, LLC DASH Management, Inc. Delta Air Lines Holdings, Inc. -1- Delta Air Lines, Inc. and Pan American World Airways, Inc.-Unterst, tzungskasse GMBH Delta Air Lines Global Services, Inc. Delta Air Lines Receivables Corporation Delta Benefits Management, Inc. (formerly known as Delta Air Lines Funding Corporation) (Class B Shares, representing 10% of the equity in DBMI, are owned by Aon Group, Inc.) Delta Capital Markets, Inc. Delta Connection, Inc. Delta Loyalty Management Services, Inc. (formerly known as Delta Tel, Inc.) Delta Technology, Inc. Delta Ventures III, Inc. (wholly-owned subsidiary of Delta Air Lines Holdings, Inc.) Epsilon Trading, Inc. Guardant, Inc. Jason Vermoegensverwaltungs GmbH (wholly-owned subsidiary of TransQuest Holding, Inc.) TransQuest Holding, Inc. (wholly-owned subsidiary of Delta Technology, Inc.) TransQuest UK Ltd. (wholly-owned subsidiary of TransQuest Holding, Inc.) -2- SCHEDULE III GUARANTY LIABILITIES $88,000,000 Regional Airports Improvement Corporation 6.35% Facilities Sublease Refunding Revenue Bonds, Issue of 1996, Delta Air Lines, Inc. (Los Angeles International Airport). SATO Guaranty (Company's allocable share of $25 million SATO revolving credit facility, used by SATO to advance payments to participating airlines on government receivables) JFK Financing* Boston Financing* - -------------- * As of the Effective Date of this Agreement, the Company is considering various means for financing proposed airport facilities projects at Boston Logan International Airport (BOS) and John F. Kennedy International Airport (JFK). Since the Company has not yet determined the structure for such financings, the intent of these provisions is to include such financings in the lists set forth in these schedules once such financings occur, if ever, and to the extent applicable to the structures ultimately selected by the Company. FIRST AMENDMENT TO CREDIT AGREEMENT The First Amendment to Credit Agreement (the "Amendment") dated as of August 29, 2001 among Delta Air Lines, Inc. (the "Company"), the Banks party hereto, and Bayerische Hypo-und Vereinsbank AG, New York Branch, as Letter of Credit Bank and Agent. W I T N E S S E T H: WHEREAS, the Company, the Banks and Bayerische Hypo-und Vereinsbank AG, New York Branch, as Letter of Credit Bank and Agent, have heretofore executed and delivered a Credit Agreement dated as of May 19, 2000 (the "Agreement"); WHEREAS, Moody's has required an increase of $5,731,052 in the Premium Component of the Letter of Credit; WHEREAS, the Company has requested that the Banks increase the Total Commitments of the Banks under the Agreement from $417,709,254 to $423,709,254 by increasing the Commitment of The Chase Manhattan Bank by $6,000,000; and WHEREAS, the parties hereto desire to amend the Agreement as provided herein; NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree that the Agreement shall be and hereby is amended as follows: 1. The definition "Total Commitments of the Banks" appearing in Section 1.1 of the Agreement is hereby amended in its entirety and as so amended shall read as follows: "Total Commitments of the Banks" shall mean the aggregate of each Bank's Commitment which on the date of the First Amendment hereto totals $423,709,254. 2. Section 1.1 of the Agreement is hereby further amended by inserting in proper alphabetical order the following new defined term: "First Amendment" shall mean the First Amendment to Credit Agreement dated as of August 29, 2001 among Delta Air Lines, Inc., the Banks party thereto and Bayerische Hypo-und Vereinsbank AG, New York Branch, as Letter of Credit Bank and Agent. 3. The Commitment of The Chase Manhattan Bank appearing on its signature page to the Agreement is hereby amended in its entirety and as so amended shall be: $23,000,000. 4. The Company hereby requests that the Letter of Credit Bank amend the Letter of Credit to increase the Issued Amount to $423,709,254 (such increase to constitute an increase in the Premium Component referred to in the Letter of Credit from $95,007,598 to $101,007,598) by executing an amendment to the Letter of Credit in the form of Exhibit A hereto and deliver such amendment to the Trustee. The Letter of Credit Bank hereby agrees that, effective on and as of the date of effectiveness of this Amendment, the Letter of Credit shall be so amended. 5. This Amendment shall become effective on the date the Agent shall have received counterparts hereof executed by the Company, Letter of Credit Bank and each Bank (or, in the case of any party as to which an executed counterpart hereof shall not have been received, receipt by the Agent in form satisfactory to it of facsimile or other written confirmation from such party of execution of a counterpart hereof by such party). 6.1. To induce the Agent, Letter of Credit Bank and the Banks to enter into this Amendment, the Company represents and warrants to the Agent, Letter of Credit Bank and the Banks that: (a) the representations and warranties contained in Sections 4.1, 4.2, 4.3, 4.5, 4.6, 4.9(a), 4.9(c), 4.10, 4.11, 4.13 and 4.14 of the Agreement, are true and correct in all material respects as of the date hereof with the same effect as though made on the date hereof; (b) after giving effect to this Amendment, no Default or Event of Default exists; (c) this Amendment has been duly authorized by all necessary corporate action and duly executed and delivered by the Company, and the Agreement, as amended by this Amendment, and each of the other Loan Documents are the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency fraudulent conveyance, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law); and (d) no consent or approval, authorization, permit or license from any federal, state or other regulatory authority which has not been obtained is required for, and in the absence of which would materially adversely effect, the legal and valid execution and delivery or performance by the Company of this Amendment or the performance by the Company of the Agreement, as amended by this Amendment, or any other Loan Document to which it is a party. 6.2. This Amendment may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Amendment. 6.3. Except as specifically provided above, the Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed in all respects. The execution, delivery, and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power, or remedy of the Agent, Letter of Credit Bank or any Bank under the Credit Agreement or any of the other Loan Documents, nor constitute a waiver or modification of any provision of any of the other Loan Documents. 6.4. All defined terms used herein and not defined herein shall have the same meaning herein as in the Agreement or the Letter of Credit (as defined in the Agreement). -2- 6.5. This Amendment and the rights and obligations of the parties hereunder shall be construed in accordance with and be governed by the law of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written. DELTA AIR LINES, INC. By: ----------------------------------------- Title: ----------------------------------- BAYERISCHE HYPO- UND VEREINSBANK AG, New York Branch, in its individual capacity as a Bank and as Agent and Letter of Credit Bank By: ----------------------------------------- Title: ----------------------------------- By: ----------------------------------------- Title: ----------------------------------- -3- ABN AMRO BANK N.V. By: ----------------------------------------- Title: ----------------------------------- By: ----------------------------------------- Title: ----------------------------------- BANK ONE, NA By: ----------------------------------------- Title: ----------------------------------- BANQUE NATIONALE DE PARIS By: ----------------------------------------- Title: ----------------------------------- -4- CREDIT INDUSTRIEL ET COMMERCIAL By: ----------------------------------------- Title: ----------------------------------- By: ----------------------------------------- Title: ----------------------------------- CREDIT LYONNAIS, New York Branch By: ----------------------------------------- Title: ----------------------------------- DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG By: ----------------------------------------- Title: ----------------------------------- By: ----------------------------------------- Title: ----------------------------------- -5- THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ----------------------------------------- Title: ----------------------------------- THE MITSUBISHI TRUST & BANKING CORPORATION By: ----------------------------------------- Title: ----------------------------------- THE SANWA BANK, LIMITED By: ----------------------------------------- Title: ----------------------------------- THE TOKAI BANK LIMITED NEW YORK BRANCH By: ----------------------------------------- Title: ----------------------------------- -6- BANCA COMMERCIALE ITALIANA, New York Branch By: ----------------------------------------- Title: ----------------------------------- By: ----------------------------------------- Title: ----------------------------------- THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By: ----------------------------------------- Title: ----------------------------------- By: ----------------------------------------- Title: ----------------------------------- THE BANK OF TOKYO-MITSUBISHI, LTD. -- New York Branch By: ----------------------------------------- Title: ----------------------------------- -7- THE CHASE MANHATTAN BANK By: ----------------------------------------- Title: ----------------------------------- CITIBANK, N.A. By: ----------------------------------------- Title: ----------------------------------- COMMERZBANK AG By: ----------------------------------------- Title: ----------------------------------- By: ----------------------------------------- Title: ----------------------------------- -8- LANDESBANK SACHSEN GIROZENTRALE By: ----------------------------------------- Title: ----------------------------------- By: ----------------------------------------- Title: ----------------------------------- NORDDEUTSCHE LANDESBANK GIRZENTRALE, New York Branch and/or Cayman Islands Branch By: ----------------------------------------- Title: ----------------------------------- By: ----------------------------------------- Title: ----------------------------------- WESTDEUTSCHE LANDESBANK GIROZENTRALE, New York Branch By: ----------------------------------------- Title: ----------------------------------- By: ----------------------------------------- Title: ----------------------------------- -9- THE DAI ICHI KANGYO BANK, LIMITED By: ----------------------------------------- Title: ----------------------------------- DEUTSCHE VERKEHRSBANK AG By: ----------------------------------------- Title: ----------------------------------- By: ----------------------------------------- Title: ----------------------------------- -10- EXHIBIT A FIRST AMENDMENT TO LETTER OF CREDIT Wilmington Trust Company As Trustee Rodney Square North 1100 N. Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Re: Delta Air Lines, Inc. Ladies and Gentlemen: Reference is hereby made to that certain Irrevocable Letter of Credit No. SB103387 dated May 19, 2000 (the "Letter of Credit"), established by Bayerische Hypo-Und Vereinsbank AG, New York Branch, in your favor as beneficiary. We hereby notify you that the Letter of Credit is hereby amended as follows: 1. The Stated Amount of the Letter of Credit (as defined in the first paragraph of the Letter of Credit) is hereby amended to be $423,709,254. 2. The amount available for drawing under the Letter of Credit as the Premium Component (as defined in clause (iii) of the first paragraph of the Letter of Credit) is hereby amended to be $101,007,598. This Amendment is subject to the International Standby Practices 1998, published by the Institute of International Banking Law and Practice, Inc. (the "ISP 98"). This Amendment shall be deemed to be a contract made under the laws of the State of New York and shall, as to matters not governed by the ISP 98, be governed by and construed in accordance with the laws of such State. Except as specifically amended hereby, all the terms and conditions of the Letter of Credit shall remain unchanged and in full force and effect. No reference to this Amendment to Letter of Credit need be made in any document, and all references to the Letter of Credit in any document shall be deemed to be references to the Letter of Credit as amended hereby. This Amendment to Letter of Credit may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which when so executed shall be an original but all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have executed and delivered this Amendment to Letter of Credit as of the ________ day of August, 2001. BAYERISCHE HYPO-UND VEREINSBANK AG, New York Branch By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Accepted and agreed to as of this _______ day of August, 2001. WILMINGTON TRUST COMPANY, as Trustee By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- -2- EXHIBIT 4.1 SECOND AMENDMENT TO CREDIT AGREEMENT THIS SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of November 9, 2001 (this "Second Amendment"), is made by and among DELTA AIR LINES, INC., a Delaware corporation (the "Company") and the financial institutions parties hereto (the "Banks"). WITNESSETH: WHEREAS, the Company, the Banks and Bayerische Hypo-und Veresinbank AG, New York Branch, as letter of credit bank and agent (the "Agent"), are parties to that certain Credit Agreement dated as of May 19, 2000 (as amended, the "Credit Agreement"), pursuant to which the Banks made certain financial accommodations available to the Company; WHEREAS, the Company has requested that the Banks amend the Credit Agreement in certain respects; and WHEREAS, the Banks are willing to so amend the Credit Agreement on the terms and conditions set forth herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereto agree as follows: Section 1. Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Second Amendment have the meanings provided in the Credit Agreement. Section 2. Amendments To Credit Agreement. Effective on (and subject to the occurrence of) the Effective Date, the Credit Agreement is hereby amended in accordance with this Section 2. Except as so amended, the Credit Agreement shall continue in full force and effect. (a) Section 1.1 of the Credit Agreement is amended by inserting in the proper alphabetical order the following new defined terms: "AFFILIATE" shall mean, with respect to any Person, any other Person (i) directly or indirectly controlling or controlled by or under direct or indirect common control with such Person or (ii) directly or indirectly owning or holding fifteen percent (15%) or more of the capital stock in such Person. "SECOND AMENDMENT" shall mean the Second Amendment to Credit Agreement dated as of November 9, 2001 among the Company and the Banks party thereto. "SECOND AMENDMENT EFFECTIVE DATE" shall mean the "Effective Date" of the Second Amendment (as defined in the Second Amendment). (b) Section 5.6 of the Credit Agreement is amended to read in its entirety as follows: Section 5.6. Security. In the event the Company secures by mortgage, pledge, encumbrance, lien or other charge (a) any debt other than as permitted by Section 6.1 hereof or (b) the debt under the Credit Agreement dated as of May 2, 1997, as heretofore amended (the "BANK OF AMERICA FACILITY"), among the Company, the financial institutions party thereto and Bank of America, N.A., as agent bank (or any syndicated revolving credit facility that replaces the Bank of America Facility), then the Company shall equally and ratably secure (together with any other indebtedness required to be so secured) the indebtedness incurred hereunder. (c) Section 6.1 of the Credit Agreement is amended by: (i) deleting "$3,000,000,000 (USD Three Billion)" in subclause (i)(a) thereof and substituting in lieu thereof "$5,350,000,000 (USD Five Billion, Three Hundred Fifty Million) plus the aggregate amount (not to exceed $150,000,000 (USD One Hundred Fifty Million)) of any Class D enhanced equipment trust certificates issued by the Company after the Second Amendment Effective Date that are secured by only those aircraft that also secure other classes of enhanced equipment trust certificates"; and (ii) inserting at the end of subclause (i)(b) thereof "and marked thereon with an asterisk". (d) Section 6.2 of the Credit Agreement is amended by: (i) inserting the following at the end of clause (a) thereof: ", provided that any calculation of "Current Debt" under this clause (a) shall not include up to $625,000,000 of secured debt obligations of the Company or any Subsidiary incurred and outstanding after the date hereof that would otherwise constitute "Current Debt""; and (ii) deleting "150%" in clause (c) thereof and substituting in lieu thereof "175%". (e) Clause (b) of Section 10.6(a) of the Credit Agreement is amended to read in its entirety as follows: "(b) (i) the assigning Bank has provided the Company with prior written notice of the proposed assignment and (ii) the assigning Bank has received the prior written approval of the Agent, the Letter of Credit Bank and (except in the case of an assignment to (x) a Bank or (y) an 2 Affiliate of the assigning Bank) the Company to the proposed assignment (which consents of the Agent and the Company shall not be unreasonably withheld);" Section 3. Representations And Warranties. The Company hereby represents and warrants that each of the representations and warranties of the Company contained in the Credit Agreement are true and accurate in all material respects as of the date hereof except for (i) any representations and warranties that expressly relate solely to an earlier date, which representations and warranties were true and accurate in all material respects on and as of such earlier date, (ii) the representations and warranties contained in Sections 4.7 of the Credit Agreement, which representations and warranties were true and accurate in all material respects on and as of May 19, 2000, and (iii) (x) the changes in the business, financial condition or results of operation of the Company and its Subsidiaries that have resulted directly or indirectly from the terrorist attacks that occurred on September 11, 2001 and related matters and (y) changes disclosed by the Company in a report on Form 10-K, 10-Q or 8-K filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, prior to the date of this Second Amendment in each case insofar as such changes affect the representation and warranty contained in the last sentence of Section 4.4 of the Credit Agreement. The Company further represents and warrants to the Agent, the Letter of Credit Bank and each of the Banks that (i) it has the requisite corporate power and authority to execute, deliver and perform this Second Amendment, (ii) this Second Amendment constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms and (iii) the execution, delivery and performance by the Company of this Second Amendment (A) have been duly authorized by all necessary corporate action and do not require any consent or approval, authorization, permit or license from any federal, state or other regulatory authority which has not been obtained, or violate any law, regulation, order, judgement, decree or determination having applicability to the Company or its organizational documents, or result in a breach of, or constitute a default under any existing indenture or credit agreement or any other agreement or instrument to which the Company is a party or by which its properties may be bound or affected, except where the failure to have such consent or approval or such violation, breach of default could not reasonably be expected to result in a material adverse effect on the business, financial condition or results of operations of the Company and its Subsidiaries taken as a whole, and (B) will not conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, the Certificate of Incorporation or Bylaws of the Company or of any agreement or instrument to which the Company is now a party, which breach would have a material adverse effect on the business, financial condition or results of operations of the Company and its Subsidiaries taken as a whole. Section 4. Amendment Of Schedule I. Schedule I of the Credit Agreement, describing the "Funded Debt" and "Secured Obligations" of the Company, is amended in its entirety to conform to Schedule I attached to this Second Amendment. The Company represents and warrants to the Agent, the 3 Letter of Credit Bank and each of the Banks that the Company does not have outstanding any Funded Debt except as set forth on Schedule I to this Second Amendment, and there exists no default under the provisions of any instrument evidencing such indebtedness or agreement relating thereto. Section 5. Effective Date. This Second Amendment shall be and become effective on the date (the "Effective Date") on or prior to November 30, 2001 upon which (i) all of the conditions set forth in this Section 5 shall have been satisfied and (ii) the Majority Banks and the Company shall have duly executed counterparts of this Second Amendment and provided original copies thereof to the Agent. (a) Closing Certificate. The Agent shall have received an Officer's Certificate, in form reasonably satisfactory to the Agent, certifying that (i) before and after giving effect to this Second Amendment, no Default or Event of Default exists or will be in existence and (ii) the representations and warranties of the Company contained in this Second Amendment are true and accurate in all material respects with the same effect as though such representations and warranties had been made on and as of the Effective Date. (b) Amendments to Other Facilities. (i) The Company shall have entered into amendments effecting changes substantially similar to those effected in Section 2 hereof with respect to the comparable provisions of (A) the Credit Agreement dated as of May 2, 1997, as heretofore amended, among the Company, the financial institutions party thereto and Bank of America, N.A., as agent bank (such amendment, (the "BANK OF AMERICA AMENDMENT"), and (B) the Reimbursement Agreement dated as of May 1, 2000 among the Company, the financial institutions parties thereto and Commerzbank AG, New York Branch, as agent and letter of credit fronting bank; (ii) the Bank of America Amendment shall have become effective; and (iii) the Company shall have terminated the commitments under (and repaid in full, together with any accrued interest, all loans under) the Credit Agreement dated as of April 6, 2001 among the Company, the banks parties thereto and Citicorp North America, Inc., as Administrative Agent. (c) Legal Opinion. The Company shall have delivered to the Agent a legal opinion of counsel to the Company, in form and content reasonably satisfactory to the Agent, opining that this Second Amendment has been duly authorized, executed and delivered by the Company and is a valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms. (d) Business Plan. The Company shall have provided to the Agent and the Banks its updated business plan, including pro forma financial statements and projections, for the fourth quarter of fiscal year 2001 and fiscal year 4 2002, including without limitation projected balance sheet, income statements and statement of cash flow for the fourth quarter of fiscal year 2001 and fiscal year 2002 on a quarterly basis, such materials being in substantially the same form and content as the business plan and cash flow projections most recently presented by the officers of the Company to the Board of Directors of the Company, or any subcommittee thereof. (e) Amendment Fee. The Agent shall have received from the Company, for the account of each Bank (a "Consenting Bank") that has evidenced its agreement hereto as provided in clause (ii) of Section 5 by 5:00 p.m. (Atlanta, Georgia time) on the later of (i) November 9, 2001 and (ii) the date on which the Agent issues a notice to the Banks stating that the condition set forth in clause (ii) of Section 5 has been satisfied, an amendment fee in the amount equal to 15 basis points (0.15%) on the aggregate amount of such Consenting Bank's Commitment. (f) Termination Date. Notwithstanding the terms of this Section 5, in the event that the Company shall fail to comply with each of the conditions to effectiveness set forth in this Section 5 on or before November 30, 2001, this Second Amendment shall not become effective and each of the signatures submitted by the Banks to the Agent shall be released. Section 6. Miscellaneous. (a) References to Credit Agreement. Each reference to the Credit Agreement in the Credit Agreement or any of the other instruments, agreements, certificates or other documents executed in connection therewith (collectively, the "Loan Documents"), shall be deemed to be a reference to the Credit Agreement, as amended hereby and as the same may be further amended, restated, supplemented or otherwise modified from time to time in accordance with Section 10.4 thereof. (b) Expenses of Agent. The Company agrees to pay, on demand, all reasonable fees, costs and expenses incurred by the Agent in connection with the preparation, negotiation and execution of this Second Amendment and any other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the reasonable costs and fees of the Agent's legal counsel and any taxes or expenses associated with or incurred in connection with any instrument or agreement referred to herein or contemplated hereby. (c) Benefits. This Second Amendment shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns. (d) Governing Law. THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES. 5 (e) Effect. Except as expressly herein amended, the terms and conditions of the Credit Agreement shall remain in full force and effect without amendment or modification, express or implied. The entering into this Second Amendment by the Banks shall not be construed or interpreted as an agreement by the Banks to enter into any future amendment or modification of the Credit Agreement or any of the other Loan Documents. (f) Counterparts; Telecopied Signatures. This Second Amendment may be executed in any number of counterparts and by different parties to this Second Amendment on separate counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns. Any signature delivered or transmitted by a party by facsimile transmission shall be deemed to be an original signature hereto. (g) Further Assurances. The Company agrees to take such further actions as the Agent shall reasonably request from time to time in connection herewith to evidence or give effect to the amendments set forth herein or any of the transactions contemplated hereby. (h) Section Titles. Section titles and references used in this Second Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto. (i) Release of Claims. To induce the Banks to enter into this Second Amendment, the Company hereby releases, acquits and forever discharges the Banks, and all officers, directors, agents, employees, successors and assigns of the Banks, from any and all liabilities, claims, demands, actions or causes of actions of any kind or nature (if there be any), whether absolute or contingent, disputed or undisputed, at law or in equity, or known or unknown, that the Company now has or ever had against such Persons arising under or in connection with, directly or indirectly, any of the Loan Documents. 6 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Credit Agreement to be executed under duly authorized officers as of the date above written. DELTA AIR LINES, INC. By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- BAYERISCHE HYPO-UND VEREINSBANK AG, New York Branch By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- ABN AMRO BANK N.V. By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- 7 BANK ONE, NA By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- BNP PARIBAS (formerly BANQUE NATIONALE DE PARIS By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- CREDIT INDUSTRIEL ET COMMERCIAL By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- CREDIT LYONNAIS, New York Branch By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- 8 DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- THE MITSUBISHI TRUST & BANKING CORPORATION By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- THE SANWA BANK, LIMITED By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- 9 THE TOKAI BANK LIMITED, New York Branch By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- INTESA Bci, New York Branch By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- THE BANK OF TOKYO-MITSUBISHI, LTD. By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- 10 THE CHASE MANHATTAN BANK By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- CITIBANK, N.A. By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- COMMERZBANK AG By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- LANDESBANK SACHSEN GIROZENTRALE By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- 11 NORDDEUTSCHE LANDESBANK GIRZENTRALE, New York Branch and/or Cayman Islands Branch By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- WESTDEUTSCHE LANDESBANK GIROZENTRALE, New York Branch By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- THE DAI ICHI KANGYO BANK, LIMITED By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- 12 DEUTSCHE VERKEHRSBANK AG By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- By: ------------------------------------------------- Name: ----------------------------------------------- Title: ---------------------------------------------- 13 SCHEDULE I TO SECOND AMENDMENT TO CREDIT AGREEMENT FUNDED DEBT AND SECURED OBLIGATIONS A. FUNDED DEBT (1) 1. 6.65-9.15% Notes with maturities ranging from 2002 to 2004. 2. 8.50% Notes due March 15, 2002. 3. 8.125% Notes due July 1, 2039. 4. 7.70% Notes due December 15, 2005. 5. 7.90% Notes due December 15, 2009. 6. 8.30% Notes due December 15, 2029. 7. 8.10% Guaranteed Serial ESOP Notes, payable in installments between 2002 and 2009. 8. 7.379% Equipment Notes (Series A-1, 2000-1) due in installments between 2001 and 2010. 9. 7.570% Equipment Notes (Series A-2, 2000-1) due November 18, 2010. 10. 7.920% Equipment Notes (Series B, 2000-1) due November 18, 2010. 11. 7.779% Equipment Notes (Series C, 2000-1) due November 18, 2005. 12. 10.125% Debentures due May 15, 2010. 13. 10.375% Debentures due February 1, 2011. 14. 9.00% Debentures due May 15, 2016. 15. 9.75% Debentures due May 15, 2021. 16. 9.25% Debentures due March 15, 2022. 17. 10.375% Debentures due December 15, 2022. - --------- (1) All of which is unsecured except for Items 8-11 and 27-31. 18. Development Authority of Fulton County Loan Agreement dated May 1, 1998. 19. Development Authority of Fulton County Loan Agreement dated September 1, 1992. 20. Development Authority of Clayton County Loan Agreement dated May 1, 2000 (Series A, B, C). 21. Capital Leases: (a) Forty-One B737-200 Aircraft Leases (b) Nine Western Aircraft Leases (4 B737-200; 3 B737-300 and 2 B727-200) 22. Credit Agreement, dated as of May 2, 1997, among the Company, the several financial institutions which are parties thereto and Bank of America N.A. (formerly Nationsbank, N.A. (South)), as Agent Bank. 23. Reimbursement Agreement, dated as of May 1, 2000 among the Company, the several financial institutions which are parties thereto and Commerzbank, AG, New York Branch, as Agent and Front Bank. 24. Credit Agreement, dated as of May 19, 2000 among the Company, the several financial institutions which are parties thereto and Bayerische Hypo-und Vereinsbank AG, New York Branch, as Agent and Letter of Credit Bank. 25. 5.0%-5.5% Massachusetts Port Authority Special Facilities Revenue Bonds (Delta Air Lines, Inc. Project), Series 2001A (Fixed Rate Securities). 26. Massachusetts Port Authority Special Facilities Revenue Bonds (Delta Air Lines, Inc. Project), Series 2001B and 2001C (Auction Rate Securities). 27. 6.619% Equipment Notes (Series A-1, 2001-1) due in installments between 2002 and 2011. 28. 7.111% Equipment Notes (Series A-2, 2001-1) due September 18, 2011. 29. 7.711% Equipment Notes (Series B, 2001-1) due September 18, 2011. 30. 7.299% Equipment Notes (Series C, 2001-1) due September 18, 2006. 31. 6.95% Equipment Notes (Series D, 2001-1) due September 18, 2006 (100% beneficial interest owned by Aero Assurance Ltd., a subsidiary of Delta). 2 B. SECURED OBLIGATIONS *1. $96,500,000 The Port Authority of New York and New Jersey Special Projects Bonds, Series 1R (Delta Air Lines, Inc. Project). *2. Nine Western Air Lines Capital Leases (4 B737-200; 3 B737-300 and 2 B727-200). *3. SATO Guaranty (pledge of Company's government receivables to provide collateral for SATO credit agreement). *4. $122,600,000 Various Credit Agreements by 11 EMB-120 Brasilias, 7 CRJs and 4 ATRs at Atlantic Southeast Airlines, Inc. *5. $149,100,000 Various Credit Agreements by 15 CRJs at Comair Airlines, Inc. 6. 7.379% Equipment Notes (Series A-1, 2000-1) due in installments between 2001 and 2010. 7. 7.570% Equipment Notes (Series A-2, 2000-1) due November 18, 2010. 8. 7.920% Equipment Notes (Series B, 2000-1) due November 18, 2010. 9. 7.779% Equipment Notes (Series C, 2000-1) due November 18, 2005. 10. 6.619% Equipment Notes (Series A-1, 2001-1) due in installments between 2002 and 2011. 11. 7.111% Equipment Notes (Series A-2, 2001-1) due September 18, 2011. 12. 7.711% Equipment Notes (Series B, 2001-1) due September 18, 2011. 13. 7.299% Equipment Notes (Series C, 2001-1) due September 18, 2006. 14. 6.95% Equipment Notes (Series D, 2001-1) due September 18, 2006 (100% beneficial interest owned by Aero Assurance Ltd., a subsidiary of Delta). *15. JFK Financing. (As of the date of this Second Amendment to Credit Agreement, the Company is considering various means for financing a proposed airport facilities project at John F. Kennedy International Airport (JFK). Since the Company has not yet determined the structure for such financing, the intent of this provision is to include such financing in the lists set forth on these schedules once such financing occurs, if ever, and to the extent applicable to the structure ultimately selected by the Company. 3 EX-4.2 4 g77552exv4w2.txt EXHIBIT 4.2 REIMBURSEMENT AGREEMENT EXHIBIT 4.2 =============================================================================== REIMBURSEMENT AGREEMENT dated as of May 1, 2000 among DELTA AIR LINES, INC., COMMERZBANK AG, New York Branch (in its capacity as Agent and the Fronting Bank) and THE LENDERS DESCRIBED HEREIN --------------------------------------- Relating to the $415,000,000 Letter of Credit Facility Arranged by COMMERZBANK AG, New York Branch --------------------------------------- =============================================================================== TABLE OF CONTENTS

Page ---- Section 1. Definitions and Accounting Terms................................................................1 1.01 Definitions.....................................................................................1 1.02 Interpretation.................................................................................11 Section 2. Issuance of Letters of Credit; Payments, Etc...................................................11 2.01 Issuance of Letters of Credit..................................................................11 2.02 Reimbursements; Advances.......................................................................11 2.03 Type of Advance; Conversion; Interest Periods; Payment of Interest; Prepayment; Breakage.......12 2.04 Fees; Expenses.................................................................................14 2.05 Increased Costs; Reduced Rate of Return........................................................15 2.06 Increased Costs, Illegality, etc...............................................................17 2.07 Manner of Payment; Late Payments...............................................................19 2.08 Evidence of Debt...............................................................................19 2.09 Obligations Unconditional......................................................................19 2.10 Reduction of Commitments.......................................................................20 2.11 Extension of Scheduled Expiration Date.........................................................20 2.12 Change in Control..............................................................................20 2.13 Application of Amounts Received from Applicable Bond Trustee or Applicable Tender Agent........21 Section 3. Conditions Precedent...........................................................................21 3.01 Agreement......................................................................................21 3.02 Letters of Credit..............................................................................22 Section 4. Representations and Warranties.................................................................23 4.01 Organization; Powers...........................................................................23 4.02 Authorization; No Violation....................................................................23 4.03 Enforceability.................................................................................23 4.04 Financial Statements...........................................................................24 4.05 Litigation.....................................................................................24 4.06 Business; Status as Air Carrier................................................................24 4.07 Funded Debt....................................................................................24 4.08 Title to Properties, Etc.......................................................................25 4.09 Tax Returns and Payments.......................................................................25 4.10 Use of Proceeds................................................................................25 4.11 Subsidiaries...................................................................................25 4.12 ERISA..........................................................................................25 4.13 Environmental Matters..........................................................................25

(i)

Page ---- Section 5. Covenants......................................................................................26 5.01 No Merger or Sale of Assets....................................................................26 5.02 Leases.........................................................................................26 5.03 Debt...........................................................................................26 5.04 Liens..........................................................................................27 5.05 Insurance......................................................................................27 5.06 Payment of Taxes...............................................................................28 5.07 Financial Statements...........................................................................28 5.08 Maintenance of Equipment.......................................................................29 5.09 Inspection.....................................................................................29 5.10 Security.......................................................................................29 5.11 Notice of Any Default or Event of Default......................................................29 5.12 ERISA Reporting Requirements...................................................................29 5.13 Ratings........................................................................................29 Section 6. Events of Default; Remedies....................................................................29 6.01 Events of Default..............................................................................29 6.02 Remedies.......................................................................................31 Section 7. Intercreditor Arrangements.....................................................................32 7.01 Fronting Bank Interests........................................................................32 7.02 Payments.......................................................................................34 7.03 Adjustment of Commitments......................................................................35 7.04 Notices to the Lenders.........................................................................35 Section 8. The Agent......................................................................................35 8.01 Appointment....................................................................................36 8.02 Nature of Duties...............................................................................36 8.03 Lack of Reliance on Agent......................................................................36 8.04 Certain Rights of the Agent....................................................................36 8.05 Reliance.......................................................................................37 8.06 Indemnification................................................................................37 8.07 The Agent in its Individual Capacity...........................................................37 8.08 Resignation by the Agent.......................................................................38 8.09 Arranger.......................................................................................38 Section 9. Miscellaneous..................................................................................38 9.01 Indemnification................................................................................38 9.02 Right of Setoff................................................................................39 9.03 Notices........................................................................................39 9.04 Successors and Assigns.........................................................................40 9.05 No Waiver; Remedies Cumulative.................................................................42 9.06 Payments Pro Rata..............................................................................43 9.07 Governing Law; Submission to Jurisdiction; Venue...............................................43 9.08 Amendment or Waiver............................................................................43 9.09 Termination of Letters of Credit; Survival.....................................................44

(ii)

Page ---- 9.10 Entire Agreement...............................................................................44 9.11 Counterparts...................................................................................44 9.12 Severability...................................................................................44 9.13 Nature of Duties...............................................................................44 9.14 Fronting Bank Cooperation......................................................................45

Exhibits Exhibit A Form of Notice of Issuance Exhibit B Form of Assignment and Acceptance Exhibit C Form of Letter of Credit Schedules Schedule 4.07 Funded Debt; Secured Obligations Schedule 4.11 Subsidiaries of Delta Air Lines, Inc. Schedule 5.03 Guaranty Liabilities (iii) REIMBURSEMENT AGREEMENT, dated as of May 1, 2000, by and among DELTA AIR LINES, INC., a Delaware corporation (the "Borrower"), COMMERZBANK AG ("Commerzbank"), acting through its New York Branch, as issuer of the hereinafter defined Letters of Credit (the "Fronting Bank"), the financial institutions listed on the signature pages hereof under the caption "Lenders" (together with each financial institution which becomes a "Lender" pursuant to Section 9.04 hereof, individually, a "Lender" and, collectively, the "Lenders"), COMMERZBANK, acting in the manner and to the extent described in Section 8 (in such capacity and together with any successor appointed pursuant to Section 8.01, the "Agent"), and COMMERZBANK, acting as arranger (in such capacity, the "Arranger"). WITNESSETH: WHEREAS, the Borrower has requested, and the Agent, the Fronting Bank and the Lenders have agreed, to make available to the Borrower a letter of credit facility in the aggregate stated amount of $415,000,000 upon the terms and conditions set forth in this Agreement; NOW, THEREFORE, in consideration of the premises and of the commitments made hereunder and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Definitions and Accounting Terms. 1.01 Definitions. The following terms as used in this Agreement shall have the following meanings, unless the context otherwise requires: "Advance" or "Advances" shall have the meanings provided in Section 2.02(a). "Advance Repayment Date" shall have the meaning provided in Section 2.02(a) "Affiliate" shall mean, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Agent" shall have the meaning provided in the introductory paragraph of this Agreement. "Agreement" shall mean this Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Airline Subsidiary" shall mean Comair, Inc., Atlantic Southeast Airlines, Inc. and any other Subsidiary of the Borrower holding an airline operating certificate issued by the U.S. Federal Aviation Administration under FAR Part 121. "Alternate Base Rate" shall mean for any day, a rate per annum equal to the higher of (i) the Prime Lending Rate for such day or (ii) the Federal Funds Rate for such day plus one-half percent (0.5%). "Alternate Base Rate Advance" shall mean any Advance while it accrues interest at the Alternate Base Rate. "Applicable Bond Trustee" shall mean, with respect to a series of Bonds, the trustee appointed from time to time by the issuer of such Bonds to act as the trustee for the holders of such Bonds. "Applicable Fee" shall mean for any day the amount set forth in the table below under the rating category applicable to the Borrower's senior unsecured long-term public debt as rated by S&P ("S&P Rating") and Moody's ("Moody's Rating"; each of the S&P Rating and the Moody's Rating referred to herein as a "Rating") on such day:

Senior Unsecured Debt Level 1 Level 2 Level 3 Level 4 Level 5 Ratings (S&P's rating followed by Moody's rating) BBB+ or higher BBB or Baa2 BBB- or Baa3 BB+ or Ba1 BB or lower or or Baa1 or Ba2 or lower higher Applicable Fee .625% .75% .875% 1.25% 1.50%

The Agent shall determine the Applicable Fee from time to time in accordance with the above table and notify the Borrower, the Fronting Bank and the Lenders of such determination from time to time. In the event the S&P Rating and the Moody's Rating correspond to different levels on the respective table resulting in different Applicable Fee determinations, the following provisions shall apply. In the event the S&P Rating and the Moody's Rating differ by one level, the Applicable Fee shall be that corresponding to the higher Rating. For example, a "BBB+" S&P Rating and a "Baa2" Moody's Rating would result in an Applicable Fee equal to 0.625%. In the event the S&P Rating and the Moody's Rating differ by two levels, the Applicable Fee shall be that corresponding to that level which is in between the two applicable levels. For example, a "BBB" S&P Rating and a "Ba1" Moody's Rating would result in an Applicable Fee equal to 0.875%. In the event the S&P Rating and the Moody's Rating differ by three levels, the Applicable Fee shall be that corresponding to the level immediately below the higher of such Ratings. For example, a "BBB+" S&P Rating and a "Ba1" Moody's Rating would result in an Applicable Fee equal to 0.75%. In the event the S&P Rating and the Moody's Rating differ by four levels (i.e. a ratings split between level 1 and level 5), the Applicable Fee shall be that corresponding to level 4. For example, a "BBB+" S&P Rating and a "Ba2" Moody's Rating would result in an Applicable Fee equal to 1.25%. In the event only one rating agency exists or continues rating the Borrower's long term senior unsecured debt, such agency's rating shall be used for purposes of the respective table. In the event: (i) neither agency exists or continues rating the Borrower's long-term senior unsecured debt or (ii) the Borrower no longer has any outstanding long term senior unsecured debt to be rated, the Applicable Fee for the first 90 days after such occurrence shall be the Applicable Fee in effect as determined using the above immediately prior to such occurrence. During such 90-day period, the Agent and the Borrower shall negotiate in good faith to agree upon a new pricing grid or other appropriate pricing terms. Any such new grid or pricing terms shall be approved by the Fronting Bank and all of the Lenders. In the event the Agent, the Borrower, the Fronting Bank and all of the Lenders cannot agree upon such new pricing grid or pricing terms by the end of such 90-day period, the -2- Applicable Fee shall be that corresponding to level 3 of the above table for the remainder of the term of this Agreement. Any necessary adjustment in the Applicable Fee pursuant to the terms hereof shall become effective immediately upon any change in a Rating. "Applicable Indenture" shall mean, with respect to a series of Bonds, the indenture, indenture of trust or trust agreement pursuant to which such Bonds were issued. "Applicable Law" shall mean, with respect to any Person, all provisions of statutes, rules, regulations and orders of any Governmental Authority applicable to such Person, and all orders and decrees of all courts and arbitrators which are binding on such Person. "Applicable Margin" shall mean, with respect to any Advance and for any day during which such Advance is outstanding, the percentage amount set forth in the table below opposite the applicable period during which such day occurs and under the rating category applicable to the Borrower's S&P Rating and Moody's Rating for such day:

Senior Unsecured Debt Level 1 Level 2 Level 3 Level 4 Level 5 Ratings (S&P's rating followed by Moody's rating) BBB+ or higher BBB or Baa2 BBB- or Baa3 BB+ or Ba1 BB or lower or or Baa1 or Ba2 or lower higher For Eurodollar Rate Advances Up to and including 90 days .75% .875% 1.00% 1.375% 1.625% 91 to 180 days 1.00% 1.125% 1.25% 1.625% 1.875% More than 180 days 1.25% 1.375% 1.50% 1.875% 2.125% For Alternate Base Rate Advances Up to and including 90 days 0% 0% 0% .375% .625% 91 to 180 days 0% .125% .25% .625% .875% More than 180 days .25% .375% .50% .875% 1.125%

The Agent shall determine the Applicable Margin from time to time in accordance with the above table and notify the Borrower, the Fronting Bank and the Lenders of such determination from time to time. In the event the S&P Rating and the Moody's Rating correspond to different levels on the respective table resulting in different Applicable Margin determinations, the following provisions shall apply. In the event the S&P Rating and the Moody's Rating differ by one level, the Applicable Margin shall be that corresponding to the higher Rating. For example, a "BBB+" S&P Rating and a "Baa2" Moody's Rating would result in an Applicable Margin for an Advance that has been outstanding for 95 days and which is then bearing interest at a -3- Eurodollar Rate equal to 1.00%. In the event the S&P Rating and the Moody's Rating differ by two levels, the Applicable Margin shall be that corresponding to that level which is in between the two applicable levels. For example, a "BBB" S&P Rating and a "Ba1" Moody's Rating would result in an Applicable Margin for an Advance that has been outstanding for 95 days and which is then bearing interest at a Eurodollar Rate equal to 1.25%. In the event the S&P Rating and the Moody's Rating differ by three levels, the Applicable Margin shall be that corresponding to the level immediately below the higher of such Ratings. For example, a "BBB+" S&P Rating and a "Ba1" Moody's Rating would result in an Applicable Margin for an Advance that has been outstanding for 95 days and which is then bearing interest at a Eurodollar Rate equal to 1.125%. In the event the S&P Rating and the Moody's Rating differ by four levels (i.e. a ratings split between level 1 and level 5), the Applicable Margin shall be that corresponding to level 4. For example, a "BBB+" S&P Rating and a "Ba2" Moody's Rating would result in an Applicable Margin for an Advance that has been outstanding for 95 days and which is then bearing interest at a Eurodollar Rate equal to 1.625%. In the event only one rating agency exists or continues rating the Borrower's long term senior unsecured debt, such agency's rating shall be used for purposes of the respective table. In the event: (i) neither agency exists or continues rating the Borrower's long-term senior unsecured debt or (ii) the Borrower no longer has any outstanding long term senior unsecured debt to be rated, the Applicable Margin for the first 90 days after such occurrence shall be the Applicable Margin in effect as determined using the above immediately prior to such occurrence. During such 90-day period, the Agent and the Borrower shall negotiate in good faith to agree upon a new pricing grid or other appropriate pricing terms. Any such new grid or pricing terms shall be approved by the Fronting Bank and all of the Lenders. In the event the Agent, the Borrower, the Fronting Bank and all of the Lenders cannot agree upon such new pricing grid or pricing terms by the end of such 90-day period, the Applicable Margin shall be that corresponding to level 3 of the above table for the remainder of the term of this Agreement. Any necessary adjustment in the Applicable Margin pursuant to the terms hereof shall become effective immediately upon any change in a Rating. "Applicable Tender Agent" shall mean, with respect to a series of Bonds, the tender agent appointed from time to time in accordance with the Applicable Indenture to act as the tender agent for such Bonds. "Applicable Termination Date" shall mean, with respect to a Letter of Credit, the Termination Date for such Letter of Credit. "Arranger" shall have the meaning provided in the introductory paragraph of this Agreement. "Assignment and Acceptance" shall mean an agreement in the form of Exhibit B hereto, executed by the assigning Lender, the assignee and other parties as contemplated thereby, if any. "Bonds" shall mean one or more of a series of variable rate tax-exempt bonds to be issued by any governmental or conduit entity on behalf of, and for the benefit of, the Borrower. "Bond Documents" shall mean, with respect to a series of Bonds, any indenture, trust agreement, bond, loan agreement, lease agreement (but only leases under which (i) rentals -4- equal to principal, interest and premium, if applicable, on the Bonds are to be paid or (ii) additional payments which correspond to payments under this Agreement are to be paid), remarketing agreement, tender agent agreement, authentication agent agreement, bond purchase agreement and other documentation related to such Bonds, the proceeds of such Bonds, the sale of such Bonds and the remarketing of such Bonds. "Borrower" shall have the meaning provided in the introductory paragraph of this Agreement. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day except Saturday, Sunday and any day which shall be in New York a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Rate Advances, any day which is a Business Day described in clause (i) above and which is also a day for trading by and between banks in the London interbank Eurodollar market. "Change in Control" shall be deemed to have occurred if (i) any Person or two (2) or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities and Exchange Act of 1934, as amended), directly or indirectly, of securities of the Borrower (or other securities convertible into such securities) representing fifty percent (50%) or more of the combined voting power of all securities of the Borrower entitled to vote in the election of directors, other than securities having such power only by reason of the happening of a contingency, or (ii) during any period up to twelve (12) consecutive months, commencing before or after the date of this Agreement, individuals who at the beginning of such twelve (12) month period were directors of the Borrower shall cease for any reason (other than death, mental or physical disability, or retirement) to constitute a majority of the board of directors of the Borrower. "Change in Control Collateral" shall have the meaning provided in Section 2.12. "Code" shall mean the Internal Revenue Code of 1986, and the regulations promulgated and rulings issued thereunder. "Collateral" shall have the meaning provided in Section 6.02(a). "Commerzbank" shall have the meaning provided in the introductory paragraph of this Agreement. "Commitment" shall mean, when used with reference to any Lender on any date of determination, the maximum amount of such Lender's payment obligation (or, if no further payment obligation exists, the maximum amount of such Lender's reimbursement right) under Section 7 as set forth opposite the name of such Lender on the Register maintained by the Agent (and, in the case of each initial Lender, as set forth opposite such Lender's signature to this Agreement under the caption "Commitment"), as the same may have been reduced or terminated through the date of determination pursuant to Sections 2.10, 7.03 and 9.09 hereof or by assignment pursuant to Section 9.04 hereof. -5- "Commitment Termination Date" shall have the meaning provided in Section 2.04(b). "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management of policies of a person, whether through the ownership of voting securities, by contract or otherwise, and "Controlling" and "Controlled" shall have meanings correlative thereto. "Convertible Subordinated Debt" shall mean any debt of the Borrower convertible into shares of any or all classes of stock of the Borrower and containing, or issued under agreements or indentures containing, provisions effectively subordinating the same to the debt created by this Agreement. "Current Debt" shall mean any obligation for borrowed money (including notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money) payable on demand or within a period of one year from the date of the creation thereof. "Date of Issuance" shall have the meaning provided in the defined term "Notice of Issuance." "Default" shall mean an event, act or occurrence which, with the giving of notice or the lapse of time (or both), would become an Event of Default. "Default Rate" shall mean, with respect to any day, a rate of interest per annum equal to one quarter of one percent (.25%) in excess of the Alternate Base Rate in effect for such day (computed on the basis of a 360-day year and actual days elapsed). "Dollars" and the sign "$" shall each mean freely transferable lawful money of the United States. "Drawing" shall mean, with respect to a Letter of Credit, a drawing made thereunder by the beneficiary thereof in accordance with its terms. "Effective Date" shall have the meaning provided in Section 3.01. "Equity" shall mean the sum of: (i) the par value (or value stated on the books of the Borrower) of the capital stock of all classes of the Borrower (other than the Borrower's Series B ESOP Convertible Preferred Stock), (ii) the amount of additional paid-in capital and reinvested earnings of the Borrower, (iii) the amount of taxes deferred and unamortized investment tax credits under Sections 167 and 168 of the Internal Revenue Code or similar provisions of any applicable tax law and carried on the balance sheet under those captions, (iv) the amount of any gain on the sale and leaseback of assets which is deferred pursuant to GAAP, (v) the principal amount of any Convertible Subordinated Debt outstanding, (vi) the amount of any post-retirement benefits (other than pensions) of the Borrower accrued in accordance with the Statement of Financial Accounting Standards No. 106 (Financial Accounting Standards Board 1990) and GAAP and classified as long term liabilities on the balance sheet of the Borrower, and (vii) the difference between (a) the stated and liquidation value of the Borrower's -6- Series B ESOP Convertible Preferred Stock and (b) the unearned compensation under the Borrower's employee stock ownership plan; minus (viii) the unrealized loss on noncurrent marketable equity securities, net of any deferred tax benefits, and minus (ix) treasury stock at cost. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute. "Eurocurrency Reserve Period" shall have the meaning provided in Section 2.06(c). "Eurodollar Rate" shall mean, with respect to an Advance during a specified Interest Period, the offered rate in the London interbank market for deposits in United States dollars of amounts equal or comparable to the principal amount of such Advance offered for a term comparable to such Interest Period, as currently shown on the Reuters Screen LIBO page as of 11:00 a.m., GMT, two Business Days prior to the first day of such Interest Period; provided, however, that (A) if more than one offered rate as described above appears on the Reuters Screen LIBO page, the rate used to determine the Eurodollar Rate will be the arithmetic average (rounded upward, if necessary, to the next higher 1/1000 of 1%) of such offered rates, or (B) if no such offered rates appear, the rate used for such Interest Period will be the arithmetic average (rounded upward, if necessary, to the next higher 1 /1000 of 1%) of rates quoted by the Fronting Bank at approximately 10:00 a.m., New York time, two Business Days prior to the first day of such Interest Period for deposits in United States dollars offered to leading European banks for a period comparable to such Interest Period in an amount comparable to the principal amount of such Advance. If the Agent ceases to use the Reuters Screen LIBO page for determining interest rates based on eurodollar deposit rates, a comparable internationally recognized interest rate reporting service shall be used to determine such offered rates. "Eurodollar Rate Advance" shall mean any Advance while it accrues interest at the Eurodollar Rate. "Event of Default" shall have the meaning provided in Section 6.01 hereof. "Federal Funds Rate" shall mean, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be the rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Agent by three independent funds brokers on such day for similar transactions as determined by the Agent. "Fee Letter" shall mean that certain letter agreement, dated February 22, 2000, between the Borrower and Commerzbank, regarding certain fees. "Financing Documents" shall mean this Agreement, the Letters of Credit, the Fee Letter and each Notice of Issuance. -7- "Fronting Bank" shall have the meaning provided in the introductory paragraph of this Agreement. "Fronting Bank Interests" shall have the meaning provided in Section 7.01(a) hereof. "Fronting Bank Share" shall have the meaning provided in Section 7.02(a). "Funded Debt" shall mean any obligation for borrowed money or the deferred purchase price of property, or any obligation arising under a capital lease, other than Convertible Subordinated Debt, payable more than one year from the date of the creation thereof which, under GAAP in effect from time to time, is shown on the balance sheet of the obligor as a liability; provided that any obligation shall be treated as Funded Debt, regardless of its term, if such obligation is renewable pursuant to the terms thereof or of a revolving credit or similar agreement effective for more than one (1) year after the date of the creation of such obligation or may be payable out of the proceeds of a similar obligation pursuant to the terms of such obligation or of any such agreement. "GAAP" shall mean generally accepted accounting principles in the U.S. applied on a consistent basis, as in effect from time to time. "Governmental Authority" shall mean any Federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality or any court, in each case whether of the United States or any foreign country. "Indemnitee" shall have the meaning provided in Section 9.01(b). "Indemnitor" shall have the meaning provided in Section 9.01(b). "Interest Period" shall have the meaning provided in Section 2.03(b). "Interest Determination Date" shall mean, with respect to any Eurodollar Rate Advance, the second Business Day prior to the commencement of any Interest Period relating to such Eurodollar Rate Advance. "Lender" shall have the meaning provided in the introductory paragraph of this Agreement and shall not include Participants; and references to "its Lenders" and any other similar expression shall mean, with respect to the Fronting Bank, the Lender or Lenders, if any, to whom the Fronting Bank has assigned an interest in its Fronting Bank Interests in accordance with the terms hereof. "Letter of Credit" or "Letters of Credit" shall have the meanings provided in Section 2.01. "Liquidity Drawing" shall mean, with respect to a Letter of Credit, a drawing on such Letter of Credit made to pay the purchase price of Bonds tendered at the request of the holders thereof pursuant to the Applicable Indenture. -8- "Losses" shall mean liabilities, obligations, losses, damages, penalties, claims, actions, judgments, suits, costs, expenses and disbursements (including, without limitation, reasonable attorneys' fees and expenses). "Majority Lenders" shall mean, as of any date of determination, Lenders whose aggregate Percentages on such date represent at least 51% of the Total Commitment on such date. "Moody's" shall mean Moody's Investors Service, Inc. "Moody's Rating" shall have the meaning set forth in the definition of Applicable Fee. "Notice of Conversion" shall have the meaning provided in Section 2.03(a). "Notice of Issuance" shall mean a completed application in the form attached hereto as Exhibit A which requests the issuance of a Letter of Credit and, in connection therewith specifies, (i) the name and address of the Applicable Bond Trustee; (ii) the Stated Amount thereof, which when added to the Stated Amount of all issued and outstanding Letters of Credit does not exceed $415,000,000; (iii) the scheduled expiration date thereof, which shall be a Business Day not later than the third anniversary of the Date of Issuance thereof; (iv) the date of issuance thereof, which shall be a Business Day not less than five (5) Business Days following the Agent's receipt of such Notice of Issuance (the "Date of Issuance"), provided that such time period shall not commence until the Agent and its counsel are satisfied with the wording of the Letter of Credit and the Bond Documents for the Bonds that are to be secured by such Letter of Credit and, provided further that the Notice of Issuance in connection with the issuance of the first three Letters of Credit issued hereunder shall be delivered at any time on or prior to the Effective Date; and (v) the delivery instructions for such Letter of Credit. "Officer's Certificate" shall mean a certificate signed by the Chairman of the Board, the President, the Chief Financial Officer, the Treasurer or any Vice President of Finance of the Borrower. "Official Statement" shall mean, with respect to any Bonds, any preliminary, final or supplemental official statement, prospectus or other similar offering document that is used in connection with the offer, sale and/or remarketing of such Bonds. "Participant" shall mean a Person that acquires a participation in the Fronting Bank's or any Lender's rights under this Agreement pursuant to Section 9.04(f) of this Agreement. "Payment Account" shall mean account number 150/1014901/05USD maintained at Commerzbank AG, New York, New York, ABA number 026-008-044, or such other account as the Agent may hereafter designate in writing as such to the other parties hereto. "Percentage" shall mean for each Lender that percentage (expressed as a decimal) obtained by dividing the amount of such Lender's Commitment by the Total Commitment. "Person" shall mean an individual, a corporation, a partnership, a limited liability company, an association, a business trust or any other entity or organization, including a Governmental Authority. -9- "Prime Lending Rate" shall mean, for any day, the rate established by the Agent at its New York branch from time to time as its "prime" or "reference" lending rate for unsecured commercial loans within the United States, said rate to change on and as of the date of any change in such established rate. The Prime Lending Rate is a reference rate only, and the Agent may make loans from time to time at interest rates above, equal to, or below the Prime Lending Rate. "Rating" shall have the meaning set forth in the definition of Applicable Fee. "Register" shall have the meaning provided in Section 9.04(d). "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Reimbursement Amounts" shall have the meaning provided in Section 7.01(a). "Reimbursement Obligation" shall mean, with respect to each drawing made under any Letter of Credit, the Borrower's obligation to repay the same as provided in Section 2.02. "S&P" shall mean Standard & Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. "S&P Rating" shall have the meaning set forth in the definition of Applicable Fee. "Stated Amount" shall mean, with respect to a Letter of Credit, the stated amount or face amount (including interest coverage as it may increase and decrease from time to time) of such Letter of Credit, which initially shall be the amount set forth in such Letter of Credit, as from time to time increased or decreased in accordance with its terms. "Subsidiary" shall mean any Person a majority (by number of votes) of the outstanding stock or other ownership interests of which is, at the time at which any determination is being made, owned by the Borrower either directly or through Subsidiaries. "Termination Date" shall mean, with respect to a Letter of Credit, the date on which such Letter of Credit terminates in accordance with its terms, which date (or method by which such date is to be determined) shall be set forth in such Letter of Credit and shall not in any case exceed three years from the Date of Issuance. "Total Commitment" shall mean, as of any date of determination, the sum of the Commitment of all Lenders as of such date. "Total Stated Amount" shall mean, as of any date of determination, the sum of the Stated Amount of all outstanding Letters of Credit as of such date. "United States" and "U.S." shall each mean the United States of America. -10- "Unutilized Commitment" shall mean, as of any date of determination, the amount obtained by subtracting the Total Stated Amount as of such date from the Total Commitment as of such date. 1.02 Interpretation. The following rules shall apply to the construction of this Agreement unless the context requires otherwise: (a) the singular includes the plural, and the plural the singular; (b) words importing any gender include the other genders; (c) references to statutes are to be construed as including all statutory provisions consolidating, and all regulations promulgated pursuant to, such statutes; (d) references to "writing" include printing, photocopy, typing, lithography and other means of reproducing words in a tangible visible form; (e) the words "including", "includes" and "include" shall be deemed to be followed by the words "without limitation"; (f) references to the introductory paragraph, recitals, sections (or clauses or subdivisions of sections) or exhibits are to those of this Agreement unless otherwise indicated; (g) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments, modifications and supplements to such instruments, but only to the extent that such amendments, modifications or supplements are permitted or not prohibited by the terms of this Agreement; (h) section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose; and (i) references to Persons include their respective permitted successors and assigns. Section 2. Issuance of Letters of Credit; Payments, Etc. 2.01 Issuance of Letters of Credit. Prior to the Commitment Termination Date, the Fronting Bank hereby agrees, on the terms and subject to the conditions hereinafter set forth and on account of the Borrower, to issue from time to time in favor of each Applicable Bond Trustee a letter of credit, which shall be in substantially the form of Exhibit C (as issued, each, a "Letter of Credit", and, collectively, the "Letters of Credit"), provided that in no event shall (a) the aggregate Stated Amount of the Letters of Credit at any time exceed $415,000,000 and (b) more than eight Letters of Credit be issued hereunder. No Letter of Credit shall have a scheduled expiration date that is later than three years from its Date of Issuance. 2.02 Reimbursements; Advances. (a) If the Fronting Bank shall make any payment pursuant to a Drawing under any Letter of Credit, the Borrower shall, or shall cause the Applicable Bond Trustee to, reimburse the aggregate amount of such Drawing to the Fronting Bank by the Fronting Bank's close of business on the day such payment is made unless, in the case of any Liquidity Drawing, the conditions of subsection (b) have been satisfied. If the conditions of subsection (b) are satisfied on the date on which the Fronting Bank honors payment of any Liquidity Drawing, the Borrower shall, unless it has delivered written notice to the contrary to the Agent, be deemed to have requested, and the Fronting Bank shall be deemed to have made, an advance to the Borrower (each such advance, "Advance" and collectively the "Advances") on the date and in the amount of such Liquidity Drawing. Advances shall be repaid by Borrower upon the earliest of (i) the Termination Date of the applicable Letter of Credit, (ii) the remarketing of the Bonds purchased with the proceeds of the related Liquidity Drawing (but only to the extent of the proceeds of the Bonds so remarketed) and (iii) the occurrence of a Default or Event of Default herein (such date of repayment, an "Advance Repayment Date"). -11- (b) Unless the Borrower has previously delivered written notice to the Agent to the effect that it does not want such Liquidity Drawing to be an Advance, a Liquidity Drawing shall constitute an Advance if on the date of such payment the following statements shall be true: (i) the representations and warranties contained in Sections 4.01, 4.02, 4.03, 4.05, 4.06, 4.09(a), 4.09(c), 4.10, 4.12 and 4.13 are correct on and as of the date of such Liquidity Drawing as though made on and as of such date, except to the extent such representations and warranties relate to an earlier date in which case such representations and warranties shall be true and correct in all material respects as of such earlier date and (ii) no event has occurred and is continuing, or would result from such Advance, which constitutes an Event of Default or a Default. Unless the Borrower shall have previously advised the Fronting Bank in writing that one or more of the above statements is no longer true, the Borrower shall be deemed to have represented and warranted, on the date of each Liquidity Drawing, that the above statements are true and correct. 2.03 Type of Advance; Conversion; Interest Periods; Payment of Interest; Prepayment; Breakage. (a) Each Advance shall initially be made as a Alternate Base Rate Advance. The Borrower shall have the option to convert on any Business Day (i) a Alternate Base Rate Advance to a Eurodollar Rate Advance and (ii) a Eurodollar Rate Advance to a Alternate Base Rate Advance, provided that (A) except as otherwise provided in Section 2.06, a Eurodollar Rate Advance may be converted into a Alternate Base Rate Advance only on the last day of an Interest Period applicable to the Eurodollar Rate Advance being converted, (B) a Alternate Base Rate Advance may not be converted to a Eurodollar Rate Advance unless the principal amount thereof is equal to or greater than $5,000,000, (C) a Alternate Base Rate Advance may only be converted into a Eurodollar Rate Advance if no Default or Event of Default is in existence on the date of the notice of conversion or on the date of conversion and (D) no more than six (6) Eurodollar Rate Advances shall be outstanding at any one time. Each such conversion shall be effected by the Borrower by giving the Agent prior to 12:00 noon (New York time) at least three Business Days' prior notice (each a "Notice of Conversion") specifying the Advances to be so converted. The Agent shall give each Lender prompt notice of any such proposed conversion. (b) At the time it gives any Notice of Conversion in respect of the conversion of a Alternate Base Rate Advance into a Eurodollar Rate Advance or on the third Business Day prior to the expiration of an Interest Period applicable to a Eurodollar Rate Advance (in the case of any subsequent Interest Period), the Borrower shall have the right to elect, by giving the Agent notice thereof, the interest period (each an "Interest Period") applicable to such Eurodollar Rate Advance, which Interest Period shall, at the option of the Borrower, be a one, two or three month period, provided that: (i) the initial Interest Period shall commence on the date of conversion thereof and each Interest Period occurring thereafter in respect of such Advance shall commence on the day on which the next preceding Interest Period applicable thereto expires; (ii) if any Interest Period relating to a Eurodollar Rate Advance begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iii) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, provided that if any Interest Period for a Eurodollar Rate Advance would otherwise expire on a day which is not a Business Day but is a day of -12- the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; and (iv) no Interest Period shall extend beyond the Termination Date of the Letter of Credit under which the Liquidity Drawing which gave rise to such Advance was made. If upon the expiration of any Interest Period applicable to a Eurodollar Rate Advance, the Borrower has failed to elect a new Interest Period to be applicable to such Eurodollar Rate Advance as provided above, the Borrower shall be deemed to have elected to convert such Eurodollar Rate Advance into a Alternate Base Rate Advance effective as of the expiration date of such current Interest Period. (c) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Alternate Base Rate Advance from the date the proceeds thereof are made available to the Borrower until the date prepaid or repaid in full at a rate per annum equal to the Alternate Base Rate in effect from time to time plus the Applicable Margin in effect from time to time; provided, however, that if a Default or Event of Default shall occur and be continuing on any day on which an Alternate Base Rate Advance is outstanding the per annum interest rate on such day shall be equal to the Alternate Base Rate plus the Applicable Margin plus 2%. (d) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Rate Advance from the date the proceeds thereof are made available to the Borrower until the date prepaid or repaid in full at a rate per annum which shall, during each Interest Period applicable thereto, be equal to the Eurodollar Rate for such Interest Period plus the Applicable Margin in effect from time to time; provided, however, that if a Default or Event of Default shall occur and be continuing on any day on which a Eurodollar Rate Advance is outstanding the per annum interest rate on such day shall be equal to the Eurodollar Rate for such Interest Period plus the Applicable Margin plus 2%. (e) Accrued (and theretofore unpaid) interest shall be payable (i) in respect of each Alternate Base Rate Advance, quarterly in arrears on the last Business Day of each March, June, September and December, (ii) in respect of each Eurodollar Rate Advance, on the last day of each Interest Period applicable thereto and (iii) in respect of each Advance, (A) on the Advance Repayment Date for such Advance, (B) on any prepayment (on the amount prepaid), (C) upon the partial remarketing of the Bonds purchased with the proceeds of the Liquidity Drawing which gave rise to such Advance (on the principal amount of the Bonds so remarketed), and (D) after the Advance Repayment Date for such Advance, on demand. (f) On each Interest Determination Date, the Agent shall determine the interest rate for the Eurodollar Rate Advance for which such determination is being made and shall promptly notify the Borrower and the Lenders thereof. Each such determination shall, absent manifest error, be conclusive and binding on all parties hereto. (g) All computations of interest shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. (h) Upon at least three (3) Business Days' written notice to the Agent, the Borrower may prepay any Eurodollar Rate Advances, without premium (but subject to payment of the amounts, if any, required to be paid pursuant to Section 2.03(i)), in whole at any time or from time to -13- time in part in amounts aggregating $5,000,000 or any multiple of $1,000,000 in excess thereof by paying the principal amount being prepaid together with accrued interest thereon to the date of prepayment. Upon at least one Business Day's written notice to the Agent, the Borrower may prepay any Alternate Base Rate Advances, without premium (but subject to payment of the amounts, if any, required to be paid pursuant to Section 2.03(i)), in whole at any time or from time to time in part by paying the principal amount being prepaid together with accrued interest thereon to the date of prepayment. (i) The Borrower shall compensate each Lender, upon its written request (as reasonably determined by such Lender), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its Eurodollar Rate Advances) which such Lender may sustain: (i) if for any reason a conversion from or into Eurodollar Rate Advances does not occur on a date specified therefor in a Notice of Conversion (whether or not withdrawn by the Borrower or deemed rescinded pursuant to Section 2.06(b)); (ii) if any prepayment or repayment or conversion of any of its Eurodollar Rate Advances occurs on a date which is not the last day of an Interest Period with respect thereto; (iii) if any prepayment of any of its Eurodollar Rate Advances is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay its Eurodollar Rate Advances when required by the terms of this Agreement or (y) any action taken pursuant to Section 2.06(b). 2.04 Fees; Expenses. (a) The Borrower agrees to pay the Agent, for the account of the Fronting Bank and the Lenders, within five (5) Business Days of its receipt of a written invoice therefor (which invoice shall be sent to the Borrower by the Agent as soon as practicable following the end of each calendar quarter during which any Letter of Credit is outstanding and as soon as practicable following the Applicable Termination Date for such Letter of Credit), a non-refundable letter of credit fee in respect of each Letter of Credit that was outstanding during such (or any portion of such) calendar quarter or period ended on the Applicable Termination Date. The fee for each Letter of Credit and for each such period shall equal the sum for each day such Letter of Credit was outstanding of the product of (i) the Stated Amount of such Letter of Credit for such day (determined at 5:00 p.m. (New York time) on such day), (ii) the Applicable Fee for such day and (iii) a fraction, the numerator of which is one and the denominator of which is three hundred sixty (360). (b) The Borrower agrees to pay the Agent, for the account of the Lenders, a non-refundable commitment fee. The commitment fee shall accrue for the period from the Effective Date to but excluding the earliest of (i) December 5, 2000, (ii) the date on which Letters of Credit have been issued, the aggregate initial Stated Amounts of which equal the Total Commitment and (iii) the second Business Day following the date on which the Agent receives written notice from the Borrower terminating in whole or in part the obligation of the Fronting Bank to issue Letters of Credit (such earliest date, the "Commitment Termination Date"). The commitment fee shall be payable in arrears on the Commitment Termination Date; provided, however, that if the Commitment Termination Date has not occurred by September 1, 2000, the commitment fee accrued from and including the Effective Date to but excluding September 1, 2000 shall be payable on September 1, 2000. The commitment fee -14- payable for each day during such period shall equal the product of (A) the Unutilized Commitment for such day (determined at 5:00 p.m. (New York time) on such day), (B) 0.00125 and (C) a fraction, the numerator of which is one and the denominator of which is three hundred sixty (360). (c) The Borrower agrees to pay the Agent, for the account of the Fronting Bank, the Agent and the Arranger, the fees set forth in the Fee Letter at the times set forth in the Fee Letter. (d) The Borrower agrees to pay and hold the Agent, the Arranger, the Fronting Bank and each Lender harmless from and against any and all present and future stamp and other similar transfer or documentary taxes which arise as a result of the execution, delivery and performance of the Financing Documents and the Bond Documents and save the Agent, the Arranger, the Fronting Bank and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to the Agent, the Arranger, the Fronting Bank or such Lender) to pay such taxes. (e) The Borrower agrees to pay within fifteen (15) days following the Borrower's receipt of a written demand therefor and an accounting thereof (i) the reasonable out-of-pocket costs and expenses incurred by the Agent and the Arranger in connection with the preparation, execution and delivery of this Agreement and the other Financing Documents and the documents and instruments referred to herein and therein and the syndication of this Agreement and the Letters of Credit, (ii) in accordance with the Fee Letter, the fees and disbursements of White & Case LLP, counsel to the Agent, incurred in connection with the preparation, execution and delivery of the Financing Documents, the Bond Documents and the other documents and instruments referred to therein, (iii) all out-of-pocket costs and expenses of the Agent, the Fronting Bank and each Lender (including, without limitation, the reasonable fees and disbursements of counsel to the Agent, the Fronting Bank and the Lenders) in connection with (A) any amendment, waiver or consent of any Financing Document or any Bond Document which requires the consent of the Agent, the Fronting Bank or any Lender or (B) the failure of a Letter of Credit to be issued on the date specified therefor in the Notice of Issuance pursuant to which the issuance of such Letter of Credit was requested, (iv) all out-of-pocket costs and expenses of the Agent, the Fronting Bank and each Lender (including, without limitation, the reasonable fees and disbursements of counsel to the Agent, the Fronting Bank and the Lenders) in connection with the enforcement of the Financing Documents, the Bond Documents and the other documents and instruments referred to herein and therein, and (v) all reasonable out-of-pocket costs and expenses of any appraiser, auditor or other consultant retained by the Agent upon the written instruction from the Fronting Bank to reasonably assist the Fronting Bank and the Lenders in monitoring the Borrower's compliance with its obligations under this Agreement following the occurrence and during the continuance of any Event of Default. 2.05 Increased Costs; Reduced Rate of Return. (a) If any change in any Applicable Law or in the interpretation thereof by any Governmental Authority, central bank or comparable agency charged with the administration thereof shall have occurred after the Effective Date, which shall either (i) impose, modify or make applicable any reserve, capital, special deposit, or similar requirement against letters of credit issued by, participations in letters of credit issued by, assets held by, or deposits in or for the account of, the Fronting Bank or any Lender; (ii) subject the Fronting Bank or any Lender to any tax, duty, assessment -15- or other charge or withholding with respect to its obligation to maintain this Agreement and/or the Letters of Credit, to pay Reimbursement Amounts, to maintain its Commitment herein or to acquire Fronting Bank Interests (except for changes in the rate of tax or the imposition of any tax or other charges on the overall net income of the Fronting Bank or any Lender imposed by the jurisdiction in which the Fronting Bank or such Lender has its principal office); or (iii) impose on the Fronting Bank or any Lender any other condition regarding this Agreement, the Letters of Credit, the obligation of any Lender to pay Reimbursement Amounts and maintain its Commitment hereunder or acquire Fronting Bank Interests, and the result of any event referred to in clause (i), (ii) or (iii) above shall be to increase the cost to the Fronting Bank or any Lender of issuing, funding or maintaining this Agreement, the Letters of Credit, of funding Reimbursement Amounts or maintaining its Commitment or acquiring Fronting Bank Interests or to reduce the Fronting Bank's or any Lender's rate of return hereon, then promptly following receipt by the Borrower of written notice by the Fronting Bank or any Lender acting through the Agent, the Borrower agrees to pay the Fronting Bank or any such Lender such additional amount or amounts as shall be sufficient to compensate the Fronting Bank or any such Lender for such increased costs. (b) If the Fronting Bank or any Lender shall have determined that the adoption of or any change in any Applicable Law regarding capital adequacy or in the interpretation or application thereof or compliance by the Fronting Bank or such Lender or any corporation controlling the Fronting Bank or such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority, in each case made subsequent to the Effective Date, has the effect of reducing the rate of return on the Fronting Bank's or such Lender's or such corporation's capital as a consequence of its obligations hereunder and under the Letters of Credit to a level below that which the Fronting Bank or such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration the Fronting Bank's or such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by the Fronting Bank or such Lender to be material, then from time to time, after submission by the Fronting Bank or such Lender acting through the Agent to the Borrower of a written request therefor and reasonable substantiating documentation, the Borrower shall promptly pay to the Fronting Bank or such Lender such additional amount or amounts as will compensate the Fronting Bank or such Lender for such reduction. (c) The Fronting Bank and each Lender agrees to promptly notify the Agent, and upon receiving the same, the Agent agrees to promptly give notice to the Borrower of any event of which it has knowledge, occurring after the Effective Date, which will entitle the Fronting Bank or such Lender to impose any increased costs hereunder. In determining any additional amounts pursuant to Section 2.05(a) or (b), the Fronting Bank and each Lender will use averaging and attribution methods which are reasonable, provided that the Fronting Bank's or such Lender's, as the case may be, determination of compensation owing under Section 2.05(a) or (b) shall be conclusive and binding on all the parties hereto, provided such determinations are made reasonably and in good faith. The Fronting Bank and each Lender, upon determining that any additional amounts will be payable pursuant to this Section 2.05, will give prompt written notice thereof to the Agent, which notice shall show the basis for calculation of such additional amounts and reasonable substantiating documentation, and the Agent shall promptly submit the same to the Borrower. Any increased costs payable under this Section 2.05 shall -16- be due and payable in Dollars at such reasonable times and in such reasonable manner as set forth in the certificate or certificates of the Agent delivered to the Borrower pursuant to this Section. (d) The Fronting Bank and each Lender shall immediately notify the Borrower of any event of which the Fronting Bank or Lender has knowledge that will entitle it to compensation pursuant to this Section 2.05 and will exercise reasonable diligence to designate a different Eurodollar lending office and/or take other measures which will avoid the need for such compensation for increased costs and will not result in material costs to such Fronting Bank or Lender, or be otherwise disadvantageous (in its sole discretion) to such Fronting Bank or Lender. 2.06 Increased Costs, Illegality, etc. (a) In the event that the Fronting Bank or any Lender shall have reasonably determined (which determination with respect to clause (i) below, may be made only by the Agent): (i) on any Interest Determination Date that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or (ii) at any time, that the Fronting Bank or such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Rate Advance because of (x) any change since the Effective Date in any Applicable Law (whether or not having the force of law) (or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, order or request), such as, for example, but not limited to, (A) a change in the basis of taxation of payments to the Fronting Bank or any Lender of the principal of or interest on any Eurodollar Rate Advance, any Fronting Lender Interests, any Reimbursement Amounts or any other amounts payable hereunder (except for changes in the rate of tax on, or determined by reference to, the net income or profits of the Fronting Bank or such Lender imposed by the jurisdiction in which its principal office is located) or (B) a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent covered by Section 2.06(c) and/or (y) other circumstances affecting the Fronting Bank or such Lender or the interbank Eurodollar market or the position of the Fronting Bank or such Lender in such market; or (iii) at any time, that the making or continuance of any Eurodollar Rate Advance has been made (x) unlawful by any law or governmental rule, regulation or order, (y) impossible by compliance by the Fronting Bank or such Lender with any governmental request (whether or not having force of law) or (z) impracticable as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the interbank Eurodollar market; then, and in any such event, the Fronting Bank or such Lender acting through the Agent (or the Agent, in the case of clause (i) above) shall promptly give notice to the Borrower and, except in the case of clause (i) above, to the Agent of such determination (which notice the Agent shall promptly transmit to the Fronting Bank and each of the other Lenders). Thereafter (x) in the case of clause (i) above, Eurodollar Rate Advances shall no longer be available until such time as the Agent notifies the Borrower, the -17- Fronting Bank and the Lenders that the circumstances giving rise to such notice by the Agent no longer exist, and any Notice of Conversion given by the Borrower with respect to Eurodollar Rate Advances which have not yet been incurred by way of conversion shall be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to the Fronting Bank or such Lender, upon written demand therefor (which written demand shall show the basis for all calculations), such additional amounts as shall be required to compensate the Fronting Bank or such Lender for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to the Fronting Bank or such Lender, showing the basis for the calculation thereof, submitted to the Borrower by the Fronting Bank or such Lender shall be conclusive and binding on all the parties hereto, provided such determinations are made reasonably and in good faith) and (z) in the case of clause (iii) above, take one of the actions specified in Section 2.06(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Eurodollar Rate Advance is affected by the circumstances described in Section 2.06(a)(ii) or (iii), the Borrower may (and in the case of a Eurodollar Rate Advance affected by the circumstances described in Section 2.06(a)(iii) shall) either (i) if the affected Eurodollar Rate Advance is then being made pursuant to a conversion, cancel said Borrowing by giving the Agent notice by telephone of the cancellation on the same date that the Borrower was notified by the Fronting Bank or the Lender or the Agent pursuant to Section 2.06(a)(ii) or (iii), or (ii) if the affected Eurodollar Rate Advance is then outstanding, upon at least three Business Days' written notice to the Agent, convert such Eurodollar Rate Advance into a Alternate Base Rate Advance. (c) In the event that the Fronting Bank or any Lender shall determine (which determination shall be conclusive and binding on all the parties hereto, provided such determination is made reasonably and in good faith) at any time that by reason of Regulation D the Fronting Bank or any Lender is required to maintain reserves in respect of Eurocurrency liabilities (as defined in Regulation D) during any period that it has a Eurodollar Rate Advance outstanding (each such period, for the Fronting Bank or any Lender, a "Eurocurrency Reserve Period"), then the Fronting Bank or such Lender acting through the Agent shall promptly give notice to the Borrower of such determination (which notice the Agent shall promptly transmit to each of the other Lenders), and the Borrower shall directly pay to the Fronting Bank or such Lender additional interest on the unpaid principal portion of each Eurodollar Rate Advance of the Fronting Bank or such Lender during such Eurocurrency Reserve Period at a rate per annum which shall, during each Interest Period applicable to such Eurodollar Rate Advance, be the amount by which (i) the Eurodollar Rate for such Interest Period divided (and rounded upward to the next whole multiple of 1/16 of 1%) by a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities (as defined in Regulation D) exceeds (ii) the Eurodollar Rate for such Interest Period. Additional interest payable pursuant to the immediately preceding sentence shall be paid by the Borrower at the time that it is otherwise required to pay interest in respect of such Eurodollar Rate Advance or, if later demanded by the Fronting Bank or any Lender, promptly on demand. The Fronting Bank and each Lender agrees that if it gives notice to the Borrower of the existence of a Eurocurrency Reserve Period, it shall promptly notify the Borrower of any termination thereof, at which time the Borrower shall cease to be obligated to pay additional interest to the Fronting Bank or such -18- Lender pursuant to the first sentence of this Section 2.06(c) until such time, if any, as a subsequent Eurocurrency Reserve Period shall occur. (d) The Fronting Bank and each Lender shall immediately notify the Borrower of any event of which the Fronting Bank or Lender has knowledge that will entitle it to compensation pursuant to this Section 2.06 and will exercise reasonable diligence to designate a different Eurodollar lending office and/or take other measures which will avoid the need for such compensation for increased costs and will not result in material costs to such Fronting Bank or Lender, or be otherwise disadvantageous (in its sole discretion) to such Fronting Bank or Lender. 2.07 Manner of Payment; Late Payments. (a) All payments under this Agreement shall be made to the Agent not later than 2:00 p.m. New York time on the date when due and shall be made in Dollars in immediately available funds at the Payment Account. Except as otherwise specifically provided herein, any payment received after 2:00 p.m. New York time (or such other time as may be specifically provided herein) on a day shall be deemed made on the next succeeding day. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension. (b) All payments made by the Borrower hereunder shall be made without setoff, counterclaim or other defense other than prior payment. Nothing herein shall restrict any claim the Borrower may have against any party hereto or any third party. (c) Except as otherwise provided in Section 2.03(c) or (d), the Borrower agrees to pay interest at the Default Rate on all overdue amounts to the Agent, the Fronting Bank, any Lender or any Transferee (including unpaid Drawings) from and including the due date thereof to and excluding the date when paid in full. Such interest shall be payable upon demand. 2.08 Evidence of Debt. The Agent shall maintain in accordance with customary industry practice a detailed account or accounts evidencing the indebtedness of the Borrower resulting from each Drawing. 2.09 Obligations Unconditional. The payment obligations of the Borrower under this Agreement are primary, absolute, independent, irrevocable and unconditional, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances: (a) any lack of validity or enforceability of any Letter of Credit, any of the other Financing Documents or any of the Bond Documents; (b) any amendment or waiver of or any consent or departure from the terms and conditions of all or any of the Financing Documents or any of the Bond Documents; (c) the existence of any claim, set-off, defense or other right which the Borrower may have at any time, whether in connection with this Agreement, the transactions contemplated herein or in the other Financing Documents, in the Bond Documents or any unrelated transaction against the Agent, the Fronting Bank, any Lender or any beneficiary or transferee of any Letter of Credit or any other Person; (d) any statement or any document presented under any Letter of Credit proving to be forged, fraudulent, invalid, inaccurate or false in any respect; (e) payment by the Fronting Bank under any Letter -19- of Credit against presentation of a draft or certificate which does not strictly comply with the terms of such Letter of Credit; (f) any non-application or misapplication by any Applicable Bond Trustee or any tender agent for any Bonds or otherwise of the proceeds of any Drawing; or (g) the failure by Fronting Bank to honor any Drawing or to make any payment demanded under any Letter of Credit on the ground that the demand for such payment does not conform to the terms and conditions of such Letter of Credit; provided that, the Borrower shall have a claim against the Fronting Bank and the Fronting Bank shall be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by the Borrower which were caused by (i) the Fronting Bank's or any Lender's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit complied with the terms thereof or (ii) the Fronting Bank's willful failure or gross negligence to pay under any Letter of Credit after the presentation to it by the beneficiary thereof of a demand and certificate strictly complying with the terms and conditions of such Letter of Credit. 2.10 Reduction of Commitments. Prior to the Commitment Termination Date, the Borrower may, at any time and from time to time, upon at least two (2) Business Days' prior notice to the Agent (which notice the Agent shall promptly transmit to each of the Lenders), without premium or penalty, terminate the Unutilized Commitment in whole or in part, provided that (a) any such termination shall apply proportionately to reduce the Commitment of each Lender and (b) after giving effect to such termination, the Total Commitment shall equal or exceed the Total Stated Amount. At the close of business on the Commitment Termination Date, the Unutilized Commitment shall be reduced to zero and the Agent shall modify the Register to reflect such reductions in the Commitment of each Lender. 2.11 Extension of Scheduled Expiration Date. At least 150 days prior to the scheduled expiration date of any Letter of Credit, the Borrower may, by written notice to the Agent, request that the scheduled expiration date for such Letter of Credit be extended for an additional one year period commencing from the then scheduled expiration date. The Agent shall promptly forward each such request to the Fronting Bank and the Lenders. The Fronting Bank and the Lenders, in their sole and absolute discretion, shall notify the Agent, which in turn shall notify the Borrower, of their decision with respect to such request within 45 days of the date on which the Agent received such request notice from the Borrower. The failure of the Agent to notify the Borrower of any decision within such 45-day period shall be deemed to be a rejection of such request and none of the Agent, the Fronting Bank or any Lender shall incur any liability or responsibility whatsoever by reason of its failure to notify the Borrower. If the Fronting Bank and all of the Lenders agree to such a request, the Fronting Bank shall promptly (and, in any event no later than the date that is 35 days prior to the then scheduled expiration date) prepare and deliver to the Applicable Bond Trustee an amendment to (or a restatement of) the applicable Letter of Credit, which amendment (or restatement) shall reflect the new scheduled expiration date. 2.12 Change in Control. Upon the occurrence of a Change in Control and at any time during the ninety (90) day period thereafter, the Borrower shall, upon the written request of the Agent (at the direction of the Majority Lenders), deposit with the Agent, in an interest bearing account, as collateral, Dollars in an amount equal to the aggregate Stated Amount of all Letters of Credit then outstanding and all other amounts owing under the Financing Documents (the "Change in Control Collateral"). Upon the occurrence of a Change in Control, and at any time during the ninety (90) day period thereafter, the Fronting Bank may (and at the direction of the Majority Lenders shall), but shall -20- not be obligated to (unless directed to do so by the Majority Lenders), deliver written notice of such Change in Control to each Applicable Bond Trustee and request the Applicable Bond Trustee for a series of Bonds to cause such Bonds to be purchased. The Change in Control Collateral shall be applied against amounts due to the Agent, the Fronting Bank and the Lenders resulting from any such purchase. All Change in Control Collateral shall be held in the account with the Agent until the earlier of (i) the 120th day after the occurrence of a Change in Control or (ii) the expiration of all Letters of Credit and payment of all Reimbursement Obligations and Advances in connection therewith, at which time the remaining Change in Control Collateral and any interest accrued thereon shall be returned to the Borrower. 2.13 Application of Amounts Received from Applicable Bond Trustee or Applicable Tender Agent. In the event the Fronting Bank receives any amount from any Applicable Bond Trustee or any Applicable Tender Agent, such amount, as soon as reasonably possible, shall be (i) first, applied to reimburse the Fronting Bank in respect of any unpaid Drawing, (ii) second, applied to prepay any outstanding Advances, with Alternate Base Rate Advances to be prepaid before Eurodollar Rate Advances, (iii) third, if Eurodollar Rate Advances are prepaid in accordance with clause (ii) of this Section 2.13 other than on the last day of the Interest Period applicable thereto, applied to pay amounts required to be paid pursuant to Section 2.03(i), and (iv) fourth, paid to the Borrower. Section 3. Conditions Precedent. 3.01 Agreement. This Agreement shall become effective on the date that all of the following conditions have been satisfied or waived by the Fronting Bank and the Lenders (such date, the "Effective Date"): (a) Agreement. The Agent shall have received counterparts of this Agreement duly executed and delivered by the Borrower, the Arranger, the Fronting Bank and each Lender listed on the signature pages hereto. (b) Opinion. The Agent shall have received from the General Counsel, an Associate General Counsel or an Assistant General Counsel of the Borrower, an opinion dated the Effective Date and addressed to the Agent, the Fronting Bank and the Lenders in form and substance satisfactory to the Agent and its counsel. (c) Corporate Proceedings. The Fronting Bank and the Lenders shall be satisfied that all corporate proceedings of the Borrower taken in connection with the transactions contemplated by this Agreement shall be in form and substance reasonably satisfactory to the Fronting Bank and the Lenders. The Fronting Bank and the Lenders acknowledge and agree that the failure of the Borrower to provide evidence of corporate proceedings related to the issuance of Bonds, other than Bonds to be issued on or about the Effective Date, shall not, by itself, be considered a failure of this condition precedent. (d) Financial Statements. The Agent shall have received a copy of the Borrower's (i) annual report on Form 10-K for the year ended June 30, 1999, as filed with the U.S. Securities and Exchange Commission, and (ii) quarterly report on Form 10-Q for the quarter ended March 31, 2000, as filed with the U.S. Securities and Exchange Commission, together with a certificate of an authorized -21- financial officer of the Borrower to the effect that the unaudited financial statements included in such quarterly report were prepared in accordance with GAAP, subject only to normal year-end audit adjustments. (e) Payment of Fees. The Borrower shall have paid to the Persons entitled thereto all fees that are due and payable pursuant to Section 2.04 on or before the Effective Date. (f) Consents. The Fronting Bank and the Lenders shall be reasonably satisfied that all necessary governmental and third party approvals, if any, required to be obtained by the Borrower in connection with the transactions contemplated by this Agreement and the other Financing Documents and otherwise referred to herein and therein shall have been obtained and remain in full force and effect (other than approvals required in connection with any such transactions that will close after the Effective Date). (g) No Adverse Change. Nothing shall have occurred since March 31, 2000 (and the Fronting Bank and the Lenders shall have become aware of no facts or conditions not previously known) which the Fronting Bank or the Lenders shall determine, in their reasonable good faith judgment, could have a material adverse effect on their rights or remedies hereunder, or on the ability of the Borrower to perform its obligations hereunder or which could have a material adverse effect on the business, financial condition or results of operations of the Borrower and its Subsidiaries taken as a whole. (h) No Litigation. The Fronting Bank and the Lenders shall be reasonably satisfied that, on the Effective Date, no judgment, order, injunction or other restraint shall have been issued or filed which restrains, and no hearing seeking injunctive relief or other restraint is pending or has been noticed which seeks to restrain, the Fronting Bank from issuing any Letter of Credit or the Borrower from consummating the transactions described in the Financing Documents. (i) No Default; Representations and Warranties. The Fronting Bank and the Lenders shall be reasonably satisfied that on the Effective Date: (a) there shall exist no Default or Event of Default and (b) all representations and warranties of the Borrower contained herein shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the Effective Date, except to the extent such representations and warranties relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. All agreements, certificates, legal opinions and other documents and papers referred to in this Section 3.01, unless otherwise specified, shall (x) be delivered to the Agent for the account of the Fronting Bank and each Lender and, in the case of this Agreement, in sufficient counterparts for each Lender and (y) be reasonably satisfactory in form and substance to the Fronting Bank and the Lenders. 3.02 Letters of Credit. The Fronting Bank will issue each Letter of Credit on the Date of Issuance therefor if all of the following conditions have been satisfied or waived by the Fronting Bank and the Lenders: (a) The Agent shall have received a Notice of Issuance executed by the Borrower. -22- (b) The representations and warranties set forth in Sections 4.01, 4.02, 4.03, 4.05, 4.06, 4.09(a), 4.09(c), 4.10, 4.12 and 4.13 hereof shall be true in all material respects on and as of the Date of Issuance of such Letter of Credit with the same effect as though made on and as of such date, except to the extent such representations and warranties relate to an earlier date in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. (c) No Default or Event of Default shall have occurred and be continuing on the Date of Issuance or shall result from the issuance of such Letter of Credit. (d) The Agent shall have received a complete copy of all Bond Documents and all Financing Documents relating to the Bonds to be secured by such Letter of Credit, together with all opinions, consents, certificates and receipts rendered and delivered in connection therewith, and the Agent and its counsel shall be reasonably satisfied with the form and substance thereof. The acceptance of the benefits of each Letter of Credit shall constitute a representation and warranty by the Borrower to the Agent, the Fronting Bank and each of the Lenders that all the conditions specified in Section 3.02 exist as of the applicable Date of Issuance. Section 4. Representations and Warranties. The Borrower represents and warrants to the Fronting Bank, the Agent and each Lender that: 4.01 Organization; Powers. The Borrower is a corporation duly organized and existing under the laws of the State of Delaware, has the corporate power to own its property and carry on its business as being conducted, and is duly qualified to do business as a foreign corporation and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary. 4.02 Authorization; No Violation. The execution, delivery and performance by the Borrower of this Agreement (i) has been duly authorized by all necessary corporate action and does not require any consent or approval, authorization, permit or license from any federal, state or other regulatory authority which has not been obtained, or violate any law, regulation, order, judgment, decree or determination having applicability to the Borrower or its organizational documents, or result in a breach of, or constitute a default under any existing indenture or credit agreement or any other agreement or instrument to which the Borrower is a party or by which its properties may be bound or affected except where the failure to have such consent or approval or such violation, breach or default could not reasonably be expected to result in a material adverse effect on the business, financial condition or results of operations of the Borrower and its Subsidiaries taken as a whole, and (ii) will not conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, the Certificate of Incorporation or Bylaws of the Borrower or of any agreement or instrument to which the Borrower is now a party, which breach would have a material adverse effect on the business, financial condition or results of operations of the Borrower and its Subsidiaries taken as a whole. 4.03 Enforceability. This Agreement has been duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the Borrower enforceable against the -23- Borrower in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 4.04 Financial Statements. The Borrower has furnished the Fronting Bank and the Lenders with the following financial statements, identified by the certificate of a principal financial officer of the Borrower: balance sheets of the Borrower as at June 30, 1999 and March 31, 2000, and income and reinvested earnings statements of the Borrower for the fiscal year or fiscal quarter, as the case may be, ended on such dates, respectively, certified, in the case of financial statements for the fiscal year ended June 30, 1999, by Arthur Andersen LLP. Such financial statements are true and correct and have been prepared in accordance with GAAP, except, in the case of the quarterly financial statements, the absence of complete footnotes and subject to normal year-end audit adjustments. The balance sheets and their accompanying notes present fairly the condition of the Borrower as of the dates thereof, and the income and reinvested earnings statements present fairly the results of the operations of the Borrower for the periods indicated. Except as disclosed in the Official Statement as in effect on the Effective Date or incorporated by reference therein, there has been no material adverse change in the business, financial condition or results of operations of the Borrower and its Subsidiaries taken as a whole since March 31, 2000. 4.05 Litigation. Except as disclosed in the Official Statement as in effect on the Effective Date or incorporated by reference therein, there is no action or proceeding pending or threatened against the Borrower before any court or administrative agency which, in the reasonable opinion of the Borrower, is likely to be determined in a manner which would result in any material adverse change in the business, financial condition or results of operations of the Borrower and its Subsidiaries taken as a whole, and the Borrower is not in default with respect to any order, writ, injunction or decree of any court or administrative agency, which would have a material adverse effect on the Borrower and its Subsidiaries taken as a whole. 4.06 Business; Status as Air Carrier. (a) The Borrower is a duly certificated air carrier and there are in force any certificates or other appropriate authority issued by appropriate governmental authorities necessary to authorize the Borrower to engage in intrastate, interstate, overseas and foreign air transportation of persons, property and mail over the routes operated by the Borrower; and (b) no proceedings are pending or threatened, by or before any public body, agency or authority, domestic or foreign, including but not limited to proceedings to alter, amend, modify, suspend or revoke such certificates in whole or in part, which might seriously affect adversely the income from, title to, or possession of, any of the properties of the Borrower, to an extent which would constitute a material adverse change in the business or condition of the Borrower. 4.07 Funded Debt. The Borrower does not have outstanding any Funded Debt except as set forth on Schedule 4.07 to this Agreement; and there exists no default under the provisions of any instrument evidencing such indebtedness or agreement relating thereto. -24- 4.08 Title to Properties, Etc. The Borrower and its Subsidiaries have good and marketable title to their respective properties and assets, including the properties and assets reflected in the balance sheets described in Section 4.04 hereof, subject to no mortgage, pledge, encumbrance, lien or charge of any kind except mortgages, pledges, encumbrances, liens or charges permitted by Section 5.04 hereof. 4.09 Tax Returns and Payments. (a) The Borrower has filed all federal income tax returns which are required to be filed, and has paid all taxes as shown on said returns and on all assessments received by it to the extent that such taxes (other than those which the Borrower is contesting in good faith by appropriate proceedings being diligently conducted) have become due. (b) The federal income tax liability of the Borrower has been finally determined by the Internal Revenue Service and satisfied for all fiscal years prior to and including the fiscal year ended June 30, 1992. (c) All other tax returns and reports of the Borrower which are required to be filed have been duly filed, and all taxes and government charges (other than those for which payment may be withheld without penalty or those which the Borrower is contesting in good faith by appropriate proceedings being diligently conducted) upon the Borrower, its assets, income or franchises which are due and payable have been paid. 4.10 Use of Proceeds. No part of the proceeds under any of the Letters of Credit will be used other than to pay the principal of and interest on Bonds. The Borrower is not engaged, principally or as one of the Borrower's important activities, in the business of purchasing or carrying any "margin stock" as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System. After giving effect to each use of the proceeds from any of the Letters of Credit, not more than 25% of the value of the assets of the Borrower and its Subsidiaries (determined on a consolidated basis) shall be represented by "margin stock". 4.11 Subsidiaries. Schedule 4.11 is a complete and correct list of all Subsidiaries as of the date hereof, all of which are corporations duly incorporated, in good standing and with corporate power to transact the business presently conducted by them. Except as disclosed in Schedule 4.11, the Borrower owns, directly or indirectly through one or more Subsidiaries, all the shares of each of such Subsidiaries (except directors' qualifying shares, if any), and all such shares are validly issued, fully paid and non-assessable and are free and clear of all liens and rights of others whatsoever. 4.12 ERISA. The Borrower and each Subsidiary have met their minimum funding requirements under the ERISA with respect to all their employee benefit plans covered by the minimum funding requirements of ERISA, and have not incurred any material liability to the Pension Benefit Guaranty Corporation (or any entity succeeding to any or all of said Corporation's functions under ERISA) under ERISA in connection with any such plan. 4.13 Environmental Matters. The Borrower and its Subsidiaries are in substantial compliance with all applicable federal, state and local environmental laws, regulations and ordinances -25- governing their respective business, properties or assets with respect to discharges into the ground and surface water, emissions into the ambient air and generation, storage, transportation and disposal of waste materials or process by-products, except such noncompliances as are not likely to have a material adverse effect on the property, assets, business, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole. All licenses, permits or registrations required for the business of the Borrower and its Subsidiaries under any federal, state or local environmental laws, regulations or ordinances have been secured, and the Borrower and each Subsidiary are in substantial compliance therewith, except such licenses, permits or registrations the failure to secure or to comply therewith are not likely to have a material adverse effect on the property, assets, business, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole. Section 5. Covenants. The Borrower covenants and agrees with the Agent, the Fronting Bank and each Lender that so long as this Agreement shall remain in effect and until all the Letters of Credit have been terminated and all fees and all other expenses or amounts payable under this Agreement by the Borrower shall have been paid in full: 5.01 No Merger or Sale of Assets. The Borrower will not, and will not permit any of its Subsidiaries to, merge or consolidate with any corporation or sell, lease or transfer or otherwise dispose of all or substantially all of its assets in any transaction or series of related transactions, except that (i) any Subsidiary may merge or consolidate with the Borrower or any one or more other Subsidiaries; (ii) any Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to the Borrower or another Subsidiary; (iii) any Subsidiary may sell or otherwise dispose of all or substantially all of its assets, provided that (a) such sale or other disposition is for a consideration which represents fair value (as determined in good faith by the Borrower) at the time of such sale or disposition, and (b) the assets so disposed of do not constitute all or substantially all of the aggregate assets of the Borrower and the Subsidiaries; (iv) the Borrower may dispose of aircraft in the ordinary course of its business, provided that such sale or other disposition is for a consideration which represents fair value (as determined in good faith by the Borrower) at the time of such sale or disposition; and (v) the Borrower may merge or consolidate with another corporation, provided that (a) the Borrower shall be the continuing or surviving corporation, (b) a majority of the board of directors of the Borrower for a period of six (6) months after the effective date of such merger consists of individuals who were directors of the Borrower twelve (12) months prior to such effective date, and (c) immediately after such merger or consolidation there shall exist no Event of Default as defined herein. 5.02 Leases. The Borrower will not, and will not permit any of its Subsidiaries to, enter into or permit to remain in effect any flight equipment lease agreements which, as of the close of any fiscal year, cause the Borrower's consolidated aircraft rentals for such fiscal year, as determined in accordance with GAAP, to exceed eight percent (8%) of the Borrower's consolidated operating revenues for such fiscal year, provided that any such lease agreements as may be necessary in connection with interchange agreements between the Borrower and other airline related businesses shall not be included in such calculation. 5.03 Debt. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist, for the Borrower and the Subsidiaries taken together, (a) -26- Current Debt in an aggregate principal amount at any one time outstanding in excess of 100% of all accounts receivable of the Borrower and its Subsidiaries outstanding as of the last day of the second calendar month next preceding the month in which such calculation of Current Debt is made, all computed in accordance with GAAP; or (b) Convertible Subordinated Debt in excess of 33.3% of Equity; or (c) Funded Debt, Current Debt (other than Convertible Subordinated Debt) and all Guaranty Liabilities (as defined below) in an amount at any one time which exceeds 150% of Equity at such time. For purposes of this Section 5.03, "Guaranty Liabilities" shall mean all liabilities of the Borrower and any Subsidiary of the Borrower as guarantor, surety, accommodation endorser or other accommodation party on behalf of any Person where the underlying obligation of such Person covered by, or the subject of, such guaranty or contingent undertaking would constitute Current Debt or Funded Debt, as defined herein, if such Person were the Borrower; provided, however, that (x) guarantees or other contingent undertakings by the Borrower on behalf of any Subsidiary, by any Subsidiary on behalf of any other Subsidiary, or by any Subsidiary on behalf of the Borrower and (y) the contingent undertakings as set forth on Schedule 5.03 hereto, shall not constitute Guaranty Liabilities. 5.04 Liens. The Borrower will not, and will not permit any of its Subsidiaries to, create, assume or suffer to exist any mortgage, pledge, encumbrance, lien or charge of any kind upon any of its property or assets, whether now owned or hereafter acquired, except: (i) mortgages, pledges, encumbrances, liens or charges where the aggregate indebtedness secured by such mortgages, pledges, encumbrances, liens or charges at any time does not exceed the sum of (a) the greater of $3,000,000,000 or fifteen percent (15%) of Equity plus (b) the amount outstanding under the obligations described on Schedule 4.07 hereof as "Secured"; (ii) liens for taxes not yet due or which are being contested in good faith; (iii) other liens, charges and encumbrances incidental to the conduct of its business or the ownership of its property and assets which were not incurred to secure the repayment of borrowed money or other advances or credit, and which do not in the aggregate materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business; (iv) liens imposed by law, such as carriers', warehousemen's, mechanics', materialmen's and vendors' liens, for sums not yet due or already due but the validity of which is being contested in good faith; (v) mortgages, pledges, encumbrances, liens or other charges on property or assets of a Subsidiary to secure obligations of such Subsidiary to the Borrower or another Subsidiary; (vi) any mortgage, pledge, encumbrance, lien or other charge, required by Section 5.10 hereof; (vii) any mortgage, pledge, encumbrance, lien or other charge existing at the date hereof on any property owned or leased by the Borrower or any Subsidiary at that date securing obligations outstanding on that date; (viii) any mortgage, pledge, encumbrance, lien or other charge on any property, shares of stock or obligation existing at the time of acquisition thereof (including acquisition through merger or consolidation) or (ix) any mortgage, pledge, encumbrance, lien or other charge on aircraft or aircraft engines (but no other assets) now owned or acquired by Borrower or any Subsidiary after the date hereof to secure the payment of all or any part of the purchase price thereof or to secure any obligation incurred or for which a firm commitment is obtained prior to, at the time of, or after, the acquisition of such property for the purpose of financing all or any part of the purchase price thereof. 5.05 Insurance. The Borrower will, and will cause each of its Airline Subsidiaries to, keep adequately insured, by financially sound and reputable insurers, all property of the character usually insured by corporations engaged in the same or similar businesses similarly situated, against loss or damage of the kind customarily insured against by such corporations, and carry adequate liability -27- insurance and other insurance of a kind generally carried by corporations engaged in the same or similar businesses similarly situated; provided, however, that nothing herein contained shall be construed to mean that a deductibility clause in any such insurance, which, in effect, results in self-insurance of a level or portion of losses considered reasonable by the Borrower's management, shall render such insurance inadequate; and provided, further, that in the case of a lease to the United States Government or an agency thereof of any aircraft or other property, indemnity therefrom by the United States Government will be considered adequate insurance against the risks that are the subject of any such indemnity. 5.06 Payment of Taxes. The Borrower will, and will cause each of its Airline Subsidiaries to, duly file all federal income tax returns and all other tax returns and reports which, to the knowledge of the officers of the Borrower are required to be filed and pay when due all taxes and governmental charges assessed against it, its assets, income or franchises, except to the extent and so long as contested in good faith. 5.07 Financial Statements. The Borrower will deliver to the Agent, the Fronting Bank and the Lenders: (a) As soon as practicable and in any event within two (2) months after the end of each quarterly period (other than the last quarterly period in each fiscal year) an income statement of the Borrower for the period from the beginning of the current fiscal year to the end of such quarterly period, and a balance sheet of the Borrower as at the end of such quarterly period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and certified by a principal financial officer of the Borrower, subject to changes resulting from year-end adjustments; and a statement as of the end of such quarterly period of the calculations made by the Borrower establishing its compliance with the provisions of Sections 5.02, 5.03 and 5.04 hereof, in sufficient detail to permit the Agent, Fronting Bank and the Lenders to determine how the conclusions on such statement were arrived at, certified by an authorized financial officer of the Borrower as accurate in all material respects; (b) As soon as practicable and in any event within three (3) months after the end of each fiscal year, an income statement and a statement of reinvested earnings of the Borrower for such year, and a balance sheet of the Borrower as at the end of such year, setting forth in each case in comparative form corresponding figures from the preceding annual audit, all in reasonable detail and satisfactory in scope to the Banks and certified by independent certified public accountants of national standing selected by the Borrower; and a statement as of the end of such fiscal year of the calculations made by the Borrower establishing compliance with the provisions of Sections 5.02, 5.03 and 5.04 in sufficient detail to permit the Agent, Fronting Bank and the Lenders to determine how the conclusions on such statement were arrived at, certified by an authorized financial officer of the Borrower as accurate in all material respects; (c) Copies of all financial statements, reports and returns which it shall send to its stockholders; (d) Promptly after the sending or filing thereof, copies of all periodic reports, if any, which the Borrower shall have filed with the Securities and Exchange Commission (or any governmental -28- agency or agencies substituted therefor) under ss.13 or ss.15(d) of the Securities Exchange Act of 1934, as amended, or with any national securities exchange; and (e) With reasonable promptness such other financial data as the Fronting Bank and any Lender may reasonably request through the Agent. 5.08 Maintenance of Equipment. The Borrower will, and will cause each of its Airline Subsidiaries to, maintain substantially all of its equipment (except surplus or obsolete equipment) in good operating order. 5.09 Inspection. The Borrower will permit any Person designated by any the Fronting Bank or any Lender in writing, to visit and inspect any of the properties, corporate books and financial records of the Borrower and its Subsidiaries at the Fronting Bank's or such Lender's expense, and to discuss the affairs, finances, and accounts of any such corporation with the principal officers of the Borrower, all at such reasonable times and as often as the Fronting Bank or such Lenders may reasonably request. This covenant shall be subject to applicable governmental and industrial security regulations. 5.10 Security. In the event the Borrower secures by mortgage, pledge, encumbrance, lien or other charge any debt other than as permitted by Section 5.04 hereof, the Borrower shall secure equally and ratably the indebtedness incurred hereunder. 5.11 Notice of Any Default or Event of Default. As soon as practicable (but in any event not more than five (5) days after the Chairman of the Board, the President, or a principal financial officer of the Borrower obtains knowledge of a Default or an Event of Default as specified in Section 6 hereof), the Borrower will deliver to the Agent, the Fronting Bank and each Lender an Officer's Certificate specifying the nature thereof, the period of existence thereof and what action the Borrower has taken or proposes to take with respect thereto. 5.12 ERISA Reporting Requirements. With respect to any employee benefit plan subject to Title IV of ERISA, the Borrower shall, if requested by the Agent, provide the Agent with copies of the most recent annual reports or returns (IRS Form 5500), audited or unaudited financial statements and actuarial valuations with respect to such plans. In addition, the Borrower shall provide the Agent copies of any notice filed with the Pension Benefit Guaranty Corporation with respect to any "Reportable Event" as defined in Section 4043 of ERISA, and the Agent shall forward copies of any such notice to the Fronting Bank and the Lenders. 5.13 Ratings. The Borrower will notify the Agent promptly after the Borrower becomes aware of any public announcement of the occurrence of any change in the S&P Rating or the Moody's Rating. Section 6. Events of Default; Remedies. 6.01 Events of Default. The occurrence of any one or more of the following events shall be an "Event of Default": -29- (a) any representation or warranty made by the Borrower herein or in any certificate furnished to the Fronting Bank or the Lenders hereunder proves to have been false or breached in any material respect on the date as of which made, or any statement or certificate furnished by the Borrower pursuant hereto shall prove to have been false in any material respect at any date as of which the facts therein set forth were stated or certified; (b) the Borrower shall fail to pay or cause to be paid, (i) within five (5) days after the date on which the principal amount of any Reimbursement Obligation or any Advance is due; (ii) within five (5) days after the date on which the interest amount of any Reimbursement Obligation or any Advance is due; (iii) within ten (10) days after the date on which the commitment fee and a letter of credit fee in Section 2.04(a) and 2.04(b), respectively, is due; or (iv) within ten (10) days after the Borrower's receipt of written notice that any such amount is past due, any other amount not included in clauses (i), (ii) and (iii) of this paragraph (b) payable to the Agent, the Arranger, the Fronting Bank or any Lender under this Agreement; (c) default in the due observance or performance by the Borrower or any Subsidiary (to the extent applicable to such Subsidiary) of any covenant, condition or agreement contained in Sections 5.01, 5.02, 5.03, and 5.04; (d) default in the due observance or performance by the Borrower or any Subsidiary (to the extent applicable to such Subsidiary) of any covenant, condition or agreement contained in this Agreement (other than those specified in (b) or (c) above) and such default remains unremedied for a period of 30 days after written notice thereof from the Agent, the Fronting Bank or any Lender to the Borrower; (e) the Borrower shall institute a voluntary case seeking liquidation or reorganization under Chapter 7 or Chapter 11, respectively, of the United States Bankruptcy Code, or shall consent to the institution of an involuntary case thereunder against it, or the Borrower shall otherwise institute any similar proceeding under any other applicable federal or state law, or shall consent thereto, or the Borrower shall apply for, or by consent or acquiescence there shall be an appointment of, a custodian, receiver, liquidator, sequestrator, trustee or other officer with similar powers, for the Borrower, or for all or a material part of its properties; or the Borrower shall make an assignment for the benefit of creditors, or the Borrower shall have ceased to pay its debts generally as they become due; or if an involuntary case shall be commenced seeking the liquidation or reorganization of the Borrower under Chapter 7 or Chapter 11, respectively, of the United States Bankruptcy Code or any similar proceeding shall be commenced against the Borrower under any other applicable federal or state law and (i) the petition commencing the involuntary case is not timely controverted, (ii) the petition commencing the involuntary case is not dismissed within forty-five (45) days of its filing, (iii) an interim trustee is appointed to take possession of all or a portion of the property and/or to operate all or any part of the business of the Borrower, or (iv) an order for relief (other than the petition itself) shall have been issued or entered therein; or a decree or order of a court having jurisdiction in the premises for the appointment of a custodian, receiver, liquidator, sequestrator, trustee or other officer having similar powers for the company or for all or a part of its properties, shall have been entered; or any other similar relief shall be granted against the Borrower under any applicable federal or state law; or -30- (f) seizure under any legal process of a substantial share of the assets of the Borrower if release is not obtained within thirty (30) days of such seizure; (g) default in any payment of principal or interest on any other obligation for borrowed money or the deferred purchase price of property beyond any period of grace provided with respect thereto, or in the payment of any capital leases, or in the performance or observance of any other agreement, term or condition contained in any agreement under which any such obligation is created, if the effect of such default is to cause, or permit the holder or holders of such obligation (or a trustee acting on behalf of such holder or holders) to cause, such obligation to become due prior to its stated maturity, provided such obligations or agreements have aggregate outstanding amounts of $75,000,000 or more; or (h) the Borrower shall have failed to meet its minimum funding requirements under the ERISA with respect to any of its employee benefit plans which are covered by Title IV of ERISA (or to which ss.412 of the Code applies), which failure has resulted in a material liability for excise tax under ss.4971 of said Code, or any of its plans aforesaid shall be the subject of voluntary or involuntary termination proceedings which may result in an uninsured payment or repayment liability of the respective corporation to the Pension Benefit Guaranty Corporation (or any entity succeeding to any or all of its functions under ERISA) in an amount which is material in relation to the net worth of the Borrower. 6.02 Remedies. (a) Upon the occurrence of an Event of Default (other than an Event of Default with respect to the Borrower described in Section 6.01(e)), the Agent may, and upon the written request of the Fronting Bank and the Majority Lenders shall, by written notice to the Borrower, declare an amount equal to the then current aggregate Stated Amount of all Letters of Credit plus all other amounts owing to the Agent, the Fronting Bank and the Lenders hereunder to be immediately due and payable, whereupon the same shall become due and payable to the Agent without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. Upon receipt of any such written notice, the Borrower agrees to deposit with the Agent, in an interest bearing account, as collateral, Dollars in an amount equal to the aggregate Stated Amount of all Letters of Credit then outstanding and all other amounts owing under the Financing Documents (the "Collateral"). The Collateral shall be applied against amounts due to the Agent, the Fronting Bank and the Lenders and any remaining Collateral shall be held in the account with the Agent until the earlier of (i) all Events of Default having been cured or (ii) the expiration of all Letters of Credit and payment of all Reimbursement Obligations and Advances in connection therewith, at which time the remaining Collateral and any interest accrued thereon shall be returned to the Borrower. (b) Notwithstanding the notice provisions contained in Section 6.02(a), if an Event of Default described in Section 6.01(e) shall occur, the results which would occur upon the giving of written notice by the Agent to the Borrower as specified in Section 6.02(a) shall occur automatically without the giving of any such notice. (c) Upon the occurrence of an Event of Default, the Fronting Bank may (and, upon the direction of the Majority Lenders, shall), but shall not be obligated to (unless so directed by the -31- Majority Lenders), deliver written notice of such Event of Default to each Applicable Bond Trustee and request the Applicable Bond Trustee for a series of Bonds to cause such Bonds to be purchased. (d) The Agent, the Fronting Bank or any Lender may take such other action and exercise such other rights as are provided under Applicable Law. Section 7. Intercreditor Arrangements. The provisions of this Section 7 are for the sole and exclusive benefit of the Agent, the Fronting Bank and the Lenders and the Borrower shall have no rights or obligations under this Section 7. 7.01 Fronting Bank Interests. (a) In the event that the Fronting Bank honors payment of a drawing made under the Letters of Credit and is not reimbursed therefor as provided in Section 2.02, the Fronting Bank shall be deemed to have acquired for its own account an undivided 100% interest in the Reimbursement Obligations created thereby (the Fronting Bank's interests therein, the "Fronting Bank Interests"). In the event that the Fronting Bank acquires any Fronting Bank Interests, it shall promptly advise each Lender, if any, thereof by telephone (promptly confirmed in writing) or by written notice, and each Lender severally agrees to unconditionally and irrevocably buy from the Fronting Bank, and the Fronting Bank agrees to sell to each Lender, a portion of the Fronting Bank Interests for an amount (each such amount, a "Reimbursement Amount") equal to such Lender's Percentage of the aggregate amount of such Fronting Bank Interests; provided, however, that no Lender shall be required to purchase any portion of any Fronting Bank Interest if as a result thereof the amount such Lender would be required to pay for such purchase, when added to the amounts paid for prior purchases of portions of Fronting Bank Interests which have not been reimbursed by the Agent under Section 7.02, would result in such Lender paying any amount in excess of its Commitment. The purchase price of each portion of a Fronting Bank Interest purchased pursuant to the preceding sentence shall be paid (without set-off, counterclaim or deduction of any kind whatsoever) to the Fronting Bank in the manner set forth below in subsection (b) of this Section 7.01. The Fronting Bank shall determine the amount of each Reimbursement Amount associated with any sale of its Fronting Bank Interests, and each such determination shall be conclusive and binding on its Lenders absent manifest error. (b) Each Lender shall pay its Reimbursement Amount associated with any purchase of a portion of the Fronting Bank Interests by transferring such amount to the order of the Fronting Bank in immediately available funds, (i) at or before 2:30 p.m. New York time on the same Business Day, if telephonic notice confirmed by written notice (by facsimile) from the Fronting Bank is received no later than 12:30 p.m. New York time on any Business Day or (ii) at or before 12:00 noon New York time on the Business Day next following the date on which notice is received, if telephonic notice confirmed by written notice (by facsimile) from the Fronting Bank is received later than 12:30 p.m. New York time on any Business Day. Telephonic notice shall be deemed given to a Lender when actually given to any individual who identifies himself or herself as an officer at such Lender's office at the address set forth in Section 9.03 hereof. Facsimile written notice required to be given pursuant to this Section shall be sent to the facsimile number provided to the Fronting Bank for such purpose by each Lender. If a Lender fails to pay to the Fronting Bank any Reimbursement Amount when due, such Lender agrees that the Fronting Bank shall be entitled to receive, and such Lender shall pay to the order of the Fronting Bank, interest on such amount at a rate equal to the Alternate Base Rate in effect on -32- each date plus 1% per annum from the date when due until paid. No Lender shall be entitled to purchase a portion of any Fronting Bank Interests until such time as it shall have paid all of its outstanding Reimbursement Amounts and any interest which may be due thereon to the Fronting Bank. Each Lender further agrees that, until it shall have paid all amounts owing to the Fronting Bank pursuant to this Section 7.01, it shall not be entitled to receive any payment described in clauses (i) or (ii) of subsection (b) of Section 7.02 and shall not be permitted to vote on any matter where its consent or approval is required. (c) Each Lender's payment obligations to the Fronting Bank under this Agreement are primary, absolute, independent, irrevocable and unconditional, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit, any of the other Financing Documents or any of the Bond Documents; (ii) any amendment or waiver of or any consent or departure from the terms and conditions of all or any of the Financing Documents or any of the Bond Documents; (iii) the existence of any claim, set-off, defense or other right which such Lender may have at any time, whether in connection with this Agreement, the transactions contemplated herein or in the other Financing Documents, in the Bond Documents or any unrelated transaction against the Agent, the Fronting Bank, any other Lender or any beneficiary or transferee of any Letter of Credit or any person; (iv) any statement or any document presented under any Letter of Credit proving to be forged, fraudulent, invalid, inaccurate or false in any respect; (v) payment by the Fronting Bank under any Letter of Credit against presentation of a draft or certificate which does not strictly comply with the terms of such Letter of Credit; (vi) any non-application or misapplication by any Applicable Bond Trustee or any tender agent for any Bonds or otherwise of the proceeds of any Drawing; (vii) the failure by Fronting Bank to honor any Drawing or to make any payment demanded under any Letter of Credit on the ground that the demand for such payment does not conform to the terms and conditions of such Letter of Credit; (viii) any participation or assignment by the Fronting Bank of any interests or obligations of the Fronting Bank's under this Agreement to any other Lender or person; (ix) any extension, indulgence, settlement or compromise granted or agreed to in relation to this Agreement or any other Financing Document; (x) any default by or insolvency or bankruptcy of the Borrower; (xi) any act or omission on the part of the Agent or the Fronting Bank relating to this Agreement or any other Financing Document; or (xii) the absence of notice of any of the foregoing, provided that a Lender shall have a claim against the Fronting Bank and the Fronting Bank shall be liable to a Lender, to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by such Lender as a direct result of (i) the Fronting Bank's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit complied with the terms thereof or (ii) the Fronting Bank's willful failure or gross negligence to pay under any Letter of Credit after the presentation to it by the beneficiary thereof of a demand and certificate strictly complying with the terms and conditions of such Letter of Credit. Each Lender hereby waives presentment, protest, notice of nonpayment of any amounts owing under this Agreement, and any defenses in law or equity which it may have to the full discharge of any of its obligations to the Fronting Bank under this Section 7. (d) It is understood that no Lender shall be responsible for any default by any other Lender of its obligation to purchase portions of Fronting Bank Interests pursuant to this Section 7 and that each Lender shall be obligated to purchase portions of Fronting Bank Interests pursuant to this -33- Section 7 regardless of the failure of any other Lender to purchase portions of the Fronting Bank Interests pursuant to this Section 7. 7.02 Payments. (a) The Fronting Bank shall be entitled to receive its pro rata share of all payments in respect of Fronting Bank Interests which pro rata share shall be determined by multiplying the amount of any such payment in respect of such Fronting Bank Interests by a fraction the numerator of which is the aggregate amount of such Fronting Bank Interests minus the aggregate amount of the Lenders' Reimbursement Amounts and the denominator of which is the aggregate amount of such Fronting Bank Interests (the "Fronting Bank Share") and each Lender shall be entitled to receive its pro rata share of all payments in respect of such Fronting Bank Interests, which pro rata share shall be determined by multiplying the amount of any such payment in respect of such Fronting Bank Interests by a fraction the numerator of which is the amount of such Lender's Reimbursement Amount paid for such Fronting Bank Interest and the denominator of which is the aggregate amount of such Fronting Bank Interests. To the extent that any Lender fails to purchase any portion of any Fronting Bank Interests, the Fronting Bank shall be deemed the owner of such portion. (b) The Agent shall act as paying agent on behalf of the Fronting Bank and the Lenders with respect to any moneys received pursuant to subsection (a) of this Section 7.02 and any other provision of this Agreement, and the Agent shall transfer to the Fronting Bank or Lenders, as the case may be, in accordance with the payment instructions delivered in writing by the Fronting Bank and each Lender to the Agent the following amounts when (and if) the Agent receives them and in the same type of funds in which the Agent receives them: (i) the Fronting Bank's and, so long as such Lender is not in default in any part of its obligations to the Fronting Bank pursuant to this Section 7, such Lender's proportionate share (determined as set forth in subsection (a) of this Section 7.02) of all payments in respect of Reimbursement Obligations; (ii) so long as such Lender is not in default in any part of its obligations to the Fronting Bank pursuant to this Section 7, such Lender's pro rata share (based on its Percentage) of each commission fee and unutilized commitment fee, if any, paid by the Borrower to the Agent pursuant to Section 2.04 of this Agreement (if any Lender is in default of its obligations to the Fronting Bank, the Fronting Bank shall retain the defaulting Lender's pro rata share of such fees for its own account for each day during which such default continues); (iii) to the Fronting Bank, each commission fee and unutilized commitment fee, if any, paid by the Borrower to the Agent pursuant to Section 2.04 of this Agreement net of amounts paid or to be paid to the Lenders in respect of commitment fees pursuant to clause (ii) immediately above; (iv) the Fronting Bank's drawing fee, if any, paid by the Borrower to the Agent pursuant to Section 2.04 of this Agreement; (v) payments, if any, received by the Agent on behalf of the Fronting Bank or any Lender in respect of stamp taxes, transfer taxes, documentary taxes, expense reimbursements, increased costs and default interest duly payable to the Fronting Bank or any Lender pursuant to Sections 2.03(i), 2.04, 2.05 and 2.06, respectively, of this Agreement; and (vi) payments, if any, received by the Agent on behalf of the Fronting Bank or any Lender pursuant to Section 9.01. Funds received by the Agent on behalf of the Fronting Bank -34- or any Lender under this Section shall, if received by the Agent prior to 10:00 a.m. New York time on any Business Day, be paid to the Fronting Bank or such Lender no later than the Agent's close of business in New York on the same Business Day. Funds received by the Agent on behalf of the Fronting Bank or any Lender after 10:00 a.m. New York time on any Business Day shall be paid to the Fronting Bank or such Lender no later than 2:00 p.m. New York time on the next Business Day. (c) If (i) the Agent shall pay any amount to the Fronting Bank or any Lender pursuant hereto in the belief or expectation that a related payment has been or will be received or collected in connection with the Fronting Bank's or any Lender's, as the case may be, interests in Fronting Bank Interests and (ii) such related payment is not received or collected by the Agent, then the Fronting Bank or such Lender, as the case may be, will promptly on demand by the Agent return such amount to the Agent, together with interest thereon at such rate as the Agent shall determine to be customary between banks for correction of errors. If the Agent determines at any time that any amount received or collected by the Agent in respect of any Reimbursement Obligations, or any other amounts paid pursuant to this Agreement must be returned to the Borrower, or paid to any other Person pursuant to any insolvency law, any sharing clause, or otherwise, then, notwithstanding any other provision of this Agreement, the Agent shall not be required to distribute any portion thereof to the Fronting Bank or any Lender, and the Fronting Bank each Lender, as the case may be, agrees to promptly on demand by the Agent repay any portion thereof that the Agent shall have distributed to the Fronting Bank or such Lender, together with interest thereon at such rate, if any, as the Agent shall pay to the Borrower, or such other Person with respect thereto. (d) Except as otherwise provided in this Agreement, no Lender shall have any right to receive any other amounts received by the Agent or the Fronting Bank or the Arranger under this Agreement (including any drawing fee or any payments made by the Borrower in respect of any indemnities or expense reimbursements incurred by the Agent or the Fronting Bank pursuant to Section 9.01) or under any other Financing Document. Any amounts other than amounts referred to in this Section 7 received by the Agent, the Arranger or the Fronting Bank from the Borrower pursuant to this Agreement or any other Financing Document shall be the Agent's, the Arranger's or the Fronting Bank's, as the case may be, sole property and shall be retained by the Agent, the Arranger or the Fronting Bank, as the case may be, for its own account and no Lender shall have any rights with respect to such amounts; provided, however, that if each Lender has paid its pro rata share (based on its Percentage) of any amounts described in Section 8.06 of this Agreement, and the Agent is thereafter reimbursed therefor by the Borrower or otherwise, then each Lender which makes any payment to the Agent pursuant to Section 8.06 will be entitled to receive its pro rata share (based on its proportionate share of the advances made to the Agent under Section 8.06) of such reimbursement. 7.03 Adjustment of Commitments. Each Lender's Commitment shall be reduced concurrently with any reduction of the Stated Amount of any Letter of Credit by its Percentage of such reduction. 7.04 Notices to the Lenders. Upon receipt by the Agent of any notice under this Agreement, the Agent shall promptly forward copies of any such notice to the Fronting Bank and each Lender. Section 8. The Agent. Except for the rights of the Borrower set forth in Section 8.08, the provisions of this Section 8 are for the sole and exclusive benefit of the Agent, the Fronting Bank and the Lenders and the Borrower shall have no rights or obligations under this Section 8. -35- 8.01 Appointment. The Fronting Bank and the Lenders hereby designate Commerzbank as Agent to act as specified herein and in the other Financing Documents. Each Lender hereby irrevocably authorizes the Agent to take such action on its behalf under the provisions of this Agreement, the other Financing Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Agent may perform any of its duties hereunder by or through its officers, directors, agents or employees. 8.02 Nature of Duties. The Agent shall have no duties or responsibilities to the Arranger, the Fronting Bank or the Lenders except those expressly set forth in this Agreement and the Financing Documents. Except as provided in Section 9.01, neither the Agent nor any of its respective officers, directors, agents or employees shall be liable to the Arranger, the Fronting Bank or any Lender for any action taken or omitted by it or them hereunder or under any other Financing Document or in connection herewith or therewith, unless caused by its or their gross negligence or willful misconduct. The duties of the Agent shall be mechanical and administrative in nature; the Agent shall not have by reason of this Agreement or any other Financing Document a fiduciary relationship in respect of the Arranger, the Fronting Bank or any Lender; and nothing in this Agreement or any other Financing Document, expressed or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of this Agreement or any other Financing Document except as expressly set forth herein. 8.03 Lack of Reliance on Agent. Independently and without reliance upon the Agent or the Arranger, the Fronting Bank and each Lender, to the extent it deems appropriate, has made and shall continue to make (a) its own independent investigation of the financial condition and affairs of the Borrower in connection with its execution and delivery of this Agreement and the taking or not taking of any action in connection herewith and (b) its own appraisal of the creditworthiness of the Borrower and, except as expressly provided in this Agreement, the Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide the Arranger, the Fronting Bank or any Lender with any credit or other information with respect thereto, whether coming into its possession before the payment of Reimbursement Amounts or at any time or times thereafter. The Agent shall not be responsible to the Arranger, the Fronting Bank or any Lender for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or any other Financing Document or the financial condition of the Borrower or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Financing Document, or the financial condition of the Borrower or the existence or possible existence of any Default or Event of Default. 8.04 Certain Rights of the Agent. If the Agent shall request instructions from the Fronting Bank or the Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Financing Document, the Agent shall be entitled to refrain from such act or taking such action unless and until the Agent shall have received instructions from the Fronting Bank or the Lenders, as the case may be; and the Agent shall not incur liability to any Person by reason -36- of so refraining. Without limiting the foregoing, neither the Fronting Bank nor any Lender shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting hereunder or under any other Financing Document in accordance with the instructions of the Fronting Bank and the Majority Lenders. 8.05 Reliance. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by any Person that the Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Financing Document and its duties hereunder and thereunder, upon advice of counsel selected by it. 8.06 Indemnification. To the extent the Agent is not reimbursed and indemnified by the Borrower, the Fronting Bank and each Lender will reimburse and indemnify the Agent for and against any and all Losses of whatsoever kind or nature which may be imposed on, asserted against or incurred by the Agent in performing its duties hereunder or under any other Financing Document, or in any way relating to or arising out of this Agreement or any other Financing Document, (a) in the case of the Fronting Bank, in an amount equal to the Losses less the portion, if any, of such Losses payable by the Lenders pursuant to clause (b) below, and (b) in the case of any Lender, in an amount equal to its Percentage of such Losses, provided that the neither the Fronting Bank nor any Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct; and provided further that upon such reimbursement and indemnification by the Fronting Bank and the Lenders, the Fronting Bank and the Lenders shall be subrogated to all rights which the Agent has with respect thereto. 8.07 The Agent in its Individual Capacity. With respect to its obligation, if any, to pay Reimbursement Amounts under this Agreement, the Agent shall have the rights and powers specified herein for a "Lender" and may exercise the same rights and powers as though it were not performing the duties specified herein. The term "Lender" or any similar term shall, unless the context clearly otherwise indicates, include the Agent its individual capacity as a Lender. The Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the Borrower or any Affiliate of the Borrower as if it were not performing the duties specified herein, and may accept fees and other consideration from the Borrower for services in connection with this Agreement and otherwise without having to account for the same to the Arranger, the Fronting Bank or the Lenders. -37- 8.08 Resignation by the Agent. (a) The Agent may resign from the performance of all its functions and duties hereunder and/or under the other Financing Documents at any time by giving 30 days' prior written notice to the Borrower, the Fronting Bank and each Lender; provided, however, that if the Agent shall determine, in its sole discretion, that its resignation shall be immediately required by law, no prior notice shall be required. Such resignation shall take effect upon the appointment of a successor Agent pursuant to clauses (b) and (c) below or as otherwise provided below. (b) Upon any such notice of resignation, the Borrower shall appoint a successor Agent hereunder which shall be a commercial bank or trust company reasonably acceptable to the Fronting Bank and the Majority Lenders. (c) If a successor Agent shall not have been so appointed within such 30 day period, the Fronting Bank and the Majority Lenders may then appoint a successor Agent reasonably acceptable to the Borrower who shall serve as Agent hereunder or thereunder. (d) If no successor Agent has been appointed pursuant to clause (b) or (c) above by the 35th day after the date such notice of resignation was given by the Agent, the Agent's resignation shall become effective and the Fronting Bank and the Lenders shall thereafter perform all the duties of the Agent hereunder and/or under any other Financing Document until such time, if any, as the Borrower appoints a successor Agent as provided above. 8.09 Arranger. The Arranger has no duties or responsibilities to the Agent, the Fronting Bank or the Lenders under this Agreement or the other Financing Documents. Neither the Arranger nor any of its officers, directors, agents or employees shall be liable to the Agent, the Fronting Bank or any Lender for any action taken or omitted by it or them hereunder or under any Financing Document or in connection herewith or therewith. The Arranger shall not have by reason of this Agreement or any other Financing Document a fiduciary relationship in respect of the Agent, the Fronting Bank or any Lender, and nothing in this Agreement or any other Financing Document, expressed or implied, is intended to or shall be so construed as to impose upon the Arranger any obligations in respect of this Agreement or any other Financing Document. Section 9. Miscellaneous. 9.01 Indemnification. (a) The Borrower agrees to indemnify and hold the Agent, the Arranger, the Fronting Bank and each Lender harmless from and against any and all Losses which the Agent, the Arranger, the Fronting Bank or any Lender may incur or which may be claimed against the Agent, the Arranger, the Fronting Bank or any Lender by any person or entity by reason of or in connection with (i) the execution, delivery and performance of this Agreement, the other Financing Documents and the Bond Documents, or (ii) the payment or failure to make lawful payment under this Agreement; provided, however, that the Borrower shall not be required to indemnify the Agent, the Arranger, the Fronting Bank or any Lender for any Losses to the extent caused by (A) the failure of such Person to satisfy its obligations under this Agreement, or (B) such Person's gross negligence or willful misconduct. -38- For purposes of clause (B) of the preceding sentence, the gross negligence or willful misconduct of a Person in one capacity shall be attributed to the same Person in all other capacities. Nothing in this Section 9.01(a) is intended to limit the Borrower's obligations contained in this Agreement. Without prejudice to the survival of any other obligations of the Borrower herein contained, the obligations of the Borrower set forth in this Section 9.01(a) shall survive the payment in full of amounts payable hereunder and the termination of this Agreement. (b) In case any claim is asserted or any action or proceeding covered by the indemnification provisions hereof is brought against any person entitled to indemnification hereunder (any such person, the "Indemnitee"), the Indemnitee shall promptly notify the party hereunder required to indemnify such person (the "Indemnitor") in writing of such claim, action or proceeding, and the Indemnitor shall resist, settle or defend such claim, action or proceeding. If, within 10 Business Days after the Indemnitor's receipt of such notice, the Indemnitor does not commence and continue to prosecute the defense of such claim, action or proceeding, or if there exists a conflict which would or does preclude the Indemnitor from representing the Indemnitee's interest, the Indemnitee may, upon 5 Business Days' notice, retain counsel to represent it in such defense and the reasonable fees and expenses of the Indemnitee's counsel shall be deemed to be an expense payable by the Indemnitor for the purpose of this Section 9.01. Subject to the foregoing, the Indemnitee shall cooperate and join with the Indemnitor, at the expense of the Indemnitor, as may be required in connection with any action taken or defended by the Indemnitor. 9.02 Right of Setoff. If an Event of Default shall have occurred and be continuing, the Agent, on behalf of itself, the Fronting Bank and each Lender, is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agent to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower then existing under this Agreement held by the Agent. The right of the Agent under this Section 9.02 is in addition to other rights and remedies which the Agent, the Fronting Bank or such Lender may have. Promptly following any exercise of the right of setoff, the Agent shall give the Borrower written notice thereof. 9.03 Notices. Except as otherwise expressly provided herein, all notices, demands and other communications provided for hereunder shall be in writing (including facsimile communication) and mailed, telecopied or delivered: If to the Borrower: Delta Air Lines, Inc. William B. Hartsfield Atlanta International Airport Atlanta, Georgia 30320 Attention: Treasurer Telephone: Facsimile: If to the Arranger, the Agent Commerzbank AG, or the Fronting Bank, at: New York Branch 2 World Financial Center -39- New York, New York 10281-1050 Attention: Joachim Pausch Telephone No.: (212) 266-7255 Facsimile No.: (212) 266- 7427 if to any initial Lender, at: the address specified opposite its signature on this Agreement; and if to any other Lender, at: the address specified in the Register for such Lender; or at such other address, telephone number or facsimile number as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall be effective when received. 9.04 Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations under this Agreement except in connection with a merger, consolidation or transfer of assets permitted under Section 5.01 hereof, (ii) the Fronting Bank may not assign or otherwise transfer any of its obligations under the Letters of Credit, (iii) neither the Fronting Bank nor any Lender shall assign its rights and obligations hereunder unless the Fronting Bank or such Lender, as the case may be, complies with the requirements of subsections 9.04(b) through 9.04(e) hereof and (iv) neither the Fronting Bank nor any Lender shall grant participations in this Agreement unless the Fronting Bank or such Lender, as the case may be, complies with the requirements of subsection 9.04(f) hereof. (b) The Fronting Bank and each Lender may, with the prior written consent of the Agent, not to be unreasonably withheld or delayed (it being understood that the failure of the Agent to consent to a transfer based upon the lack of creditworthiness or perceived lack of creditworthiness of the proposed transferee shall, in all cases, be deemed "reasonable"), and, so long as no Default or Event of Default has occurred and is continuing, the Borrower, not to be unreasonably withheld or delayed, assign to one or more assignees all or a portion of its Fronting Bank Interests and, in the case of a Lender, its Commitment hereunder; provided, however, that (i) the consent of the Borrower shall not be required in the case of an assignment to an assignee that is already a Lender; (ii) each such assignment shall be of a constant, and not a varying, percentage of Fronting Bank Interests and Commitment; (iii) no partial assignment shall, as of the effective date of such assignment, result in the sum of the assigning Lender's Commitment and Fronting Bank Interests being less than $5,000,000, this Section 9.04(b)(iii) being inapplicable to an assignment among and between the Fronting Bank, the Lenders and their respective Affiliates; (iv) no partial assignment shall, as of the effective date of such assignment, result in the assignee holding a Commitment and Fronting Bank Interests in an aggregate amount less than $5,000,000, this Section 9.04(b)(iv) being inapplicable to an assignment among and between the Fronting Bank, the Lenders and their respective Affiliates; (v) no assignment shall, as of the effective date of such assignment, increase the Borrower's obligations, if any, to the assignee under any -40- Financing Document, including, without limitation, Sections 2.03(i), 2.04, 2.05, 2.06 or 9.01 of this Agreement as of such date beyond those obligations, if any, owing as of such date to the Fronting Bank or the assigning Lender, as the case may be; and (vi) the parties to each such assignment shall execute and deliver to the Agent an Assignment and Acceptance and the assigning Lender shall deliver to the Agent a processing and recordation fee of $3,500 which shall not be payable by the Borrower. The Agent shall deliver a copy of any such Assignment and Acceptance to the Borrower and the Fronting Bank promptly after receipt thereof. Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, (A) the assignee thereunder shall become a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement as well as the rights in the Fronting Bank Interests so assigned and (B) the Fronting Bank or the assigning Lender, as the case may be, thereunder shall, to the extent provided in such assignment, cease to have any rights in the Fronting Bank Interests and, in the case of an assigning Lender, the Commitment or part thereof so assigned. (c) By executing and delivering an Assignment and Acceptance, the Fronting Bank or the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the Fronting Bank Interests being assigned thereby free and clear of any adverse claim, the Fronting Bank or the assigning Lender, as the case may be, makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with its Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Financing Document or any other instrument or document furnished pursuant hereto or thereto; (ii) the Fronting Bank or the assigning Lender, as the case may be, makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement, any other Financing Document or any other instrument or document furnished pursuant hereto or thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance and this Agreement; (iv) such assignee will independently and without reliance upon the Agent, the Fronting Bank or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and any other Financing Document as are delegated to the Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement and any other Financing Document are required to be performed by it as a Lender. (d) The Agent shall maintain at its address set forth in Section 9.03, a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of (i) the name and address of the Fronting Bank and the amount of its Fronting Bank Interests and (ii) the names and addresses of the Lenders and their respective Commitments, Percentages and participation interests in the Fronting Bank Interests. The entries in the Register shall be conclusive, absent manifest error, and -41- the Borrower, the Agent, the Fronting Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as the owner of any Fronting Bank Interests as the owner thereof for all purposes of this Agreement. The Register shall be available for inspection by the Borrower, the Fronting Bank and any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a duly completed Assignment and Acceptance executed by the Fronting Bank or an assigning Lender and an assignee together with the processing and recordation fee referred to in paragraph (b) above, the Agent shall (subject, so long as no Default or Event of Default has occurred and is continuing, to the consent of the Borrower to such assignment which consent shall not be unreasonably withheld or delayed), (i) accept such Assignment and Acceptance, (ii) modify the Register to reflect the Commitment, Percentage and amount of Fronting Bank Interests of the assignee Lender and the reduced Fronting Bank Interests of the Fronting Bank or the assigning Lender, as the case may be, and (iii) give prompt notice thereof to the Borrower and the Fronting Bank. (f) The Fronting Bank and each Lender may without the consent of the Borrower sell subparticipation interests to one or more banks or other entities in all or a portion of its Fronting Bank Interests or participation interests therein; provided, however, that (i) the Fronting Bank's or such Lender's obligations, and the Borrower's obligations, under this Agreement shall remain unchanged, (ii) the Fronting Bank or such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) a Participant shall be entitled to the benefit of the cost protection provisions contained in Sections 2.03(i), 2.04, 2.05, 2.06, and 9.01 to the same extent that the Fronting Bank or the Lender from which such Participant acquired its subparticipation would be entitled to the benefit of such cost protection provisions if such subparticipation had not been sold, granted or assigned, (iv) no subparticipation shall increase the Borrower's obligations hereunder beyond those that exist in favor of the Fronting Bank or the Lender granting such subparticipation; and (v) the Borrower, the Fronting Bank, the Agent and the other Lenders shall continue to deal solely and directly with the Fronting Bank or such Lender in connection with the Fronting Bank's or such Lender's rights and obligations under this Agreement, and the Fronting Bank or such Lender shall retain the sole right to enforce the obligations of the Borrower hereunder and to approve any amendment, modification or waiver of any provision of this Agreement or any other Financing Document (other than amendments, modifications or waivers which (A) waive or reduce fees payable hereunder, (B) waive or reduce the amount of principal of or the rate at which default interest is payable on Reimbursement Obligations, (C) change the dates fixed for payments of such amounts, (D) increase the aggregate Stated Amount of the Letters of Credit or the granting Lender's Commitment and (E) extend the Termination Date of any Letter of Credit). 9.05 No Waiver; Remedies Cumulative. No failure or delay on the part of the Agent, the Fronting Bank or any Lender in exercising any right, power or privilege hereunder or under any other Financing Document and no course of dealing between the Borrower, the Agent, the Fronting Bank or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Financing Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights, powers and remedies herein or in any other Financing Document expressly provided are cumulative and not exclusive of any rights, powers or remedies which the Agent, the Fronting Bank or -42- any Lender would otherwise have. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent, the Fronting Bank or any Lender to any other or further action in any circumstances without notice or demand. 9.06 Payments Pro Rata. The Fronting Bank and each Lender agrees that if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Financing Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, Reimbursement Obligations or fees, which with respect to the related amount or amounts received by the Fronting Bank and/or other Lenders is in a greater proportion than the total amount of such Reimbursement Obligations or fees then owed and due to the Fronting Bank or such Lender bears to the total amount of such Reimbursement Obligations or fees then owed and due to the Fronting Bank and/or all of the Lenders immediately prior to such receipt, then the Fronting Bank or such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the Fronting Bank and/or the other Lenders an interest in the Reimbursement Obligations or fees then owed to the Fronting Bank and/or such Lenders in such amount as shall result in a proportional participation by the Fronting Bank and/or all of the Lenders in such amount; provided, however, that if all or any portion of such excess amount is thereafter recovered from the Fronting Bank or such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. 9.07 Governing Law; Submission to Jurisdiction; Venue. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. (b) Any legal action or proceeding against the Borrower with respect to this Agreement may be brought in any court of the State of New York sitting in the Borough of Manhattan or in the United States District Court for the Southern District of New York, and, by execution and delivery of this Agreement, the Borrower hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts for such purposes. (c) The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement brought in the courts referred to in clause (b) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 9.08 Amendment or Waiver. Neither this Agreement nor any terms hereof (other than the provisions of Sections 7 and 8) may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination has been consented to in writing signed by the Agent, the Fronting Bank, the Majority Lenders and the Borrower; provided, however, that no such change, waiver, discharge or termination shall, without the consent of each Lender, (a) extend the final maturity -43- of any Reimbursement Obligation, or reduce the rate or extend the time of payment of interest thereon or reduce the principal amount thereof, or increase the Commitment of any Lender over the amount thereof then in effect, (b) reduce the amount of any fee payable to such Lender or change the time for payment of any such fee, (c) amend, modify or waive any provision of this Section 9.08 or Sections 2.03(i), 2.04(a), 2.04(b), 2.04(d), 2.05, 2.06, 8.06, 9.01, 9.04 or 9.06, (d) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or any other Financing Document, (e) extend the scheduled expiration date of any Letter of Credit pursuant to Section 2.11, (f) amend or modify the defined terms "Majority Lenders" or "Advance Repayment Date" or "Applicable Fee" or "Applicable Margin", or (g) release the Collateral other than pursuant to Section 6.02(a). The provisions of Sections 7 and 8 (except for Section 8.08) may only be amended or waived by a written instrument signed by the Agent, the Fronting Bank and the Majority Lenders. Section 8.08 may only be amended or waived by a written instrument signed by the Borrower, the Agent, the Fronting Bank and the Majority Lenders. 9.09 Termination of Letters of Credit; Survival. The Borrower may, if the Applicable Indenture so provides, without penalty, replace or terminate any Letter of Credit issued hereunder at any time. Except for the Borrower's indemnification obligations under this Agreement, which indemnification obligations shall expressly survive the termination of this Agreement, this Agreement shall terminate as soon as all Letters of Credit issued hereunder have terminated in accordance with their terms and all reimbursement obligations of the Borrower set forth herein shall have been paid in full. 9.10 Entire Agreement. This Agreement and the other Financing Documents constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the other Financing Documents. Nothing in this Agreement or in the other Financing Documents, expressed or implied, is intended to confer upon any party other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Financing Documents. 9.11 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Agent. 9.12 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. 9.13 Nature of Duties. (a) None of the Agent, the Fronting Bank or the Lenders shall be responsible: (i) for the form, validity, accuracy, genuineness, or legal effect of any document submitted by any party to the Fronting Bank in connection with the application for and issuance of or payment under any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, inaccurate, fraudulent, or forged; (ii) for the validity of any instrument transferring or assigning or purporting to transfer or assign -44- any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) for errors, omissions, interruptions, or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, or otherwise, whether or not they be in cipher; and (iv) for any consequences arising from causes beyond the control of the Agent, the Fronting Bank or the Lenders, including, without limitation, any acts by Governmental Authorities; provided that, the Borrower shall have a claim against the Fronting Bank and the Fronting Bank shall be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by the Borrower which were caused by (A) the Agent's, the Fronting Bank's or any Lender's willful misconduct or gross negligence in determining whether documents presented under any Letter of Credit complied with the terms thereof or (B) the Fronting Bank's willful failure or gross negligence to pay under any Letter of Credit after the presentation to it by the beneficiary thereof of a demand and certificate strictly complying with the terms and conditions of such Letter of Credit. (b) The Borrower assumes all risks associated with the acceptance by the Fronting Bank of any proper draw certificate received by telecommunication, it being agreed that the use of telecommunication devices is for the benefit of the Borrower and that the Fronting Bank and Lenders assume no liabilities or risks with respect to the receipt of any proper draw certificate by telecommunication device. 9.14 Fronting Bank Cooperation. The Fronting Bank agrees to cooperate with the Borrower in connection with the sale and remarketing of Bonds by providing the Borrower with (a) current disclosure regarding the Fronting Bank for inclusion in any Official Statement, (b) customary closing certificates and (c) customary legal opinions. * * * -45- IN WITNESS WHEREOF, the parties below have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. DELTA AIR LINES, INC. By ----------------------------------------- Name: Title: [Signature Page to Reimbursement Agreement] COMMERZBANK AG, New York Branch, in its capacity as the Agent, the Arranger and the Fronting Bank By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: [Signature Page to Reimbursement Agreement] "Lenders" Commitment $35,000,000 COMMERZBANK AG, New York Branch By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: Address for Notice Commerzbank AG, New York Branch 2 World Financial Center New York, New York 10281-1050 Attn.: Joachim Pausch [Signature Page to Reimbursement Agreement] Commitment $27,000,000 BANCA NAZIONALE DEL LAVORO S.p.A., New York Branch By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: Address for Notice 25 West 51st Street New York, NY 10019 Attn: Giulio Giovine [Signature Page to Reimbursement Agreement] Commitment $27,000,000 BAYERISCHE LANDESBANK GIROZENTRALE, Cayman Island Branch By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: Address for Notice 560 Lexington Avenue New York, NY 10022 Attn: James Fox [Signature Page to Reimbursement Agreement] Commitment $27,000,000 CITIBANK, N.A. By ----------------------------------------- Name: Title: Address for Notice Credit Contact: Kirk P. Lakeman 400 Perimeter Center Terrace Suite 600 Atlanta, GA 30346 [Signature Page to Reimbursement Agreement] Commitment $27,000,000 CREDIT INDUSTRIEL ET COMMERCIAL By ----------------------------------------- Name: Title: Address for Notice 520 Madison Avenue New York, NY 10022 Attn: Eric Longuet [Signature Page to Reimbursement Agreement] Commitment $27,000,000 THE DAI-ICHI KANGYO BANK, LTD. By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: Address for Notice One World Trade Center Suite 4911 New York, NY 10048 Attn: Robert Gallagher, Jr. [Signature Page to Reimbursement Agreement] Commitment $27,000,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED By ----------------------------------------- Name: Title: Address for Notice 191 Peachtree Street, N.E. Suite 3825 Atlanta, GA 30303 Attn: James Masters [Signature Page to Reimbursement Agreement] Commitment $27,000,000 SUNTRUST BANK By ----------------------------------------- Name: Title: Address for Notice 303 Peachtree Street 3rd Floor Atlanta, GA 30308 Attn: Debbie Armstrong [Signature Page to Reimbursement Agreement] Commitment $27,000,000 THE SANWA BANK, LIMITED By ----------------------------------------- Name: Title: Address for Notice Park Avenue Plaza 55 East 52nd Street New York, NY 10055 Attn: Michael Lawrence [Signature Page to Reimbursement Agreement] Commitment $27,000,000 WACHOVIA BANK, N.A. By ----------------------------------------- Name: Title: Address for Notice 191 Peachtree Street, N.E. 29th Floor Mailcode: GA-3940 Atlanta, GA 30303 Attn: Tom Gleason [Signature Page to Reimbursement Agreement] Commitment $27,000,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE, New York Branch By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: Address for Notice 1211 Avenue of the Americas New York, NY 10036 Attn: Walter T. Duffy III [Signature Page to Reimbursement Agreement] Commitment $19,000,000 BAYERISCHE HYPO- UND VEREINSBANK AG, New York Branch By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: Address for Notice 150 East 42nd Street New York, NY 10017 Attn: Marianne Weinzinger [Signature Page to Reimbursement Agreement] Commitment $19,000,000 DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG, Cayman Islands Branch By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: Address for Notice One Peachtree Ctr. 303 Peachtree Street N.E. Suite 2900 Atlanta, GA 30308 Attn: John Somers [Signature Page to Reimbursement Agreement] Commitment $19,000,000 NATEXIS BANQUE By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: Address for Notice 45 rue Saint Dominique 75700 Paris, 07 SP France Attn: Michel Heraud [Signature Page to Reimbursement Agreement] Commitment $19,000,000 NORDDEUTSCHE LANDESBANK GIROZENTRALE, New York Branch and/or Cayman Islands Branch By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: Address for Notice 1114 Avenue of the Americas 37th Floor New York, NY 10036 Attn: Stephanie Finnen [Signature Page to Reimbursement Agreement] Commitment $19,000,000 THE SAKURA BANK, LIMITED By ----------------------------------------- Name: Title: Address for Notice 101 Park Avenue 17th Floor New York, NY 10178 Attn: Yoshikazu Nagura [Signature Page to Reimbursement Agreement] Commitment $15,000,000 LANDESBANK SCHLESWIG-HOLSTEIN GIROZENTRALE By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: Address for Notice Martensdamm 6 Kiel, Germany 24103 Attn: Constanze Lorsch [Signature Page to Reimbursement Agreement] EXHIBIT A FORM OF NOTICE OF ISSUANCE No. __________(1) Dated ___________ (2) COMMERZBANK AG, NEW YORK BRANCH as the Agent and the Fronting Bank under the Reimbursement Agreement (as amended, modified or supplemented from time to time, the "Reimbursement Agreement"), dated as of May 1, 2000 among Delta Air Lines, Inc. Commerzbank AG, New York Branch as the Fronting Bank, Agent and Arranger and the Lenders from time to time party thereto 2 World Financial Center New York, New York 10281-1050 Attention: Joachim Pausch Telephone No.: (212) 266-7255 Facsimile No.: (212) 266-7427 Dear Sirs: We hereby give you notice pursuant to Section 3.02 of the Reimbursement Agreement, that the undersigned requests that the Fronting Bank, issue a Letter of Credit for the account of the undersigned on ___________ (3) (the "Date of Issuance") in the aggregate stated amount of ___________ (4). This notice may only be revoked by the undersigned in the event the Bonds to be secured by the Letter of Credit described herein are not issued on the Date of Issuance. - --------- (1) Notice of Issuance Request Number. (2) Date of Notice of Issuance Request. (3) Date of Issuance which shall be a Business Day not less than five (5) Business Days following the Agent's receipt of such Notice of Issuance, provided that such time period shall not commence until the Agent and its counsel are satisfied with the wording of the Letter of Credit and the Bond Documents for the Bonds that are to be secured by such Letter of Credit, and, provided further that the Notice of Issuance in connection with the issuance of the first three Letters of Credit issued under the Reimbursement Agreement shall be delivered at any time on or prior to the Effective Date. (4) The Stated Amount of Letter of Credit. Exhibit A Page 2 For purposes of this Notice of Issuance, unless otherwise defined herein, all capitalized terms used herein which are defined in the Reimbursement Agreement shall have the respective meaning provided therein. The beneficiary of the requested Letter of Credit will be _________ (5), and such Letter of Credit will be in support of __________ (6) and will have a stated expiration date of _____________ (7). The Letter of Credit is in substantially the form attached as Exhibit C to the Reimbursement Agreement and should be delivered __________ (8). The undersigned hereby certifies that the following statements are true on the date hereof: (a) The Borrower's representations and warranties contained in Sections 4.01, 4.02, 4.03, 4.05, 4.06, 4.09(a), 4.09(c), 4.10, 4.12 and 4.13 of the Reimbursement Agreement are true and correct in all material respects, before and after giving effect to the issuance of the Letter of Credit requested hereby, as though made on and as of such date, except to the extent such representations and warranties relate to an earlier date in which case such representations and warranties shall be true and correct in all material respects as of such earlier date; (b) No event has occurred and is continuing, or will result from the issuance of the Letter of Credit requested hereby, which constitutes or, after giving effect to such issuance of the Letter of Credit, would constitute a Default or an Event of Default; and (c) After giving effect to the issuance of the Letter of Credit requested hereby, the aggregate principal amount of the Stated Amounts of all issued and outstanding Letters of Credit shall not exceed $415,000,000. - --------- (5) Insert name and address of beneficiary. (6) Insert description of Bonds being secured. (7) Insert last date upon which drafts may be presented which shall be a Business Day not later than the third anniversary of the Date of Issuance. (8) Insert delivery instructions. Exhibit A Page 3 Very truly yours, DELTA AIR LINES, INC. By ----------------------------------------- Name: Title: EXHIBIT B FORM OF ASSIGNMENT AND ACCEPTANCE __________, 200__ (1) Reference is made to the Reimbursement Agreement, dated as of May 1, 2000 (the "Agreement"), by and among Delta Air Lines, Inc. (the "Borrower"), Commerzbank AG, New York Branch, as Agent, Fronting Bank and Arranger and certain other Lenders named therein. Unless otherwise defined herein, capitalized terms used herein shall have the meanings given thereto in the Agreement. ________________________ (2) (the "Assignor") and ______________________ (3) (the "Assignee") hereby agree as follows: 1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases as of the Effective Date set forth below, a ___% interest in and to all the Assignor's participation interests in and to all of the outstanding Fronting Bank Interests and unpaid commitment fees and letter of credit commissions due under section 2.04(a) and 2.04(b) of the Agreement to the Assignor [, and the Assignor's Commitment under the Agreement] (4). 2. The Assignor represents and warrants to the Assignee that (a) it is the legal and beneficial owner of the interests being assigned hereby free and clear of any adverse claim, and (b) it is not in default under any of its obligations set forth in the Agreement. The Assignor does not represent or warrant and assumes no responsibility (x) with respect to any statements, warranties or representations made in or in connection with the Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Agreement, any Financing Document, any Bond Document or any other instrument or document furnished thereunder or pursuant thereto; and (y) with respect to the financial position of the Borrower or the performance or observance by the Borrower of any of its obligations under the Agreement, any Financing Document, any Bond Document or any other instrument or document furnished thereunder or pursuant thereto. 3. The Assignee (a) represents and warrants to the Assignor that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received a copy of the Agreement, together with copies of the most recent financial statements delivered - --------- (1) Insert date on which this Assignment and Acceptance is executed and delivered (2) Insert legal name of Assignor. (3) Insert legal name of financial institution to which the Assignor is assigning its Fronting Bank Interests. (4) Insert if the Assignor is a Lender. Exhibit B Page 2 pursuant to Section 5 of the Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) will independently and without reliance upon the Agent, the Fronting Bank or such assigning Lender, as the case may be, or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement; (d) appoints and authorizes the Agent and the Fronting Bank to take such action as agent on its behalf and to exercise such powers under the Agreement as are delegated to the Agent and the Fronting Bank by the terms thereof, together with such powers as are reasonably incidental thereto; and (e) agrees that it will perform in accordance with their terms all the obligations which by the terms of the Agreement are required to be performed by it as a Lender. 4. From and after the Effective Date (a) the Assignee shall be party to and be bound by the provisions of the Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder as well as the rights in the interests and commitment fees so assigned and (b) the Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Agreement. 5. This Assignment and Acceptance will be delivered to the Agent together with a process and recordation fee of $3,500.00 from the Assignor. 6. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York. 7. The effective date of this Assignment and Acceptance shall be __________________ (5) (the "Effective Date"). - --------- (5) Insert a date at least five Business Days after the date on which this Assignment and Acceptance is executed. Exhibit B Page 3 IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed and delivered by their respective duly authorized officers as of the date first written above. [NAME OF ASSIGNOR] By: ---------------------------------------- Name: Title: [NAME OF ASSIGNEE] By: ---------------------------------------- Name: Title: Exhibit B Page 4 Agreed to and Accepted: (6) DELTA AIR LINES, INC. By: ---------------------------------- Name: Title: Agreed to and Accepted: COMMERZBANK AG, New York Branch, in its capacity as Agent By: ---------------------------------- Name: Title: - --------- (6) Insert if the Borrower or the Agent have the right to consent. EXHIBIT C FORM OF LETTER OF CREDIT [_______], 200[_] Letter of Credit No.______ [Applicable Bond Trustee] - ------------------------------ - ------------------------------ Attention: Telephone: Facsimile: Ladies and Gentlemen: At the request and on the instructions of Delta Air Lines, Inc., a Delaware corporation (the "Company"), we hereby establish in your favor, as trustee under the Trust Indenture, dated as of [________] (the "Indenture"), between [___________________](the "Issuer") and you, pursuant to which $[__________] in aggregate principal amount of the Issuer's [_____________________](the "Bonds") have been issued, this Irrevocable Direct-Pay Letter of Credit No. [___________] in the amount of $[___________] (hereinafter, as reduced and reinstated from time to time in accordance with the provisions hereof, the "Stated Amount"), of which (a) an amount not exceeding $[___________] (as reduced and reinstated from time to time in accordance with the terms hereof, the "Principal Component") may be drawn upon with respect to payment of the unpaid principal amount of Bonds at maturity, upon acceleration or upon redemption or the portion of the purchase price corresponding to principal of Bonds delivered for purchase under the Indenture and either not remarketed or for which no remarketing proceeds have been received prior to such drawing and (b) an amount not exceeding $[_________] (as reduced and reinstated from time to time in accordance with the terms hereof, the "Interest Component") may be drawn upon with respect to payment of accrued interest on the Bonds or the portion of the purchase price of Bonds so delivered for purchase corresponding to interest accrued on the Bonds on or prior to the stated maturity thereof, effective immediately and expiring at the close of business on [___________] unless terminated earlier in accordance with the provisions hereof. Funds under this Letter of Credit will be made available to you, to your account with us or to your designee (named in a written demand as specified below) against receipt by us of one or more written demands for payment, each in the form of the certificate attached as Exhibit A hereto, and specifying the type of Drawing or Drawings being made as follows: (A) a drawing with respect to payment of the portion of the purchase price corresponding to principal of Bonds to be purchased from the holder thereof pursuant to Exhibit C Page 2 Sections [___] and [___] of the Indenture which Bonds have either not been remarketed or for which no remarketing proceeds have been received prior to such drawing (an ""A" Drawing"); (B) a drawing with respect to the payment of principal of the Bonds, whether at maturity or upon acceleration or redemption pursuant to Sections [___] and [___] of the Indenture (a ""B" Drawing"); (C) a drawing with respect to the payment of the portion of the purchase price of Bonds to be purchased from the holder thereof pursuant to Sections [___] and [___] of the Indenture corresponding to accrued interest (a ""C" Drawing"); and (D) a drawing with respect to the payment of accrued interest or with respect to the payment of interest in accordance with Section [___] of the Indenture (a ""D" Drawing"). An "A" Drawing and a "C" Drawing made to purchase Bonds tendered at the request of the holders thereof pursuant to Section [___] of the Indenture is hereinafter collectively referred to as a "Liquidity Drawing." Such certificate or certificates shall be appropriately completed and executed by a purported Authorized Officer (as hereinafter defined) and shall be presented only on a Business Day (as hereinafter defined) to us by facsimile (to facsimile number (212) 266-7427 or such other facsimile number as may be designated by us in writing to you from time to time). Prior to, or contemporaneously with, the presentation of a certificate or certificates hereunder, you shall use best efforts to give telephonic notice (by call to telephone number (212) 266-7255 or such other number designated by us in writing to you from time to time) of your intention to present such certificate or certificates and stating the amount or amounts to be demanded; provided, however, that such telephonic notice and subsequent overnight delivery shall not be conditions precedent to our obligation to honor a drawing otherwise made in compliance with the terms hereof. Demands for payment may be made by you under this Letter of Credit at any time during our business hours at our aforesaid address on a Business Day (as hereinafter defined). If demand for payment (other than a Liquidity Drawing) is made by you hereunder at or prior to 10:00 a.m. on a Business Day and such demand for payment and the documents presented in connection therewith conform to the terms and conditions hereof, payment shall be made to you or to your designee by wire transfer of the amount demanded, in same day funds, not later than 2:00 p.m. on the same Business Day or such later Business Day as you may specify in your demand. If demand for payment (other than a Liquidity Drawing) is made by you hereunder after 10:00 a.m. on a Business Day and such demand for payment and the documents presented in connection therewith conform to the terms and conditions hereof, payment shall be made to you or to your designee by wire transfer of the amount demanded, in same day funds, not later than 2:00 p.m. on the next succeeding Business Day or such later Business Day as you may specify in your demand. If demand for payment pursuant to a Liquidity Drawing is made by you hereunder at or prior to 1:00 p.m. on a Business Day and such demand for payment and the documents presented in connection therewith conform to the terms and conditions hereof, payment shall be made to you or to your designee by wire transfer of the amount demanded, in Exhibit C Page 3 same day funds, not later than 3:00 p.m. on the same Business Day or such later Business Day as you may specify in your demand. If demand for payment pursuant to a Liquidity Drawing is made by you hereunder after 1:00 p.m. on a Business Day and such demand for payment and the documents presented in connection therewith conform to the terms and conditions hereof, payment shall be made to you or to your designee by wire transfer of the amount demanded, in same day funds, not later than 3:00 p.m. on the next succeeding Business Day or such later Business Day as you may specify in your demand. If requested by you, payment under this Letter of Credit will be made by deposit of same day funds into a designated account that you maintain with us. All payments hereunder will be made with our own funds. Demands for payment hereunder honored by us shall not, in the aggregate, exceed the Stated Amount, as the Stated Amount may have been reinstated by us as provided in the second succeeding paragraph. Subject to the preceding sentence, each "A" Drawing and each "B" Drawing honored hereunder shall pro tanto reduce the Principal Component, and each "C" Drawing and "D" Drawing honored hereunder shall pro tanto reduce the Interest Component. Any such reduction in accordance with the preceding sentence shall result in a corresponding reduction in the Stated Amount, it being understood that after the effectiveness of any such reduction you shall no longer have any right to make a drawing hereunder in respect of the amount of such principal of and/or interest on the Bonds or the payment of the purchase price corresponding thereto. Upon receipt by us of a Notice of Reduction or Termination in the form attached hereto as Exhibit B signed on your behalf by a purported Authorized Officer (as hereinafter defined) and appropriately completed, this Letter of Credit shall be terminated, or the Stated Amount, the Principal Component and/or the Interest Component, as the case may be, shall thereupon be reduced by the amount specified therein. Following any "A" Drawing, and for the corresponding "C" Drawing, if any, immediately upon our being fully reimbursed therefor the Stated Amount and the Principal Component shall be reinstated (effective on such reimbursement) by the amount of such "A" Drawing and, if applicable, the Stated Amount and the Interest Component shall be reinstated (effective on such reimbursement) by the amount of such "C" Drawing; provided, however, the Stated Amount, the Principal Component and the Interest Component shall be permanently reduced to zero and shall not be reinstated once the Bank has honored an "A" Drawing and/or a "C" Drawing made to purchase Bonds at our direction following a Change in Control or an Event of Default under, and as defined in, the Reimbursement Agreement, dated as of May 1, 2000, among the Company, the financial institutions described as Lenders therein, the Agent for the Lenders and us (the "Reimbursement Agreement"). In addition, if you shall not have received, within seven calendar days after any payment in respect of a "D" Drawing, written notice from us to the effect that an Event of Default under the Reimbursement Agreement has occurred and is continuing and that we are not reinstating the Interest Component, the Stated Amount and the Interest Component will automatically be reinstated, as of the close of business Exhibit C Page 4 on the seventh calendar day following such "D" Drawing, by an amount equal to the amount thereof. Only you or your successor as trustee under the Indenture may make a drawing under this Letter of Credit. Upon payment to you, to your designee or to your account of the amount demanded hereunder, we shall be fully discharged of our obligation under this Letter of Credit with respect to such demand for payment and we shall not thereafter be obligated to make any further payments under this Letter of Credit in respect of such demand for payment to you or any other person who may have made to you or makes a demand for payment of principal of, purchase price of, or interest on, any Bond. By paying to you, to your designee or to your account an amount demanded in accordance herewith, we make no representation as to the correctness of the amount demanded. This Letter of Credit applies only to the payment of principal or the portion of the purchase price of Bonds corresponding to principal and the payment of up to 45 days' interest or the portion of the purchase price corresponding to up to 45 days' interest (computed at an assumed rate of 12% per annum calculated on the basis of a 365 day year) accruing on the Bonds on or prior to the expiration of this Letter of Credit and does not apply to any interest that may accrue thereon or any principal which may be payable with respect thereto after such date. Upon the earliest of (i) the making by you of the final drawing available to be made hereunder and payment thereof, (ii) the expiration date stated above, or (iii) the surrender by you to us of this Letter of Credit in connection with delivery of a certificate in the form of Exhibit B attached hereto stating that this Letter of Credit is terminated, this Letter of Credit shall automatically terminate and be delivered to us for cancellation. Communications with respect to this Letter of Credit shall be in writing and shall be addressed to us at the address specified above and shall specifically refer to this Letter of Credit by number. All times of day referred to in this Letter of Credit refer to prevailing Eastern Time in New York. This Letter of Credit may be transferred in its entirety (but not in part) to a successor trustee properly appointed and qualified pursuant to Section [___] of the Indenture (a "Transferee"), and such transferred Letter of Credit may be successively transferred. If this Letter of Credit is transferred to a Transferee, all references to the Trustee in this Letter of Credit and the certificates attached hereto shall be deemed references to such Transferee. Transfer of the balance available to be drawn under this Letter of Credit to a Transferee shall be effected by a request which shall (i) be in the form of Exhibit C attached hereto appropriately completed, (ii) be signed by a purported Authorized Officer, (iii) state the name and address of the Transferee and (iv) be accompanied by the payment of the transfer fee of $1,000.00 from the Company. Upon such presentation and receipt, we shall forthwith effect a transfer of this Letter of Credit to the designated Transferee. As used herein (a) "Authorized Officer" shall mean any of your Vice Presidents, Assistant Vice Presidents, Trust Officers or Assistant Trust Officers or any equivalent officer of a successor beneficiary hereof; and (b) "Business Day" means a day on which banks located in Exhibit C Page 5 New York, banks located in the city in which the Principal Office of the Trustee (as defined in the Indenture) is located and banks located in the city in which the Principal Office of the Paying Agent (as defined in the Indenture) is located are not required or authorized to remain closed and on which the New York Stock Exchange is not closed. This Letter of Credit sets forth in full our undertaking, and such undertaking shall not in any way be modified, amended, amplified or limited by reference to any document, instrument or agreement referred to herein (including, without limitation, the Bonds), except only the certificates referred to herein, which form an integral part hereof; and any such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement except for such certificates. This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500 (the "Uniform Customs"). This Letter of Credit shall be deemed to be a contract made under the laws of the State of New York and shall, as to matters not governed by the Uniform Customs, be governed by and construed in accordance with the laws of said State. Very truly yours, COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: Exhibit A To Letter of Credit No.____ CERTIFICATE FOR DRAWING [Date] Commerzbank AG, New York Branch Two World Financial Center New York, New York 10281 Attention: Letter of Credit Department Re: Irrevocable Direct-Pay Letter of Credit No. ____ (the "Letter of Credit") Ladies and Gentlemen: [Insert name of current Trustee], as Trustee (the "Trustee"), through its undersigned duly authorized officer, hereby certifies to Commerzbank AG, New York Branch (the "Fronting Bank"), that: (1) The Trustee is the Trustee under the Indenture, dated as of [_____________] (as amended or supplemented), for the holders of the Bonds. (2) The Trustee is making drawings under the above-referenced Letter of Credit in the aggregate amount of $____________ consisting of the sums set forth below: "A" Drawing The portion of the purchase price corresponding to principal of Bonds to be purchased from the holder thereof pursuant to the following Sections of the Indenture: [ ] $ --- [ ] $ --- [ ] $ --- [ ] $ --- [ ] $ --- "B" Drawing The principal amount of Bonds maturing on __________________: $ ------------- Exhibit A To Letter of Credit No.____ The principal amount of Bonds accelerated pursuant to Section [___] of the Indenture: $ ------------- The principal amount of Bonds redeemed pursuant to Section [___] of the Indenture: $ ------------- "C" Drawing The portion of the purchase price of Bonds corresponding to accrued interest thereon, which Bonds are to be purchased from the holders thereof pursuant to following Sections of the Indenture: [ ] $ --- [ ] $ --- [ ] $ --- [ ] $ --- [ ] $ --- "D" Drawing Accrued interest on the Bonds: $ ------------- (3) With respect to the foregoing amounts, moneys are not otherwise available pursuant to the Indenture. (4) Payment of such amount is demanded on [_____________________], the date on which such amount is due and payable under the Indenture, to [___________________] [insert account or designee]. (5) The amount demanded hereunder does not include any amount in respect of any Bonds (a) registered in the name of the Company or any affiliate or subsidiary thereof as to which the Trustee has received written notice of such ownership from the Company or (b) registered in the name of the Issuer. (6) The amount demanded hereby does not exceed the amount available on the date hereof to be drawn under the Letter of Credit in respect of the Principal -2- Exhibit A To Letter of Credit No.____ Component or the Interest Component, as the case may be, or the amount which the Trustee is required to draw on the date hereof under the Indenture. (7) Upon receipt by the undersigned of the amount demanded hereby, (a) the undersigned will apply the same, or cause the same to be applied, directly to the payments, when due, in accordance with the Indenture, (b) no portion of said amount shall be applied by the undersigned for any other purpose and (c) no portion of said amount shall be commingled with other funds held by the undersigned. Capitalized terms used herein and not otherwise defined herein but defined in the Letter of Credit shall have the same meanings herein as in the Letter of Credit. * * * -3- Exhibit A To Letter of Credit No.____ IN WITNESS WHEREOF, the Trustee has executed and delivered this certificate as of the ______ day of _____________ 200__. [INSERT NAME OF CURRENT TRUSTEE], as Trustee By ----------------------------------------- Name: Title: -4- Exhibit B To Letter Of Credit No. _____ NOTICE OF REDUCTION OR TERMINATION [Date] Commerzbank AG, New York Branch Two World Financial Center New York, New York 10281 Attention: Letter of Credit Department Re: Irrevocable Direct-Pay Letter of Credit No. ____ (the "Letter of Credit") Ladies and Gentlemen: [Insert name of current Trustee], as Trustee (the "Trustee"), through its undersigned duly authorized officer, hereby certifies to Commerzbank AG, New York Branch (the "Fronting Bank"), with reference to Irrevocable Letter of Credit No. __________ (the "Letter of Credit") (the terms defined therein and not otherwise defined herein being used herein as therein defined) issued by the Fronting Bank in favor of the Trustee, that: (1) The Trustee is the Trustee under the Indenture for the holders of the Bonds. (2) The Trustee hereby informs you that (check one box): [__] (A) the Letter of Credit is terminated. [__] (B) the conditions precedent to the delivery of a substitute letter of credit as provided in the Indenture have been satisfied and the Trustee has accepted delivery of such substitute letter of credit. [__] (C) no Bonds remain Outstanding. [__] (D) (i) The Stated Amount has been reduced from $______ to $_______ such reduction to be effective on ________________ (the "Effective Date"); (ii) The Principal Component has been reduced from $_______ to $________, such reduction to be effective on the Effective Date; (iii) The Interest Component has been reduced from $_________ to $_______ such reduction to be effective on the Effective Date. (3) We submit hereby [for cancellation] [for replacement] the original of the Letter of Credit. -1- Exhibit B To Letter Of Credit No. _____ IN WITNESS WHEREOF, the Trustee has executed and delivered this Certificate as of the _______ day of ___________200___. [INSERT NAME OF CURRENT TRUSTEE], as Trustee By ----------------------------------------- Name: Title: -2- Exhibit C To Letter Of Credit No. _____ DEMAND TO TRANSFER LETTER OF CREDIT [Date] Commerzbank AG, New York Branch Two World Financial Center New York, New York 10281 Attention: Letter of Credit Department Re: Irrevocable Direct-Pay Letter of Credit No. ____ (the "Letter of Credit") Ladies and Gentlemen: The undersigned [insert name of current Trustee] ("Transferor"), through its duly authorized officer, certifies that immediately prior to the transfer contemplated hereby, Transferor was the Trustee under the Indenture for the holders of the Bonds. For value received, Transferor hereby irrevocably transfers to: [Name of new Trustee] ("Transferee") [Address] [Telephone/Facsimile] [Attention] all rights of Transferor to draw under the Letter of Credit in its entirety. Transferee has succeeded Transferor as Trustee under the Indenture described in the above referenced Letter of Credit. By this transfer, all rights of Transferor in the Letter of Credit are transferred to Transferee and Transferee shall have sole rights as beneficiary thereof. All amendments are to be advised direct to Transferee without any necessity of consent or notice from Transferor. By their signatures below, Transferor and Transferee acknowledge that Transferee has duly succeeded Transferor as Trustee under the Indenture, and that Transferee has agreed to be bound by the terms of the Indenture as if it were originally named "Trustee" therein. Terms used but not defined herein have the meanings assigned to them in the Letter of Credit. The Letter of Credit is returned herewith, and we ask you to endorse and transfer the Letter of Credit, and forward the Letter of Credit to Transferee. * * * Exhibit C To Letter Of Credit No. _____ IN WITNESS WHEREOF, the parties hereto have executed and delivered this Certificate as of the _______ day of ___________ 200___. [INSERT NAME OF CURRENT TRUSTEE], as Trustee By ----------------------------------------- Name: Title: SIGNATURE AUTHENTICATED By ----------------------------------------- Name: Title: Acknowledged and Agreed by: [INSERT NAME OF NEW TRUSTEE] By: ----------------------------- Name: Title: -2- SCHEDULE 4.07 FUNDED DEBT; SECURED OBLIGATIONS (1) 1. 6.65-9.15% Notes with maturities ranging from 1999 to 2004 2. 8.50% Notes due March 15, 2002 3. 8.125% Notes due July 1, 2039 4. 7.7% Notes due December 15, 2005 5. 7.9% Notes due December 15, 2009 6. 8.3% Notes due December 15, 2029 7. 8.10% Guaranteed Serial ESOP Notes, payable in installments between 2002 and 2009 8. 10.125% Debentures due May 15, 2010 9. 10.375% Debentures due February 1, 2011 10. 9.00% Debentures due May 15, 2016 11. 9.75% Debentures due May 15, 2021 12. 9.25% Debentures due March 15, 2022 13. 10.375% Debentures due December 15, 2022 14. Development Authority of Fulton County Loan Agreement dated May 1, 1998 15. Development Authority of Fulton County Loan Agreement dated September 1, 1992 16. Development Authority of Clayton County Loan Agreement dated May 1, 2000 (Series A, B and C) 17. Capital Leases: (a) Forty-One B737-200 Aircraft Leases (b) nine Western Aircraft Leases (4 B737-200; 3 B737-300 and 2 B727-200) - --------- 1 All of which is unsecured except Item 17(b). Schedule 4.07 Page 2 18. Credit Agreement, dated as of May 2, 1997, among the Borrower, the several financial institutions which are parties hereto and Nationsbank, N.A. (South), as Agent Bank. 19. Credit Agreement, dated as of March 22, 1999, among the Borrower, the several financial institutions party thereto, The Chase Manhattan Bank and Citibank, N.A. SECURED OBLIGATIONS 1. $96,500,000 The Port Authority of New York and New Jersey Special Project Bonds, Series 1R, Delta Air Lines, Inc. Project 2. Nine Western Air Lines Capital Leases (4 B737-200; 3 B737-300 and 2 B727-200) 3. SATO Guaranty (pledge of Borrower's government receivables to provide collateral for SATO credit agreement) 4. $58,000,000 Various Credit Agreements by 27 EMB-120 Brasilias at Atlantic Southeast Airlines, Inc. 5. $100,600,000 Various Credit Agreements by 10 CRJs and 8 Brasilias at Comair Airlines, Inc. 6. JFK Financing* 7. Boston Financing* - --------- * As of the Effective Date of this Agreement, the Borrower is considering various means for financing proposed airport facilities projects at Boston Logan International Airport (BOS) and John F. Kennedy International Airport (JFK). Since the Borrower has not yet determined the structure for such financings, the intent of these provisions is to include such financings in the lists set forth in these schedules once such financings occur, if ever, and to the extent applicable to the structures ultimately selected by the Borrower. SCHEDULE 4.11 SUBSIDIARIES OF DELTA AIR LINES, INC. Aero Assurance Ltd. ASA Holdings, Inc. (wholly-owned subsidiary of Delta Air Lines Holdings, Inc.) ASA Investments, Inc. (wholly-owned subsidiary of ASA Holdings, Inc.) Atlantic Southeast Airlines, Inc. (wholly-owned subsidiary of ASA Holdings, Inc.) CMD, Inc. (wholly-owned subsidiary of Comair Services, Inc.) Comair Acquisition Co., Inc. (wholly-owned subsidiary of Comair Holdings, Inc.) Comair Holdings, Inc. (wholly-owned subsidiary of Delta Air Lines Holdings, Inc.) Comair, Inc. (wholly-owned subsidiary of Comair Holdings, Inc.) Comair Investment Co., Inc. (wholly-owned subsidiary of Comair Holdings, Inc.) Comair Services, Inc. (wholly-owned subsidiary of Comair Holdings, Inc.) Comair Aviation Academy, Inc. (wholly-owned subsidiary of Comair Services, Inc.) Crown Rooms, Inc. Crown Rooms of Texas, Inc. (wholly-owned subsidiary of Crown Rooms, Inc.) CVG Aviation, Inc. (wholly-owned subsidiary of Comair Services, Inc.) DAL Aircraft Trading, Inc. DAL Foreign Sales, Inc. DAL Moscow, Inc. (wholly-owned subsidiary of Delta Air Lines Holdings, Inc.) DAL Receivables, LLC DASH Management, Inc. Delta Air Lines Holdings, Inc. Delta Air Lines, Inc. and Pan American World Airways, Inc. - Unterstutzungskasse GMBH Delta Air Lines Global Services, Inc. Delta Air Lines Receivables Corporation Schedule 4.11 Page 2 Delta Benefits Management, Inc. (formerly known as Delta Air Lines Funding Corporation) (Class B Shares, representing 10% of the equity in DBMI, are owned by Aon Group, Inc.) Delta Capital Markets, Inc. Delta Connection, Inc. Delta Loyalty Management Services, Inc. (formerly known as Delta Tel, Inc.) Delta Technology, Inc. Delta Ventures III, Inc. (wholly-owned subsidiary of Delta Air Lines Holdings, Inc.) Epsilon Trading, Inc. Guardant, Inc. TransQuest Holding, Inc. (wholly-owned subsidiary of Delta Technology, Inc.) TransQuest UK Ltd. (wholly-owned subsidiary of TransQuest Holding, Inc.) SCHEDULE 5.03 GUARANTY LIABILITIES $88,000,000 Regional Airports Improvement Corporation 6.35% Facilities Sublease Refunding Revenue Bonds, Issue of 1996, Delta Air Lines, Inc. (Los Angeles International Airport) SATO Guaranty (Borrower's allocable share of $25 million SATO revolving credit facility, used by SATO to advance payments to participating airlines on government receivables) JFK Financing* Boston Financing* - --------- * As of the Effective Date of this Agreement, the Borrower is considering various means for financing proposed airport facilities projects at Boston Logan International Airport (BOS) and John F. Kennedy International Airport (JFK). Since the Borrower has not yet determined the structure for such financings, the intent of these provisions is to include such financings in the lists set forth in these schedules once such financings occur, if ever, and to the extent applicable to the structures ultimately selected by the Borrower. FIRST AMENDMENT TO REIMBURSEMENT AGREEMENT THIS FIRST AMENDMENT TO REIMBURSEMENT AGREEMENT, dated as of November 9, 2001 (this "First Amendment"), is made by and among DELTA AIR LINES, INC., a Delaware corporation (the "Borrower"), the financial institutions parties hereto (the "Lenders") and COMMERZBANK AG, acting through its New York branch ("Commerzbank"), as letter of credit fronting bank (the "Fronting Bank") and agent (the "Agent"). WITNESSETH: WHEREAS, the Borrower, the Lenders and Commerzbank, as letter of credit fronting bank, agent and arranger, are parties to that certain Reimbursement Agreement dated as of May 1, 2000 (the "Reimbursement Agreement"), pursuant to which the Fronting Bank and the Lenders made certain financial accommodations available to the Borrower; WHEREAS, the Borrower has requested that the Fronting Bank, the Agent and the Lenders amend the Reimbursement Agreement in certain respects; and WHEREAS, the Fronting Bank, the Agent and the Lenders are willing to so amend the Reimbursement Agreement on the terms and conditions set forth herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereto agree as follows: Section 1. Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this First Amendment have the meanings provided in the Reimbursement Agreement. Section 2. Amendments to Reimbursement Agreement. Effective on (and subject to the occurrence of) the Effective Date, the Reimbursement Agreement is hereby amended in accordance with this Section 2. Except as so amended, the Reimbursement Agreement shall continue in full force and effect. (a) Section 1.01 of the Reimbursement Agreement is amended by inserting in the proper alphabetical order the following new defined terms: "FIRST AMENDMENT" shall mean the First Amendment to Reimbursement Agreement dated as of November 9, 2001 among the Borrower, the Lenders party thereto, the Fronting Bank and the Agent. "FIRST AMENDMENT EFFECTIVE DATE" shall mean the "Effective Date" of the First Amendment (as defined in the First Amendment). (b) Section 5.03 of the Reimbursement Agreement is amended by: (i) inserting the following at the end of clause (a) thereof: ", provided that any calculation of "Current Debt" under this clause (a) shall not include up to $625,000,000 of secured debt obligations of the Borrower or any Subsidiary incurred and outstanding after the date hereof that would otherwise constitute "Current Debt""; and (ii) deleting "150%" in clause (c) thereof and substituting in lieu thereof "175%". (c) Section 5.04 of the Reimbursement Agreement is amended by: (i) deleting "$3,000,000,000" in subclause (i)(a) thereof and substituting in lieu thereof "$5,350,000,000 plus the aggregate amount (not to exceed $150,000,000) of any Class D enhanced equipment trust certificates issued by the Borrower after the First Amendment Effective Date that are secured by only those aircraft that also secure other classes of enhanced equipment trust certificates"; and (ii) inserting at the end of subclause (i)(b) thereof "and marked thereon with an asterisk". (d) Section 5.10 of the Reimbursement Agreement is amended to read in its entirety as follows: Section 5.10. Security. In the event the Borrower secures by mortgage, pledge, encumbrance, lien or other charge (a) any debt other than as permitted by Section 5.04 hereof or (b) the debt under the Credit Agreement dated as of May 2, 1997, as heretofore amended (the "BANK OF AMERICA FACILITY"), among the Borrower, the financial institutions party thereto and Bank of America, N.A., as agent bank (or any syndicated revolving credit facility that replaces the Bank of America Facility), then the Borrower shall equally and ratably secure (together with any other indebtedness required to be so secured) the indebtedness incurred hereunder. Section 3. Representations and Warranties. The Borrower hereby represents and warrants that each of the representations and warranties of the Borrower contained in the Reimbursement Agreement are true and accurate in all 2 material respects as of the date hereof except for (i) any representations and warranties that expressly relate solely to an earlier date, which representations and warranties were true and accurate in all material respects on and as of such earlier date, (ii) the representations and warranties contained in Sections 4.07 of the Reimbursement Agreement, which representations and warranties were true and accurate in all material respects on and as of May 1, 2000, and (iii) (x) the changes in the business, financial condition or results of operation of the Borrower and its Subsidiaries that have resulted directly or indirectly from the terrorist attacks that occurred on September 11, 2001 and related matters and (y) changes disclosed by the Borrower in a report on Form 10-K, 10-Q or 8-K filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, prior to the date of this First Amendment, in each case insofar as such changes affect the representation and warranty contained in the last sentence of Section 4.04 of the Reimbursement Agreement. The Borrower further represents and warrants to the Fronting Bank, the Agent and each of the Lenders that (i) it has the requisite corporate power and authority to execute, deliver and perform this First Amendment, (ii) this First Amendment constitutes a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms and (iii) the execution, delivery and performance by the Borrower of this First Amendment (A) have been duly authorized by all necessary corporate action and do not require any consent or approval, authorization, permit or license from any federal, state or other regulatory authority which has not been obtained, or violate any law, regulation, order, judgement, decree or determination having applicability to the Borrower or its organizational documents, or result in a breach of, or constitute a default under any existing indenture or credit agreement or any other agreement or instrument to which the Borrower is a party or by which its properties may be bound or affected, except where the failure to have such consent or approval or such violation, breach of default could not reasonably be expected to result in a material adverse effect on the business, financial condition or results of operations of the Borrower and its Subsidiaries taken as a whole, and (B) will not conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, the Certificate of Incorporation or Bylaws of the Borrower or of any agreement or instrument to which the Borrower is now a party, which breach would have a material adverse effect on the business, financial condition or results of operations of the Borrower and its Subsidiaries taken as a whole. Section 4. Amendment of Schedule 4.07. Schedule 4.07 of the Reimbursement Agreement, describing the "Funded Debt; Secured Obligations" of the Borrower, is amended in its entirety to conform to Schedule 4.07 attached to this First Amendment. The Borrower represents and warrants to the Fronting Bank, the Agent and each of the Lenders that the Borrower does not have outstanding any Funded Debt except as set forth on Schedule 4.07 to this First Amendment, and there 3 exists no default under the provisions of any instrument evidencing such indebtedness or agreement relating thereto. Section 5. Effective Date. This First Amendment shall be and become effective on the date (the "Effective Date") on or prior to November 30, 2001 upon which (i) all of the conditions set forth in this Section 5 shall have been satisfied and (ii) the Agent, the Fronting Bank, the Majority Lenders and the Borrower shall have duly executed counterparts of this First Amendment and provided original copies thereof to the Agent. (a) Closing Certificate. The Agent shall have received an Officer's Certificate, in form reasonably satisfactory to the Agent, certifying that (i) before and after giving effect to this First Amendment, no Default or Event of Default exists or will be in existence and (ii) the representations and warranties of the Borrower contained in this First Amendment are true and accurate in all material respects with the same effect as though such representations and warranties had been made on and as of the Effective Date. (b) Amendments to Other Facilities. (i) The Borrower shall have entered into amendments effecting changes substantially similar to those effected in Section 2 hereof with respect to the comparable provisions of (A) the Credit Agreement dated as of May 2, 1997, as heretofore amended, among the Borrower, the financial institutions party thereto and Bank of America, N.A., as agent bank (such amendment, the "BANK OF AMERICA AMENDMENT"), and (B) the Credit Agreement dated as of May 19, 2000, as heretofore amended, among the Borrower, the financial institutions parties thereto and Bayerische Hypo-und Vereinsbank AG, New York Branch, as letter of credit bank and agent; (ii) the Bank of America Amendment shall have become effective; and (iii) the Borrower shall have terminated the commitments under (and repaid in full, together with any accrued interest, all loans under) the Credit Agreement dated as of April 6, 2001 among the Borrower, the banks parties thereto and Citicorp North America, Inc., as Administrative Agent. (c) Legal Opinion. The Borrower shall have delivered to the Agent a legal opinion of counsel to the Borrower, in form and content reasonably satisfactory to the Agent, opining that this First Amendment has been duly authorized, executed and delivered by the Borrower and is a valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms. (d) Business Plan. The Borrower shall have provided to the Fronting Bank, the Agent and the Lenders its updated business plan, including pro forma financial statements and projections, for the fourth quarter of fiscal year 2001 and fiscal year 2002, including without limitation projected balance sheets, income statements and statements of cash flow for the fourth quarter of fiscal year 2001 and fiscal year 2002 4 on a quarterly basis, such materials being in substantially the same form and content as the business plan and cash flow projections most recently presented by the officers of the Borrower to the Board of Directors of the Borrower, or any subcommittee thereof. (e) Amendment Fee. The Agent shall have received from the Borrower, for the account of each Lender (a "Consenting Lender") that has evidenced its agreement hereto as provided in clause (ii) of Section 5 by 5:00 p.m. (Atlanta, Georgia time) on the later of (i) November 9, 2001 and (ii) the date on which the Agent issues a notice to the Lenders stating that the condition set forth in clause (ii) of Section 5 has been satisfied, an amendment fee in the amount equal to 15 basis points (0.15%) on the aggregate amount of such Consenting Lender's Commitment. (f) Termination Date. Notwithstanding the terms of this Section 5, in the event that the Borrower shall fail to comply with each of the conditions to effectiveness set forth in this Section 5 on or before November 30, 2001, this First Amendment shall not become effective and each of the signatures submitted by the Agent, the Fronting Bank and the Majority Lenders to the Agent shall be released. Section 6. Miscellaneous. (a) References to Reimbursement Agreement. Each reference to the Reimbursement Agreement in the Reimbursement Agreement or any of the other instruments, agreements, certificates or other documents executed in connection therewith, shall be deemed to be a reference to the Reimbursement Agreement, as amended hereby and as the same may be further amended, restated, supplemented or otherwise modified from time to time in accordance with Section 9.08 thereof. (b) Expenses of Agent. The Borrower agrees to pay, on demand, all reasonable fees, costs and expenses incurred by the Agent in connection with the preparation, negotiation and execution of this First Amendment and any other Financing Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the reasonable costs and fees of the Agent's legal counsel and any taxes or expenses associated with or incurred in connection with any instrument or agreement referred to herein or contemplated hereby. (c) Benefits. This First Amendment shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns. (d) Governing Law. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS 5 OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES. (e) Effect. Except as expressly herein amended, the terms and conditions of the Reimbursement Agreement shall remain in full force and effect without amendment or modification, express or implied. The entering into this First Amendment by the Lenders shall not be construed or interpreted as an agreement by the Lenders to enter into any future amendment or modification of the Reimbursement Agreement or any of the other Financing Documents. (f) Counterparts; Telecopied Signatures. This First Amendment may be executed in any number of counterparts and by different parties to this First Amendment on separate counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns. Any signature delivered or transmitted by a party by facsimile transmission shall be deemed to be an original signature hereto. (g) Further Assurances. The Borrower agrees to take such further actions as the Agent shall reasonably request from time to time in connection herewith to evidence or give effect to the amendments set forth herein or any of the transactions contemplated hereby. (h) Section Titles. Section titles and references used in this First Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto. (i) Release of Claims. To induce the Agent, the Fronting Bank and the Lenders to enter into this First Amendment, the Borrower hereby releases, acquits and forever discharges the Agent, the Fronting Bank and the Lenders, and all officers, directors, agents, employees, successors and assigns of the Agent, the Fronting Bank and the Lenders, from any and all liabilities, claims, demands, actions or causes of actions of any kind or nature (if there be any), whether absolute or contingent, disputed or undisputed, at law or in equity, or known or unknown, that the Borrower now has or ever had against such Persons arising under or in connection with, directly or indirectly, any of the Financing Documents. 6 IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Reimbursement Agreement to be executed under duly authorized officers as of the date above written. DELTA AIR LINES, INC. By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- COMMERZBANK, A.G., New York Branch, as Fronting Bank, as Agent and as a Lender By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- BANCA NAZIONALE DEL LAVORO S.p.A., New York Branch By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- BAYERISCHE LANDESBANK GIROZENTRALE, Cayman Island Branch By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- 7 CITIBANK, N.A. By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- CREDIT INDUSTRIEL ET COMMERCIAL By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- THE DAI-ICHI KANGYO BANK, LTD. By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- SUNTRUST BANK By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- THE SANWA BANK, LIMITED By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- 8 WACHOVIA BANK, N.A.. By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- WESTDEUTSCHE LANDESBANK GIROZENTRALE, New York Branch By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- BAYERISCHE HYPO-UND VEREINSBANK A.G., New York Branch By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG, Cayman Islands Branch By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- 9 NATEXIS BANQUE POPULAIRES By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- NORDDEUTSCHE LANDESBANK GIROZENTRALE, New York Branch and/or Cayman Islands Branch By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- THE SUMITOMO MITSUI BANKING CORP. By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- LANDESBANK SCHLESWIG- HOLSTEIN GIROZENTRALE By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title -------------------------------------- 10 EX-10.1 5 g77552exv10w1.txt EXHIBIT 10.1 2002 RETENTION PROGRAM EXHIBIT 10.1 DELTA AIR LINES, INC. 2002 RETENTION PROGRAM 1. Purpose On January 23, 2002, the Personnel & Compensation Committee ("Committee") of the Board of Directors of Delta Air Lines, Inc. ("Delta") adopted Delta's 2002 Retention Program ("Program"). The purpose of the Program is to assist Delta in retaining key members of management who were employed by Delta prior to September 11, 2001, and who are serving as officers when the Program was adopted. The Committee believes it is important to retain these individuals to enable Delta to continue to respond successfully to the financial and operational challenges facing Delta and the airline industry as a result of the terrorist attacks on the United States on September 11, 2001. 2. Administration The Program shall be administered by the Committee. The Committee shall have the authority, in its sole and absolute discretion and subject to the terms of the Program: (a) to interpret the Program; (b) to adopt, amend and rescind such rules and regulations as it deems necessary or advisable for the proper operation and administration of the Program; (c) to select the participants in the Program; (d) to determine the terms of the retention award opportunities granted under the Program; and (e) to take any and all other action it deems necessary or advisable for the proper operation or administration of the Program. All determinations of the Committee with respect to the Program shall be final, binding and conclusive on all persons. No member of the Committee shall be liable to any person for any action, interpretation or construction made with respect to the Program. 3. Eligibility; Retention Awards a. Eligibility. Officers of Delta designated by the Committee shall be participants in the Program. b. Retention Awards. Each participant in the Program shall be granted a retention award opportunity (a "Retention Award") as determined by the Committee. The Retention Award shall be subject to the terms of the Program. Subject to such modifications as the Committee shall determine, a participant's Retention Award shall be set forth in a Retention Award Opportunity Certificate substantially in the form of Attachment A to the Program. 4. General Rules Regarding Vesting and Payment of Retention Awards Subject to the terms of the Program: a. Vesting and Payment of First Installment. 33% of a participant's Retention Award shall vest on December 31, 2003 and be paid in cash within 30 days thereafter if the participant is continuously employed by Delta from January 1, 2002 through and including December 31, 2003. b. Vesting and Payment of Second Installment. The remaining 67% of a participant's Retention Award ("Second Installment") shall vest on December 31, 2004 and be paid in cash within 30 days thereafter if the participant is continuously employed by Delta from January 1, 2002 through and including December 31, 2004. c. Accelerated Vesting and Payment of Second Installment. A participant's Second Installment shall instead vest on December 31, 2003 and be paid in cash within 90 days thereafter (i) if Delta's EBITDAR Margin for the Measurement Period is at or above the median of the EBITDAR Margins for the Measurement Period of the members of the Peer Group; and (ii) if the participant is continuously employed by Delta from January 1, 2002 through and including December 31, 2003. "EBITDAR Margin", "Peer Group" and "Measurement Period" are defined in Section 10 of the Program. 5. Special Rules Regarding Vesting and Payment of Retention Awards The General Rules Regarding the Vesting and Payment of Retention Awards in Section 4 of the Program are subject to the following terms: a. Termination of Employment On or Before December 31, 2003 Because of Disability or Death. If a participant's employment with Delta terminates on or before December 31, 2003 due to Disability (as defined in the Delta 2000 Performance Compensation Plan) or death, a pro rata portion of the participant's Retention Award shall vest on the date of such termination of employment and be paid in cash within 30 days thereafter. The pro rata portion of the participant's Retention Award which shall vest under this Section 5(a) will be determined by multiplying the Retention Award amount by a fraction, (i) the numerator of which is the number of full and partial months (rounded to two decimal places) the participant was continuously employed by Delta during the period beginning on January 1, 2002 and ending on the date of such termination of employment; and (ii) the denominator of which is 24. b. Termination of Employment During Calendar Year 2004 Because of Disability or Death. If a participant's employment with Delta terminates during calendar year 2004 due to Disability or death, a pro rata portion of the participant's unvested Retention Award shall vest on the date of such termination of employment and be paid in cash within 30 days thereafter. The pro rata portion of the participant's unvested Retention Award which shall vest under this Section 5(b) will be determined by multiplying the unvested Retention Award amount by a fraction, (i) the numerator of which is the number of full and partial months (rounded to two decimal places) the participant was continuously employed by Delta during the period beginning on January 1, 2004 and ending on the date of such termination of employment; and (ii) the denominator of which is 12. c. Termination of Employment for Reasons Other Than Disability or Death. Except to the extent otherwise determined by the Committee, if a participant's employment with Delta terminates on or before December 31, 2004 for any reason other than Disability or death, any unvested portion of the participant's Retention Award shall immediately lapse and be forfeited at the time of such termination of employment. Any vested portion of the participant's Retention Award which has not been paid as of such termination of employment shall be paid in accordance with the terms of the Program. 2 d. Change in Control On or Before December 31, 2003. If, on or before December 31, 2003, there is a Change in Control (as defined in the Delta 2000 Performance Compensation Plan) while a participant is employed by Delta, a pro rata portion of the participant's Retention Award shall vest on the date of the Change in Control and be paid in cash within 30 days thereafter. The pro rata portion of the participant's Retention Award which shall vest under this Section 5(d) will be determined by multiplying the Retention Award amount by a fraction, (i) the numerator of which is the number of full and partial months (rounded to two decimal places) the participant was continuously employed by Delta during the period beginning on January 1, 2002 and ending on the date of the Change in Control; and (ii) the denominator of which is 24. e. Change in Control During Calendar Year 2004. If, during calendar year 2004, there is a Change in Control while a participant is employed by Delta, any unvested portion of the participant's Retention Award shall vest on the date of the Change in Control and be paid in cash within 30 days thereafter. f. Discharge of Liabilities. The payment to a participant of amounts due under Section 5(d) or Section 5(e) of the Program shall discharge all liabilities of Delta to the participant (i) under the Program; and (ii) only with respect to the Program, under any executive retention protection agreement or employment agreement between Delta and the participant. 6. Intent to Remain Employed with Delta. By accepting the grant of a Retention Award, a participant shall be deemed to demonstrate his or her intent to remain employed with Delta. 7. Transferability of Awards No Retention Award granted under the Program shall be subject in any manner to alienation, anticipation, sale, assignment, pledge, encumbrance or transfer, and no other person shall otherwise acquire any rights therein. Notwithstanding the foregoing, a Retention Award may be transferred by will, by the laws of descent and distribution, or by beneficiary designation at death as provided in Section 9(e). 8. Amendment and Termination of the Program a. Amendment. The Committee may amend the Program at any time and from time to time; provided, however, that no amendment of the Program that would adversely affect or impair the rights of a participant shall be effective without the participant's written consent. b. Termination. The Committee may terminate the Program at any time. However, termination of the Program shall not alter or impair any of the rights of any participant without his or her written consent under any Retention Award granted prior to termination of the Program. In the absence of such consent, any Retention Award granted prior to the termination of the Program shall remain in effect after termination of the Program and shall continue to be governed by the applicable terms of the Program. 3 9. General Provisions a. Withholding Tax. Delta shall withhold, with respect to any payment made to a participant under the Program, any taxes required by law to be withheld because of such payment. b. No Right To Continued Employment. The grant of a Retention Award under the Program shall not be construed as conferring any legal or other right upon any participant for the continuation of his or her employment for any period. Delta expressly reserves the authority (which may be exercised at any time and without regard to the timing of the vesting of a Retention Award) to discharge any participant or to otherwise treat any participant without regard to the effect which such treatment might have upon him or her as a participant in the Program. c. Payments Not Considered for Other Purposes. Payments to a participant under the Program shall not be considered as earnings, compensation or otherwise for purposes of determining the participant's benefits under any other plan or program of Delta (including, without limitation, any disability, life insurance, retirement and survivorship benefits under any qualified or nonqualified plan). d. Unsecured Interest. No participant or any other party claiming an interest in amounts earned under the Program shall have any interest whatsoever in any specific asset of Delta. To the extent that any party acquires a right to receive payments under the Program, such right shall be equivalent to that of an unsecured general creditor of Delta. e. Beneficiary Designation. Each participant under the Program may, from time to time, name any beneficiary or beneficiaries (who may be designated as a primary, contingent or successor beneficiary) to whom any benefit under the Program is to be paid in case of the participant's death before he or she receives payment of the vested portion of such benefit. Each designation shall revoke all prior designations by the same participant, shall be in a form prescribed by the Committee, and shall be effective only when filed by the participant in writing with the Committee during his or her lifetime. f. Successors and Assigns of Participant. The Program shall be binding upon all successors and assigns of each participant, including, without limitation, his or her estate, the personal representative, executor, administrator or trustee of such estate, any beneficiary designated as provided in Section 9(e) or any trustee in bankruptcy or representative of his or her creditors. g. Governing Law; Severability. The Program and all determinations made and actions taken hereunder shall be governed by the internal substantive laws, and not the choice of law rules, of the State of Georgia, and construed accordingly, to the extent not superseded by applicable federal law. If any provision of the Program shall be held unlawful or otherwise invalid or unenforceable in whole or in part, the unlawfulness, invalidity or unenforceability shall not affect any other provision of the Program or part thereof, each of which shall remain in full force and effect. 4 10. Calculation of EBITDAR Margin a. Methodology. The EBITDAR Margin for Delta and each member of the Peer Group shall be calculated by dividing (i) Delta's or such Peer Group member's aggregate operating income for the Measurement Period, determined prior to charges, costs and expenses for depreciation, amortization and aircraft rent; by (ii) its aggregate operating revenue for the Measurement Period. Each company's EBITDAR Margin shall be determined based on its regularly prepared and publicly available statements of operations prepared in accordance with GAAP (and, if necessary to determine certain items, based on data filed by such company with the U.S. Department of Transportation); provided, however, that the calculation of the EBITDAR Margin for each company shall be adjusted to exclude any item of gain, loss or expense determined by the Committee to be extraordinary or unusual in nature or infrequent in occurrence. Delta's EBITDAR Margin shall be deemed to be at or above the median of the EBITDAR Margins of the members of the Peer Group if Delta's EBITDAR Margin is equal to or higher than (i.e., superior to) the EBITDAR Margins of at least three members of the Peer Group. Each company's EBITDAR Margin shall be rounded to three decimal places. b. GAAP. "GAAP" means generally accepted accounting principles in the United States. c. Measurement Period. "Measurement Period" means the period beginning on January 1, 2002 and ending on and including December 31, 2003. d. Peer Group. "Peer Group" means AMR Corporation, Continental Airlines, Inc., Northwest Airlines Corporation, Southwest Airlines Co., UAL Corporation and US Airways Group, Inc. e. Other Factors. If a member of the Peer Group (i) ceases to exist during the Measurement Period because it is merged into another company or otherwise, (ii) fails to issue regularly prepared and publicly available statements of operations in accordance with GAAP for the Measurement Period or (iii) becomes the subject of voluntary or involuntary bankruptcy proceedings during the Measurement Period, that company's EBITDAR Margin shall be deemed to be lower than (i.e., inferior to) Delta's EBITDAR Margin. f. Committee Authority to Make Adjustments. In determining under Section 4(c) of the Program whether Delta's EBITDAR Margin for the Measurement Period is at or above the median of the EBITDAR Margins for that period of the members of the Peer Group, the Committee may make such adjustments to that determination as it deems in its sole and absolute discretion to be necessary or advisable to prevent the dilution or enlargement of the benefits or potential benefits intended to be made available under the Program. 5 ATTACHMENT A RETENTION AWARD OPPORTUNITY CERTIFICATE Participant: ---------------------------------------------------------- Annual Base Salary as of January 23, 2002: ---------------------------- Multiple of Annual Base Salary ---------------------------------------- Retention Award Opportunity: ------------------------------------------ ACCEPTANCE AND ACKNOWLEDGMENT I hereby acknowledge receipt and accept the terms of the Delta Air Lines, Inc. 2002 Retention Program. In accepting this Retention Award Opportunity, I hereby acknowledge and reaffirm my obligations to Delta, including obligations relating to protection and use of confidential information, and my intention to continue to remain employed with Delta and to devote my full business time and attention to the performance of my duties. Date: ---------------------------- ---------------------------------------- (Signature) EX-10.2 6 g77552exv10w2.txt EXHIBIT 10.2 FORM OF STOCK OPTION AWARD AGREEMENT EXHIBIT 10.2 DELTA 2000 PERFORMANCE COMPENSATION PLAN NON-QUALIFIED STOCK OPTION AWARD AGREEMENT JANUARY 24, 2002 PARTICIPANT NAME The Delta 2000 Performance Compensation Plan ("Plan") is an incentive compensation plan for officers and key employees of Delta Air Lines, Inc. ("Delta") and its Subsidiaries. The Plan is administered by the Personnel & Compensation Committee of Delta's Board of Directors ("Committee"). Words beginning with a capital letter which are used but not otherwise defined in this Agreement have the meaning set forth in the Plan. The Committee has selected you to receive an award of Non-Qualified Stock Options, as follows: NUMBER OF STOCK OPTIONS XX,XXX Stock Options. Each Stock Option may AWARDED: be exercised for one share of Delta common stock as provided below. AWARD DATE: January 24, 2002 OPTION EXERCISE PRICE: $32.02, which was the closing price of Delta Common Stock on the New York Stock Exchange on January 24, 2002. EXERCISE PERIOD: General Rule. Subject to the terms and conditions of the Plan and the Rules For Non-Qualified Stock Options Granted On January 24, 2002 ("Rules"), (1) 50% of the number of Stock Options granted pursuant to this Agreement shall become exercisable on each of January 24, 2003 and January 24, 2004; and (2) your Stock Options shall remain exercisable through and including January 23, 2012. Special Rules. The Rules contain the Special Rules, which result in the following upon the occurrence of specified events: (1) change in the period during which your Stock Options may be exercised; and/or (2) forfeiture of your Stock Options. In no event may any of your Stock Options be exercised after January 23, 2012. Also see the Prospectus and the Rules for other information about your award. The Prospectus tells you how to access the Rules and the Plan on the Delta intranet site and how to receive paper copies of these documents if you prefer. The Rules tell you how and when your Stock Options may be exercised; the process you will follow to exercise your Stock Options, including how to contact the agent that administers certain exercises of Stock Options under the Plan (currently the agent is Salomon Smith Barney); and the methods available to pay the Option Exercise Price and/or to satisfy tax withholding due --------------------------- This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933. at the time you exercise Stock Options. Delta may from time to time change the process for exercising Stock Options, including changing the method(s) that you may use to pay the Option Exercise Price and satisfy the tax withholding requirements. If you do not comply with the applicable requirements, Delta and the agent may refuse to process exercises of your Stock Options. By signing this Agreement: (a) you acknowledge that you have had a full and adequate opportunity to read this Agreement and the Prospectus for Non-Qualified Stock Options dated January 24, 2002 which was delivered to you with this Agreement; (b) you acknowledge that you have received and had a full and adequate opportunity to read the Plan and the Rules; (c) you agree -- for yourself and for any designated beneficiary and for your heirs, executors, administrators and personal representatives -- to all of the terms and conditions contained in this Agreement, the Rules, and the Plan; and (d) you consent to receive all material regarding any awards under the Plan, including any prospectuses, electronically with an e-mail notification to your work e-mail address. Subject to any written executive retention protection agreement signed by you and Delta, this Agreement, together with the Plan and the Rules (the terms of which are made a part of this Agreement and are incorporated into this Agreement by reference), constitute the entire agreement between you and Delta with respect to the award of your Stock Options. The Plan, the Rules, this Agreement and all determinations made and actions taken pursuant to any of them shall be governed by the internal substantive laws, and not the choice of law rules, of the State of Georgia and construed accordingly, to the extent not superseded by applicable federal law. If there is any conflict between the Plan and either or both of the Rules and this Agreement, the Plan shall control; if there is any conflict between this Agreement and the Rules, the Rules shall control. Delta may amend this Agreement or the Rules at any time; provided that no amendment of this Agreement or Part I of the Rules, which impacts any outstanding Stock Options in a manner adverse to you, shall be made without your written consent. This Agreement has been executed in duplicate. Please note your acceptance by signing below and returning one original to the Vice President - Global Rewards & Recognition (Dept. 959-ATG) for Delta's records. You and Delta, each intending to be bound legally, agree to the matters set forth above by signing this Agreement, all as of January 24, 2002. DELTA AIR LINES, INC. AWARD RECIPIENT By: /s/ Leo F. Mullin By: ----------------------------------- ----------------------------------- Leo F. Mullin Chairman of the Board and Chief Executive Officer 2 DELTA 2000 PERFORMANCE COMPENSATION PLAN RULES FOR NON-QUALIFIED STOCK OPTIONS GRANTED ON JANUARY 24, 2002 These Rules apply to all Non-Qualified Stock Options granted on January 24, 2002 under the Delta 2000 Performance Compensation Plan ("Plan"). These Rules contain important information about those awards, and should be read in conjunction with the Plan, your Non-Qualified Stock Option Award Agreement dated January 24, 2002 ("your Award Agreement") and the Non-Qualified Stock Option Prospectus dated January 24, 2002. Words beginning with a capital letter and not otherwise defined in these Rules shall have the meaning set forth in the Plan. Delta may amend Part I and Part II of these Rules at any time; provided that no amendment of Part I of these Rules which impacts your outstanding Stock Options in a manner adverse to you shall be made without your written consent. PART I. SUBSTANTIVE RULES A. STOCK OPTION EXERCISE PERIOD - GENERAL RULE The General Rule regarding the period during which you may exercise your Stock Options is set forth in your Award Agreement ("General Rule"). The General Rule is subject to the terms and conditions of the Plan and the Special Rules in Paragraph I.B. below ("Special Rules"). B. STOCK OPTION EXERCISE PERIOD - SPECIAL RULES As discussed below, the Special Rules in this Paragraph I.B. change the period during which you may exercise your Stock Options, and/or result in the forfeiture of your Stock Options, whether or not your Stock Options are then exercisable under the General Rule. The Special Rules apply only to the extent your Stock Options have not previously been exercised, forfeited or revoked. Specifically, the General Rule is subject to the following terms and conditions: 1. Definitions - Employment with Delta. For purposes of this Paragraph I.B., (i) employment with Delta includes employment with any Subsidiary of Delta; and (ii) termination of employment with Delta means you are no longer an employee of Delta or any of its Subsidiaries. --------------------------- This document constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933. 2. Termination of Employment Before January 24, 2003 Because of Retirement. If your employment with Delta terminates before January 24, 2003 due to Retirement, your Stock Options shall be forfeited at the time of such termination of employment. 3. Termination of Employment On or After January 24, 2003 Because of Retirement. If your employment with Delta terminates on or after January 24, 2003 due to Retirement, your Stock Options may be exercised, in whole or in part, only during the period (i) beginning on the date your employment with Delta terminates due to Retirement; and (ii) ending on and including the earlier of (A) January 23, 2012 or (B) the third anniversary of the date your employment with Delta terminates due to Retirement. 4. Termination of Employment Because of Disability. If your employment with Delta terminates due to Disability, your Stock Options may be exercised, in whole or in part, only during the period (i) beginning on the later of (A) January 24, 2003 or (B) the date your employment with Delta terminates due to Disability; and (ii) ending on and including the earlier of (A) January 23, 2012 or (B) the third anniversary of the date your employment with Delta terminates due to Disability. 5. Termination of Employment Because of Death. If you die while employed by Delta, your Stock Options may be exercised, in whole or in part, only during the period (i) beginning on the date of your death; and (ii) ending on and including the earlier of (A) January 23, 2012 or (B) the third anniversary of the date of your death. 6. Death After Termination of Employment Because of Disability. If you die after your employment with Delta terminates due to Disability, your Stock Options may be exercised, in whole or in part, only during the period (i) beginning on the date of your death; and (ii) ending on and including the earlier of (A) January 23, 2012 or (B) the third anniversary of the date your employment with Delta terminates due to Disability. 7. Termination of Employment for Reasons Other Than Retirement, Disability or Death. If your employment with Delta terminates for any reason other than Retirement, Disability or death, your Stock Options shall be forfeited at the time of such termination of employment. 8. Non-Competition Agreement - Termination of Employment On or After January 24, 2003 Because of Early Retirement. If (i) your employment with Delta terminates on or after January 24, 2003 due to Retirement prior to age 65, if you are not then on the pilot seniority list of Delta or any of its Subsidiaries, or age 60, if you are then on such a seniority list, and (ii) within two years after such Retirement and without the Committee's approval, you directly or indirectly provide management or executive services (whether as a consultant, advisor, officer or director) to any person or entity in direct and substantial competition with the air transportation business of Delta or its Subsidiaries, then your Stock Options shall be forfeited at the time you first provide such management or executive services. Because of the broad and extensive scope of Delta's air transportation business, you acknowledge that the restrictions in this Paragraph I.B.8. 2 are intended to extend to management or executive services which are directly related to the provision of air transportation services into, within or from the United States, as no smaller geographical restriction will adequately protect the legitimate business interests of Delta. 9. Demotion. If, prior to January 24, 2004, you voluntarily suggest and then accept a demotion, or are involuntarily demoted, to a position with Delta or any of its Subsidiaries involving lesser responsibilities than those of the job held by you on January 24, 2002, the Committee may in its sole discretion, not later than six months from the date of the demotion, modify or revoke your Stock Options in any manner it deems appropriate under the circumstances. The Committee will determine in its sole discretion what constitutes a demotion to a job involving lesser responsibilities under this Paragraph I.B.9. 10. Change In Control. If a Change In Control (as defined in the Plan) occurs, your outstanding Stock Options shall become immediately exercisable, vested and nonforfeitable. PART II. ADMINISTRATIVE RULES A. OVERVIEW The process for exercising Stock Options varies depending on the manner in which you pay the Option Exercise Price and make certain other required payments. As discussed below, there are currently three ways to exercise your Stock Options: the Cash Purchase Method; the Cashless Exercise Method; and the Share Tender Method. Delta has retained Salomon Smith Barney Inc. ("SSB") to process Stock Option exercise requests under the Cash Purchase Method and the Cashless Exercise Method; Delta processes Stock Option exercise requests under the Share Tender Method. B. REQUIRED PAYMENTS To exercise your Stock Options, you are required to make the following payments: - Option Exercise Price. You must pay the Option Exercise Price for each Stock Option you exercise. - Withholding Taxes. You must pay required withholding taxes. When you exercise Stock Options, you realize ordinary compensation income equal to the excess of the fair market value of the Delta common stock acquired on the date of exercise over the Option Exercise Price. Delta is required to comply with applicable income tax withholding requirements with respect to that amount. - Other Costs. If you use the Cashless Exercise Method, you must pay SSB a brokerage commission for selling shares of Delta common stock on your behalf 3 and certain administrative charges. There are no such charges under the Cash Purchase Method or the Share Tender Method. C. STOCK OPTION EXERCISE METHODS You may exercise your Stock Options using any of the following three methods: 1. Cash Purchase Method. Under the Cash Purchase Method, you pay SSB the Option Exercise Price and required withholding taxes from your own funds before you exercise your Stock Options. The payment must be made by a check payable to Salomon Smith Barney Inc. or by electronic funds transfer. It must be received by SSB before your Stock Option exercise request will be processed. SSB will credit your SSB brokerage account with the shares of Delta common stock you received from your Stock Option exercise. 2. Cashless Exercise Method. The Cashless Exercise Method allows you to exercise your Stock Options without paying out any cash of your own. That is why it is called "cashless." In effect, you pay the Option Exercise Price, required withholding taxes and other costs by using your "gain" -- the excess of the fair market value of the Delta common stock acquired on the date of exercise over the Option Exercise Price. There are two types of Cashless Exercises: Exercise and Sell; and Sell-to-Cover. - Under the Exercise and Sell Method, you instruct SSB to sell all shares of Delta common stock acquired from the exercise of your Stock Options. The proceeds of this sale will be used to pay the Option Exercise Price, required withholding taxes and other applicable costs. SSB will send you a check for the net proceeds. - Under the Sell-to-Cover Method, SSB will (1) estimate the number of shares of Delta common stock that needs to be sold to pay the Option Exercise Price, required withholding taxes and other costs; (2) sell on your behalf that estimated number of shares from the Delta common stock you are acquiring pursuant to the Stock Option exercise; and (3) use the proceeds from that sale to make the required payments. SSB will credit your brokerage account with the remaining shares of Delta common stock, and any remaining cash proceeds. 3. Share Tender Method. Under the Share Tender Method, you pay the Option Exercise Price by using unrestricted shares of Delta common stock (i) that you have owned for at least six months; and (ii) that have a Fair Market Value on the date of your Stock Option exercise equal to the Option Exercise Price. Under this method, you do not make a physical delivery of your previously owned shares of Delta common stock, but instead use a process called "attestation." Attestation does not involve any physical movement of stock certificates. Rather, you provide to Delta on the appropriate form the stock certificate number for the attested shares if you hold the shares in your own name, 4 or the name and number of your account if your broker or bank holds the attested shares on your behalf. This information allows verification (i) that you own the shares being attested; (ii) that the shares are unrestricted; and (iii) that you have owned the shares for at least six months. Providing incorrect information may result in disqualification of the Stock Option exercise and/or disciplinary action. Under the Share Tender Method, Delta will deduct from the shares you acquired from your Stock Option exercise the number of (i) attested shares used to pay the Option Exercise Price; and (ii) the shares necessary to satisfy tax withholding requirements. You will receive the net number of shares. Please note that you may not exercise your Stock Options by attesting shares that you have attested during the previous six months. D. STOCK OPTION EXERCISE PROCEDURES 1. Cash Purchase Method or Cashless Exercise Method. To exercise your Stock Options using the Cash Purchase or Cashless Exercise Method, you must first open a brokerage account with SSB and then submit a Stock Option exercise request to SSB in accordance with its procedures. You may contact SSB as follows: Salomon Smith Barney Inc. Attention Stock Plan Services P.O. Box 2151 New York, NY 10116 Telephone: 800 323-7788 (in the U.S.) 212 503-1809 (outside the U.S.) Voice Response Information: 800 367-4777 Internet Information: http://www.benefitaccess.com 2. Share Tender Method. To exercise your Stock Options using the Share Tender Method, please contact Delta as follows: Craig Whipple Specialist - Executive Rewards 1060 Delta Boulevard, Department 959 Atlanta, Georgia 30354-1989 Telephone: 404 715-6333 Fax: 404 715-2795 email: craig.whipple@delta.com 5 E. TRANSFERABILITY OF STOCK OPTIONS Your Stock Options are not transferable otherwise than by will, by the laws of descent and distribution, or by a written designation referred to in Section 8.5 of the Plan, and are exercisable during your lifetime only by you. In the event that your Stock Options are to be exercised by any person other than you, such person shall provide appropriate proof of his or her right to exercise your Stock Options. 6 EX-10.3 7 g77552exv10w3.txt EXHIBIT 10.3 LETTER DATED MAY 28, 2002 EXHIBIT 10.3 [DELTA LOGO] LEO F. MULLIN Chairman and Chief Executive Officer May 28, 2002 Mr. Robert L. Colman Department 950 Atlanta Dear Bob: This letter will supplement the letter dated September 17, 1998 from myself to you (the "Letter") concerning your employment with Delta Air Lines, Inc. ("Delta"). We have agreed that in consideration of your continuing employment with Delta, the provision of the Letter that calls for the reduction of any nonqualified benefits from Delta by any qualified or nonqualified defined benefit retirement benefits from General Electric Company will be deleted. This will be accomplished by amending the Letter to delete the following sentence from page 4: "However, the benefit under the nonqualified plan will be reduced by the amount of any retirement benefits which you receive under any qualified or nonqualified defined benefit retirement plan of General Electric Company." Bob, we look forward to your continuing employment with Delta. If the terms outlined above reflect your understanding of our agreement, please so indicate by signing the two original letters provided. Please keep one letter for your records and return the other to Leon Piper. Sincerely, /s/ Leo F. Mullin Accepted: /s/ Robert L. Colman - --------------------------------- Robert L. Colman Date: 5/30/02 - --------------------------------- cc: Robert S. Harkey Leon A. Piper DELTA AIR LINES, INC., POST OFFICE BOX 20706, ATLANTA, GA 30320-6001 U.S.A. EX-12 8 g77552exv12.txt EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS EXHIBIT 12 DELTA AIR LINES, INC. STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS (LOSS) TO FIXED CHARGES (In millions, except ratios)

Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2002 2001 2002 2001 ------------ ------------ ---------- ---------- Earnings (loss) Loss before income taxes $(287) $ (99) $(889) $(321) Add (deduct) Fixed charges from below 330 287 645 568 Interest capitalized (4) (10) (10) (19) ----- ----- ----- ----- Earnings (loss) as adjusted $ 39 $ 178 $(254) $ 228 Fixed charges Interest expense $ 168 $ 127 $ 325 $ 247 Portion of rental expense representative of the interest factor 162 160 320 321 ----- ----- ----- ----- Total fixed charges $ 330 $ 287 $ 645 $ 568 Ratio of earnings (loss) to fixed charges (1) 0.12 0.62 (0.39) 0.40

(1) Fixed charges exceeded our adjusted earnings (loss) by $291 million and $899 million for the three and six months ended June 30, 2002, respectively, and $109 million and $340 million for the three and six months ended June 30, 2001, respectively. EX-15 9 g77552exv15.txt EXHIBIT 15 LETTER FROM DELOITTE & TOUCHE LLP EXHIBIT 15 August 12, 2002 Delta Air Lines, Inc. Atlanta, Georgia We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Delta Air Lines, Inc. and subsidiaries for the three-month and six-month periods ended June 30, 2002, as indicated in our report dated July 18, 2002; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which was included in your Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, is being incorporated by reference in Registration Statement Nos. 2-94541 and 333-65218 on Form S-3 and Registration Statement Nos. 33-30454, 33-65391, 333-16471, 333-46904, 333-48718, 333-49553, 333-73856, and 333-92291 on Form S-8. We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statements prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. /s/ Deloitte & Touche LLP Atlanta, Georgia EX-99.1 10 g77552exv99w1.txt EXHIBIT 99.1 CERTIFICATION OF THE CEO AND CFO Exhibit 99.1 August 13, 2002 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Ladies and Gentlemen: The certifications set forth below are hereby submitted to the Securities and Exchange Commission pursuant to, and solely for the purpose of complying with, Section 1350 of Chapter 63 of Title 18 of the United States Code in connection with the filing on the date hereof with the Securities and Exchange Commission of the Quarterly Report on Form 10-Q of Delta Air Lines, Inc. ("Delta") for the period ended June 30, 2002 (the "Report"). Each of the undersigned, the Chief Executive Officer and the Chief Financial Officer, respectively, of Delta, hereby certifies that, as of the end of the period covered by the Report: 1. such Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Delta. /s/ Leo F. Mullin ------------------------ Name: Leo F. Mullin Chief Executive Officer /s/ M. Michele Burns ------------------------ Name: M. Michelle Burns Chief Financial Officer GRAPHIC 11 g77552xbox.gif GRAPHIC begin 644 g77552xbox.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!PA>`/]%8T:PH,%_ M&0`H7,@0(3UF_R)&C*8N`T)P"O1(1"4@F$6+UB@0^H=*P2V$*/]94\!$P$F4 J%B/^`1!%XL>('#-EC'BSY,F0(S]& GRAPHIC 12 g77552box.gif GRAPHIC begin 644 g77552box.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!P@Z`/\)'$APX)L? M"!,J_/<#F;B'$!\:8"BNX,`#%"T*Q/BCHD:.'BV"U/AOY,>,)SN2Y&C@@,N7 &+@$$!``[ ` end -----END PRIVACY-ENHANCED MESSAGE-----

EX-4.1

                                                                     EXHIBIT 4.1



================================================================================

                                CREDIT AGREEMENT


                            DATED AS OF MAY 19, 2000


                                  BY AND AMONG


                             DELTA AIR LINES, INC.,


        EACH OF THE FINANCIAL INSTITUTIONS INITIALLY A SIGNATORY HERETO,
         TOGETHER WITH THOSE ASSIGNEES PURSUANT TO SECTION 10.6 HEREOF,


                      BAYERISCHE HYPO- UND VEREINSBANK AG,
                                NEW YORK BRANCH,
                            as Letter of Credit Bank,

                                       AND

                      BAYERISCHE HYPO- UND VEREINSBANK AG,
                                NEW YORK BRANCH,
                                    as Agent


================================================================================




                     THE INDUSTRIAL BANK OF JAPAN, LIMITED,
                             as Documentation Agent,


                        CREDIT LYONNAIS, NEW YORK BRANCH
                              as Syndication Agent

                                       AND

                      BAYERISCHE HYPO- UND VEREINSBANK AG,
                                NEW YORK BRANCH,
                                   as Arranger













                                TABLE OF CONTENTS

                                                                                                           
ARTICLE I                  DEFINITIONS............................................................................1

       Section 1.1.        Definitions............................................................................1

ARTICLE II                 AMOUNT AND TERMS OF CREDIT............................................................11

       Section 2.1.        Letter of Credit......................................................................11
       Section 2.2.        Method of Issuance of Amendments to the Letter of Credit..............................12
       Section 2.3.        Letter of Credit Reimbursement........................................................13
       Section 2.4.        Letter of Credit Bank.................................................................15
       Section 2.5.        Loans.................................................................................15
       Section 2.6.        Notice and Place of Borrowing for Loans...............................................16
       Section 2.7.        Evidence of Indebtedness..............................................................16
       Section 2.8.        Interest..............................................................................17
       Section 2.9.        Place of Payment......................................................................18
       Section 2.10.       Voluntary Prepayment..................................................................18
       Section 2.11.       Pro Rata Treatment....................................................................18
       Section 2.12.       Initial Determination of Interest Rate and Conversion of
                             Loans Between Eurodollar Rate and Base Rate.........................................18
       Section 2.13.       Failure to Borrow.....................................................................19
       Section 2.14.       Fees..................................................................................19
       Section 2.15.       Termination of Credit Facility........................................................19
       Section 2.16.       Optional Reductions of Commitment.....................................................20
       Section 2.17.       Substitution of Banks.................................................................20
       Section 2.18.       Capital Requirements..................................................................23
       Section 2.19.       Change in Control.....................................................................24
       Section 2.20.       Administration Fees...................................................................24

ARTICLE III                CONDITIONS TO EFFECTIVENESS OF AGREEMENT, FOR
                           BORROWINGS AND ISSUANCE OF LETTER OF CREDIT...........................................24

       Section 3.1.        Effectiveness, Initial Borrowing and Issuance of Letter of Credit.....................24
       Section 3.2.        All Borrowings........................................................................26

ARTICLE IV                 REPRESENTATIONS AND WARRANTIES........................................................27

       Section 4.1.        Organization; Standing, Etc...........................................................27
       Section 4.2.        Authorization; No Violation...........................................................27
       Section 4.3.        Enforceability........................................................................27
       Section 4.4.        Financial Statements..................................................................27
       Section 4.5.        Litigation............................................................................28
       Section 4.6.        Business; Status as Air Carrier.......................................................28
       Section 4.7.        Funded Debt...........................................................................28
       Section 4.8.        Title to Properties, Etc..............................................................28



                                       -i-



                                                                                                           
       Section 4.9.        Tax Returns and Payments..............................................................28
       Section 4.10.       Use of Proceeds.......................................................................29
       Section 4.11.       Governmental Regulation...............................................................29
       Section 4.12.       Subsidiaries..........................................................................29
       Section 4.13.       ERISA.................................................................................29
       Section 4.14.       Environmental Matters.................................................................29

ARTICLE V                  AFFIRMATIVE COVENANTS.................................................................30

       Section 5.1.        Insurance.............................................................................30
       Section 5.2.        Payment of Taxes......................................................................30
       Section 5.3.        Financial Statements..................................................................30
       Section 5.4.        Maintenance of Equipment..............................................................31
       Section 5.5.        Inspection............................................................................31
       Section 5.6.        Security..............................................................................31
       Section 5.7.        Notice of Any Default or Event of Default.............................................31
       Section 5.8.        ERISA Reporting Requirements..........................................................32
       Section 5.9.        Ratings...............................................................................32

ARTICLE VI                 NEGATIVE COVENANTS....................................................................32

       Section 6.1.        Liens.................................................................................32
       Section 6.2.        Debt..................................................................................33
       Section 6.3.        Mergers; Disposition of Assets........................................................33
       Section 6.4.        Leases................................................................................33

ARTICLE VII                DEFAULTS..............................................................................34

       Section 7.1.        Events of Default.....................................................................34

ARTICLE VIII               YIELD PROTECTION......................................................................36

       Section 8.1.        Increased Cost of Eurodollar Rate Loans...............................................36
       Section 8.2.        Change of Law.........................................................................38
       Section 8.3.        Funding Losses........................................................................38
       Section 8.4.        Increased Cost of Maintaining Letter of Credit........................................38
       Section 8.5.        Mandatory Repayment or Conversion on Certain Events...................................39
       Section 8.6.        Survival..............................................................................39

ARTICLE IX                 THE AGENT.............................................................................39

       Section 9.1.        Authorization and Action..............................................................39
       Section 9.2.        Agent's Reliance, Etc.................................................................40
       Section 9.3.        Agent and Affiliates..................................................................40
       Section 9.4.        Representations of the Banks..........................................................40
       Section 9.5.        Events of Default.....................................................................41
       Section 9.6.        Right to Indemnity....................................................................41
       Section 9.7.        Indemnification.......................................................................41
       Section 9.8.        Successor Agent.......................................................................41




                                     -ii-



                                                                                                           
ARTICLE X                  MISCELLANEOUS.........................................................................42

       Section 10.1.       Rights and Remedies...................................................................42
       Section 10.2.       Notice................................................................................42
       Section 10.3.       Expenses, Indemnification, Etc........................................................43
       Section 10.4.       Amendments to This Agreement and the Notes............................................45
       Section 10.5.       Agreement as to Right of Set-off, Sharing of Losses...................................45
       Section 10.6.       Successors and Assigns; Participations................................................46
       Section 10.7.       Holidays..............................................................................47
       Section 10.8.       Governing Law; Submission to Jurisdiction; Venue......................................47
       Section 10.9.       Right of Setoff.......................................................................47
       Section 10.10.      Execution and Effective Date..........................................................47
       Section 10.11.      Representations of Banks..............................................................47
       Section 10.12.      Severability..........................................................................48
       Section 10.13.      Entire Agreement......................................................................48




Exhibit A      Form of Note
Exhibit B-1    Form of Notice and Agreement Regarding Addition of Bank
Exhibit B-2    Form of Agreement of Existing Bank to Replace Replaced Bank
Exhibit C      Form of Assignment and Assumption Agreement
Exhibit D      Form of Letter of Credit
Exhibit E-1    Form of Opinion of General, Associate or Assistant General
                 Counsel
Exhibit E-2    Form of Opinion of Davis Polk & Wardwell

Schedule I     Funded Debt of the Company
Schedule II    Subsidiaries of the Company
Schedule III   Certain Excluded Guaranty Liabilities


                                     -iii-





                                CREDIT AGREEMENT

         THIS CREDIT AGREEMENT dated as of May 19, 2000 (as amended,
supplemented or otherwise modified, this "Agreement") by and among DELTA AIR
LINES, INC., a corporation organized under the laws of the State of Delaware
(the "Company"), each of the financial institutions initially a signatory hereto
together with those assignees pursuant to Section 10.6 hereof (collectively, the
"Banks" and each individually, a "Bank"), BAYERISCHE HYPO- UND VEREINSBANK AG,
New York Branch, as Letter of Credit Bank and BAYERISCHE HYPO- UND VEREINSBANK
AG, New York Branch, in its capacity as agent for the Banks (the "Agent").


                                    ARTICLE I


                                   DEFINITIONS

         Section 1.1. Definitions. In addition to terms defined elsewhere
herein, the following terms shall have the following meanings for the purposes
of this Agreement:

                  "Agent" shall mean Bayerische Hypo- und Vereinsbank AG, New
         York Branch in its capacity as agent for the Banks; provided, however,
         that if Bayerische Hypo- und Vereinsbank AG, New York Branch shall have
         resigned or been removed as Agent, then "Agent" shall mean the bank
         selected as Agent pursuant to the provisions of Section 9.8 hereof.

                  "Airline Subsidiary" shall mean Comair, Inc., Atlantic
         Southeast Airlines, Inc. and any other Subsidiary of the Company
         holding an airline operating certificate issued by the Federal Aviation
         Administration of the United States under FAR Part 121.

                  "Applicable Letter of Credit Fee" shall mean, as of any date
         of determination, the percentage rate set forth below corresponding to
         the long term senior unsecured debt rating of the Company, as rated by
         S&P (the "S&P Rating") and Moody's (the "Moody's Rating"; each of the
         S&P Rating and the Moody's Rating referred to herein as a "Rating"):


         ---------------------- ----------------- --------------- ----------------- --------------- ----------------
         Senior Unsecured       Level 1           Level 2         Level 3           Level 4         Level 5
         Debt Rating (S&P's     BBB+ or higher    BBB or Baa2     BBB- or Baa3      BB+ or Ba1      BB or lower or
         rating followed by     or Baal or                                                          Ba2 or lower
         Moody's rating)        higher
         ---------------------- ----------------- --------------- ----------------- --------------- ----------------
                                                                                     
         Applicable Letter of
         Credit Fee                  0.625%           0.750%           0.875%           1.250%          1.500%
         ---------------------- ----------------- --------------- ----------------- --------------- ----------------


         The Agent shall determine the Applicable Letter of Credit Fee from time
to time in accordance with the above table and notify the Company and the Banks
of such determination from time to time. In the event the S&P Rating and the
Moody's Rating correspond to different



levels on the above table resulting in different Applicable Letter of Credit Fee
determinations, the following provisions shall apply. In the event the S&P
Rating and the Moody's Rating differ by one level, the Applicable Letter of
Credit Fee shall be that corresponding to the higher Rating. For example, a
"BBB+" S&P Rating and a "Baa2" Moody's Rating would result in an Applicable
Letter of Credit Fee equal to 0.625%. In the event the S&P Rating and the
Moody's Rating differ by two levels, the Applicable Letter of Credit Fee shall
be that corresponding to that level which is in between the two applicable
levels. For example, a "BBB" S&P Rating and a "Ba1" Moody's Rating would result
in an Applicable Letter of Credit Fee equal to 0.875%. In the event the S&P
Rating and the Moody's Rating differ by three levels, the Applicable Letter of
Credit Fee shall be that corresponding to the level immediately below the higher
of such Ratings. For example, a "BBB+" S&P Rating and a "Ba1" Moody's Rating
would result in an Applicable Letter of Credit Fee equal to 0.750%. In the event
the S&P Rating and Moody's Rating differ by four levels (i.e. a ratings split
between level 1 and level 5), the Applicable Letter of Credit Fee shall be that
corresponding to level 4 (i.e. a "BBB+" S&P Rating and a "Ba2" Moody's Rating
would result in an Applicable Letter of Credit Fee equal to 1.25%).

         In the event only one rating agency exists or continues rating the
Company's long term senior unsecured debt, such agency's rating shall be used
for purposes of the above table. In the event: (i) neither agency exists or
continues rating the Company's long term senior unsecured debt or (ii) the
Company no longer has any outstanding long term senior unsecured debt to be
rated, the Applicable Letter of Credit Fee for the first 90 days after such
occurrence shall be the Applicable Letter of Credit Fee in effect as determined
above immediately prior to such occurrence. During such 90-day period, the Agent
and the Company shall negotiate in good faith to agree upon a new pricing grid
or other appropriate pricing terms. Any such new grid or pricing terms shall be
approved by the Banks. In the event the Agent, the Company and the Banks cannot
agree upon such new pricing grid or pricing terms by the end of such 90-day
period, the Applicable Letter of Credit Fee shall be that corresponding to level
5 of the above table for the remainder of the term of the Agreement. Any
necessary adjustment in the Applicable Letter of Credit Fee pursuant to the
terms hereof shall become effective immediately upon any change in Rating.


                                      -2-


                  "Applicable Margin" shall mean, with respect to any Loan and
         for any day during which such Loan is outstanding, the percentage
         amount set forth in the table below opposite the applicable period
         during which such day occurs and under the rating category applicable
         to the Company's S&P Rating and Moody's Rating for such day:



         ---------------------- ----------------- --------------- ----------------- ---------------- ---------------
         Senior Unsecured       Level 1           Level 2         Level 3           Level 4          Level 5
         Debt Ratings (S&P's
         rating followed by     BBB+ or higher    BBB or Baa2     BBB- or Baa3      BB+ or Ba1       BB or lower
         Moody's rating)        or Baa1 or                                                           or Ba2 or
                                higher                                                               lower
         ---------------------- ------------------------------------------------------------------------------------
         For Eurodollar Rate
         Loans
         ---------------------- ------------------------------------------------------------------------------------
                                                                                      
         Up to and including          .75%            .875%            1.00%            1.375%           1.625%
         90 days
         ---------------------- ----------------- --------------- ----------------- ---------------- ---------------
         91 days to and              1.00%            1.125%           1.25%            1.625%           1.875%
         including 180 days
         ---------------------- ----------------- --------------- ----------------- ---------------- ---------------
         More than 180 days          1.25%            1.375%           1.50%            1.875%           2.125%
         ---------------------- ------------------------------------------------------------------------------------
         For Base Rate Loans
         ---------------------- ------------------------------------------------------------------------------------
         Up to and including            0%                0%              0%             .375%            .625%
         90 days
         ---------------------- ----------------- --------------- ----------------- ---------------- ---------------
         91 days to and                 0%             .125%            .25%             .625%            .875%
         including 180 days
         ---------------------- ----------------- --------------- ----------------- ---------------- ---------------
         More than 180 days           .25%             .375%            .50%             .875%           1.125%
         ---------------------- ----------------- --------------- ----------------- ---------------- ---------------


         The Agent shall determine the Applicable Margin from time to time in
accordance with the above table and notify the Company and the Banks of such
determination from time to time. In the event the S&P Rating and the Moody's
Rating correspond to different levels on the above table resulting in different
Applicable Margin determinations, the following provisions shall apply. In the
event the S&P Rating and the Moody's Rating differ by one level, the Applicable
Margin shall be that corresponding to the higher Rating. For example, a "BBB+"
S&P Rating and a "Baa2" Moody's Rating would result in an Applicable Margin
equal to 1.00% for a Loan that has been outstanding for 95 days and which is
then bearing interest at a Eurodollar Rate. In the event the S&P Rating and the
Moody's Rating differ by two levels, the Applicable Margin shall be that
corresponding to that level which is in between the two applicable levels. For
example, a "BBB" S&P Rating and a "Bal" Moody's Rating would result in an
Applicable Margin equal to 1.25% for a Loan that has been outstanding for 95
days and which is then bearing interest at a Eurodollar Rate. In the event the
S&P Rating and the Moody's Rating differ by three levels, the Applicable Margin
shall be that corresponding to the level immediately below the higher of such
Ratings. For example, a "BBB+" S&P Rating and a "Ba1" Moody's Rating


                                      -3-


would result in an Applicable Margin equal to 1.125% for a Loan that has been
outstanding for 95 days and which is then bearing interest at a Eurodollar Rate.
In the event the S&P Rating and the Moody's Rating differ by four levels (i.e. a
ratings split between level 1 and level 5), the Applicable Margin shall be that
corresponding to level 4 (i.e. a "BBB+" S&P Rating and a "Ba2" Moody's Rating
would result in an Applicable Margin equal to 1.625% for a Loan that has been
outstanding for 95 days and which is then bearing interest at a Eurodollar
Rate.)

         In the event only one rating agency exists or continues rating the
Company's long term senior unsecured debt, such agency's rating shall be used
for purposes of the above table. In the event: (i) neither agency exists or
continues rating the Company's long-term senior unsecured debt or (ii) the
Company no longer has any outstanding long term senior unsecured debt to be
rated, the Applicable Margin for the first 90 days after such occurrence shall
be the Applicable Margin in effect as determined using the foregoing provisions
immediately prior to such occurrence. During such 90-day period, the Agent and
the Company shall negotiate in good faith to agree upon a new pricing grid or
other appropriate pricing terms. Any such new grid or pricing terms shall be
approved by the Banks. In the event the Agent, the Company and the Banks cannot
agree upon such new pricing grid or pricing terms by the end of such 90-day
period, the Applicable Margin shall be that corresponding to level 5 of the
above table for the remainder of the term of this Agreement. Any necessary
adjustment in the Applicable Margin pursuant to the terms hereof shall become
effective immediately upon any change in a Rating.

                  "Available Commitment" shall mean, on any date, the Total
         Commitments of the Banks in effect on such date minus the sum of: (i)
         the Issued Amount of the Letter of Credit on such date, (ii) the
         aggregate outstanding principal amount of Loans on such date, and (iii)
         any Reimbursement Obligations unpaid on such date.

                  "Base Rate" shall mean for any day the greater of:

                  (i)      the rate of interest announced by Bayerische Hypo-
         und Vereinsbank AG, New York Branch from time to time as its prime
         commercial rate, or equivalent, for United States Dollar loans to
         borrowers located in the United States, with any change in the Base
         Rate resulting from a change in such prime commercial rate to be
         effective as of the date of the relevant change in such prime
         commercial rate; and

                  (ii)     the sum of (x) the rate for that day set forth
         opposite the caption "Federal Fund (effective)" in the daily
         statistical release designated as "Composite 3:30 P.M. Quotations for
         U.S. Government Securities," or any successor publication, published by
         the Federal Reserve Bank of New York or, if such publication shall be
         suspended or terminated, the rate determined by the Agent (based on
         quotations received from two or more Federal funds dealers of
         recognized standing) to be the prevailing rate per annum (rounded
         upward, if necessary, to the nearest 1/100 of 1%) at approximately 9:00
         a.m. (New York time) (or as soon thereafter as is practicable) on such
         day for the purchase at face value of overnight Federal funds in an
         amount approximately equal to the principal amount owed to Bayerische
         Hypo- und Vereinsbank AG, New York Branch for which such rate is being
         determined, plus (y) 1/2 of 1% (0.50%).


                                      -4-


                  "Base Rate Loan" shall mean any Loan which bears interest at
         the Base Rate plus the Applicable Margin.

                  "Business Day" shall mean any day during which the Main Office
         of the Agent is scheduled to be open for the conduct of its banking
         business and during which banks located in New York, New York are open
         for the conduct of banking business.

                  "Change in Control" shall be deemed to have occurred if (i)
         any Person or two or more Persons acting in concert shall have acquired
         beneficial ownership (within the meaning of Rule 13d-3 of the
         Securities and Exchange Commission under the Securities and Exchange
         Act of 1934, as amended), directly or indirectly, of securities of the
         Company (or other securities convertible into such securities)
         representing fifty percent (50%) or more of the combined voting power
         of all securities of the Company entitled to vote in the election of
         directors, other than securities having such power only by reason of
         the happening of a contingency, or (ii) during any period of up to
         twelve (12) consecutive months, commencing before or after the date of
         this Agreement, individuals who at the beginning of such twelve (12)
         month period were directors of the Company shall cease for any reason
         (other than death, mental or physical disability, or retirement) to
         constitute a majority of the board of directors of the Company.

                  "Change in Control Collateral" shall have the meaning set
         forth in Section 2.19.

                  "Commitment" of any Bank shall mean the amount set forth
         opposite such Bank's name on the appropriate signature page hereof or,
         in the case of a Bank that becomes a Bank pursuant to an assignment,
         the amount of the assignor's Commitment assigned to such Bank, in
         either case as the same may be reduced or increased from time to time
         in accordance with the terms of this Agreement.

                  "Convertible Subordinated Debt" shall mean any debt of the
         Company convertible into shares of any or all classes of stock of the
         Company and containing, or issued under agreements or indentures
         containing, provisions effectively subordinating the same to the debt
         created by this Agreement.

                  "Credit Facility" shall mean the credit facility extended to
         the Company by the Banks pursuant hereto.

                  "Current Debt" shall mean any obligation for borrowed money
         (including notes payable and drafts accepted representing extensions of
         credit whether or not representing obligations for borrowed money)
         payable on demand or within a period of one year from the date of the
         creation thereof.

                  "Default" shall mean any of the events specified in paragraphs
         (a) through (i) of Section 7.1 hereof, whether or not there has been
         satisfied any requirement for giving of notice, lapse of time or the
         happening of any other condition.

                  "Dollar" and "$" shall mean lawful money of the United States
         of America.


                                      -5-


                  "Downgrade Collateral Account" shall have the meaning set
         forth in Section 2.17.1.

                  "Downgraded Bank" shall have the meaning set forth in Section
         2.17.1(b).

                  "Drawing" shall mean a drawing by the beneficiary under the
         Letter of Credit.

                  "Effective Date" shall mean the date upon which: (i) all of
         the conditions of Section 3.1 hereof have been satisfied and (ii) the
         Company has paid to each Bank the fee required by Section 3.1(j)
         hereof.

                  "Equity" shall mean the sum of: (i) the par value (or value
         stated on the books of the Company) of the capital stock of all classes
         of the Company (other than the Company's Series B ESOP Convertible
         Preferred Stock), (ii) the amount of additional paid-in capital and
         reinvested earnings of the Company, (iii) the amount of taxes deferred
         and unamortized investment tax credits under Sections 167 and 168 of
         the Internal Revenue Code or similar provisions of any applicable tax
         law and carried on the balance sheet under those captions, (iv) the
         amount of any gain on the sale and leaseback of assets which is
         deferred pursuant to GAAP, (v) the principal amount of any Convertible
         Subordinated Debt outstanding, (vi) the amount of any postretirement
         benefits (other than pensions) of the Company accrued in accordance
         with the Statement of Financial Accounting Standards No. 106 (Financial
         Accounting Standard Board 1990) and GAAP and classified as long term
         liabilities on the balance sheet of the Company, and (vii) the
         difference between (a) the stated and liquidation value of the
         Company's Series B ESOP Convertible Preferred Stock and (b) the
         unearned compensation under the Company's employee stock ownership
         plan; minus (viii) the unrealized loss on noncurrent marketable equity
         securities, net of any deferred tax benefits, and minus (ix) treasury
         stock at cost.

                  "ERISA" shall mean the Employee Retirement Income Security Act
         of 1974, as amended from time to time and any successor statute.

                  "ESOP Notes" shall mean the $290,194,981 original aggregate
         principal amount of Series C Guaranteed ESOP Notes due 2009 issued
         pursuant to the several Note Purchase Agreements, each dated February
         22, 1990, and each as amended by Amendment No. 1 thereto dated as of
         July 27, 1999, among Fidelity Management Trust Company, a Massachusetts
         corporation, in its capacity as trustee of the Delta Family-Care
         Savings Plan and the trust established thereunder, as issuer, the
         Company, as Guarantor, and the respective purchasers named therein of
         which $290,194,981 in aggregate principal amount are outstanding on the
         Effective Date.

                  "Eurodollar Business Day" shall mean any day on which banks
         are scheduled to be open for business and quoting interest rates for
         Dollar deposits on the London interbank market and which is also a
         Business Day.


                                      -6-


                  "Eurodollar Lending Office" shall mean with respect to each
         Bank the office of such Bank identified as such from time to time to
         the Agent and the Company as the office of such Bank or of its
         affiliate at which the Eurodollar Rate Loans held by such Bank are to
         be maintained.

                  "Eurodollar Rate" shall mean a rate per annum determined by
         Agent pursuant to the following formula:

                           Eurodollar Rate = LIBOR plus Applicable Margin.

                  "Eurodollar Rate Loan" shall mean any Loan which bears
         interest at the Eurodollar Rate.

                  "Event of Default" shall mean any one of the events specified
         in paragraphs (a) through (i) of Section 7.1 hereof, provided that any
         requirement for notice or lapse of time or other condition contained
         therein has been satisfied.

                  "Federal Funds Rate" shall mean the fluctuating interest rate
         per annum described in clause (ii) of the definition of Base Rate in
         Section 1.1 hereof.

                  "Fee Letter" shall mean the letter from Bayerische Hypo- und
         Vereinsbank AG, New York Branch, to the Company dated April 28, 2000 as
         modified by the May 12, 2000 letter supplemental thereto.

                  "Funded Debt" shall mean any obligation for borrowed money or
         the deferred purchase price of property, or any obligation arising
         under a capital lease, other than Convertible Subordinated Debt,
         payable more than one year from the date of the creation thereof which,
         under GAAP in effect from time to time, is shown on the balance sheet
         of the obligor as a liability; provided that any obligation shall be
         treated as Funded Debt, regardless of its term, if such obligation is
         renewable pursuant to the terms thereof or of a revolving credit or
         similar agreement effective for more than one (1) year after the date
         of the creation of such obligation or may be payable out of the
         proceeds of a similar obligation pursuant to the terms of such
         obligation or of any such agreement.

                  "GAAP" shall mean generally accepted accounting principles in
         the United States of America applied on a consistent basis, as in
         effect from time to time.

                  "Immediate Replacement Event" shall mean a change in any law,
         rule, or regulation, or any change in the interpretation or
         administration thereof, or, a new law, rule, or regulation, having any
         of the consequences specified in Section 8.1 hereof.

                  "Indenture" shall mean the Indenture of Trust dated as of
         August 1, 1993 among the Trustee, the Company and Fidelity Management
         Trust Company, ESOP Trustee relating to the ESOP Notes, as amended or
         supplemented from time to time.


                                      -7-


                  "Interest Period" shall mean for each Eurodollar Rate Loan,
         the period beginning on the date of such Loan and ending one month
         later and thereafter the period beginning on a date of conversion
         thereof or on the last day of an immediately preceding Interest Period
         for such Loan and ending one, two, three, or six months later, as
         specified in the notice given by the Company to the Agent; provided,
         however, that if the last day of any Interest Period would fall on a
         day which is not a Eurodollar Business Day that Interest Period shall
         be extended to the next succeeding day which is a Eurodollar Business
         Day, unless the result of such extension would be to carry such
         Interest Period to the next succeeding calendar month in which event
         such Interest Period shall end on the immediately preceding Eurodollar
         Business Day, further provided that any Interest Period that would
         extend beyond the Termination Date shall end on such date.

                  "Interest Rate" shall mean:

                           (a)      With respect to a Eurodollar Rate Loan, the
                  Eurodollar Rate; and

                           (b)      With respect to a Base Rate Loan, the Base
                  Rate plus the Applicable Margin.

                  "Issued Amount" shall mean the amount available to be drawn by
         the beneficiary under the Letter of Credit outstanding under this
         Agreement from time to time, as such amount may be increased or reduced
         from time to time in accordance with the terms of the Letter of Credit
         and this Agreement.

                  "Letter of Credit" shall mean the irrevocable transferable
         direct pay letter of credit issued by the Letter of Credit Bank for the
         account of the Company in favor of the Trustee, in the form of Exhibit
         D hereto, as amended from time to time, and any letter of credit issued
         by the Letter of Credit Bank in substitution therefor, in each case in
         support of the ESOP Notes.

                  "Letter of Credit Bank" shall mean Bayerische Hypo- und
         Vereinsbank AG, acting by and through its New York Branch or any other
         Bank under this Agreement approved by the Company that agrees, pursuant
         to documentation in form and substance satisfactory to the Agent and
         the Company, to issue the Letter of Credit hereunder.

                  "LIBOR" shall mean, with respect to any Interest Period for
         Eurodollar Rate Loans, the offered rate in the London interbank market
         for deposits in United States dollars of amounts equal or comparable to
         the principal amount of such Eurodollar Rate Loans offered for a term
         comparable to such Interest Period, as currently shown on the Reuters
         Screen LIBO page as of 11:00 a.m., GMT, two Eurodollar Business Days
         prior to the first day of such Interest Period; provided, however, that
         (A) if more than one offered rate as described above appears on the
         Reuters Screen LIBO page, the rate used to determine LIBOR will be the
         arithmetic average (rounded upward, if necessary, to the next higher
         1/1,000 of 1%) of such offered rates, or (B) if no such offered rates
         appear, the rate used for such Interest Period will be the arithmetic
         average (rounded upward, if necessary, to the next higher 1/1,000 of
         1%) of rates quoted by the Reference Banks at


                                      -8-


         approximately 10:00 a.m., New York time, two Eurodollar Business Days
         prior to the first day of such Interest Period for deposits in United
         States dollars offered to leading European banks for a period
         comparable to such Interest Period in an amount comparable to the
         principal amount of such Eurodollar Rate Loans. If the Agent ceases to
         use the Reuters Screen LIBO page for determining interest rates based
         on eurodollar deposit rates, a comparable internationally recognized
         interest rate reporting service shall be used to determine such offered
         rates.

                  "Loans" shall mean, collectively, the Eurodollar Rate Loans
         and the Base Rate Loans.

                  "Main Office" of the Agent shall be 150 East 42nd Street, New
         York, New York 10017.

                  "Majority Banks" shall mean, as of any date, Banks on such
         date having Credit Exposures (as defined below) aggregating more than
         50% of the aggregate Credit Exposures of all the Banks on such date.
         For purposes of the preceding sentence, the amount of the "Credit
         Exposure" of each Bank shall be equal to: (i) prior to the maturity of
         the Loans or the occurrence of an Event of Default and the acceleration
         of the Loans pursuant to the terms hereof, the amount of such Bank's
         Commitment and (ii) after an Event of Default has occurred and the
         Loans have been accelerated or have matured pursuant to the terms
         hereof, the aggregate principal amount of Loans and Reimbursement
         Obligations (including through participation interests in Reimbursement
         Obligations) owing to such Bank.

                  "Moody's" shall mean Moody's Investors Service, Inc.

                  "Moody's Rating" has the meaning set forth in the definition
         of Applicable Letter of Credit Fee.

                  "Notes" shall have the meaning set forth in Section 2.7
         hereof.

                  "Obligations" shall mean all fees payable hereunder, all
         obligations of the Company to pay principal or interest on Loans and
         Reimbursement Obligations, and all other payment obligations of the
         Company arising under or in relation to this Agreement or any Letter of
         Credit.

                  "Officer's Certificate" shall mean a certificate signed by the
         Chairman of the Board, the President, the Chief Financial Officer, the
         Treasurer or any Vice President of Finance of the Company.

                  "Orderly Replacement Event" shall mean as to any Eurodollar
         Rate Loan, the determination by the Agent not later than two (2)
         Eurodollar Business Days prior to the first day of any Interest Period
         that: (a) for any reason whatsoever rates are not quoted for the
         offering of Dollars in the London interbank market for deposit for a
         period comparable to such Interest Period; or (b) the quoted rate for
         purposes of computing the


                                      -9-


         rate of interest on the Eurodollar Rate Loans does not accurately
         reflect the funding cost to the Banks of making or maintaining such
         Loans.

                  "Person" shall mean and include an individual, a partnership,
         a joint venture, an estate, a corporation, a trust, an unincorporated
         organization, a limited liability company, and a government or any
         department or agency or political subdivision thereof.

                  "Rating" has the meaning set forth in the definition of
         Applicable Letter of Credit Fee.

                  "Reference Banks" shall mean Bayerische Hypo- und Vereinsbank
         AG, New York Branch, The Chase Manhattan Bank and Citibank, N.A., and
         each of their respective successors.

                  "Reimbursement Obligation" shall mean the obligation of the
         Company to reimburse the Agent for any Drawing pursuant to Section
         2.3(c) hereof.

                  "Required Number" shall mean in the case of notices to the
         Agent relating to Loans hereunder: (a) relative to borrowings,
         prepayments, elections of, and conversions into, the Eurodollar Rate,
         selections of Interest Periods and other transactions in respect of
         Eurodollar Rate Loans, not less than three (3) Eurodollar Business
         Days; and (b) relative to all transactions in respect to Base Rate
         Loans, not less than one Business Day.

                  "S&P" shall mean Standard & Poor's Ratings Group, a division
         of The McGraw-Hill Companies, Inc.

                  "S&P Rating" has the meaning set forth in the definition of
         Applicable Letter of Credit Fee.

                  "Subsidiary" shall mean any corporation, association or other
         business entity, a majority (by number of votes) of the outstanding
         stock or other ownership interest of which is, at the time at which any
         determination is being made, owned by the Company either directly or
         through Subsidiaries.

                  "Termination Date" shall mean May 19, 2003 unless the Credit
         Facility is earlier terminated pursuant to the applicable provisions of
         this Agreement.

                  "Total Commitments of the Banks" shall mean the aggregate of
         each Bank's Commitment which on the date hereof total $420,963,733.

                  "Trustee" shall mean Wilmington Trust Company, as Trustee
         under the Indenture.


                                      -10-


                                   ARTICLE II


                           AMOUNT AND TERMS OF CREDIT

         Section 2.1. Letter of Credit. (a) Subject to the terms and conditions
of this Agreement, the Letter of Credit Bank, on behalf of the Banks, agrees to
issue and amend (including without limitation, to extend or renew) for the
account of the Company, the Letter of Credit as may be requested from time to
time by the Company, from and including the Effective Date to the Termination
Date, up to a maximum Issued Amount at any one time outstanding equal to the
Total Commitments of the Banks minus the sum of (i) the aggregate principal
amount of Loans outstanding, plus (ii) the aggregate principal amount of
Reimbursement Obligations outstanding; provided, however, that the expiration
date of the Letter of Credit shall not extend beyond the Termination Date.

         (b)      Each Bank severally agrees that it shall be absolutely,
unconditionally and irrevocably liable, without regard to the occurrence of any
Default or Event of Default or any condition precedent whatsoever, to the extent
of such Bank's pro rata share of the Total Commitments of the Banks, to
reimburse the Letter of Credit Bank for the amount of each Drawing paid by the
Letter of Credit Bank under the Letter of Credit to the extent such amount is
not reimbursed by the Company in accordance with Section 2.3 hereof. Each Bank's
obligation to reimburse the Letter of Credit Bank pursuant to this Section
2.1(b) shall not be affected by any circumstances, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which such Bank may have against the Letter of Credit Bank, the Company, any
direct or indirect beneficiary of the Letter of Credit, the Agent or any other
Person whatsoever; (ii) the occurrence or continuance of a Default or an Event
of Default; (iii) any adverse change in the condition (financial or otherwise)
of the Company; (iv) any breach of this Agreement by the Company, the Agent, the
Letter of Credit Bank or any other Bank; or (v) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing;
provided, however, that the Banks shall not be obligated to reimburse the Letter
of Credit Bank pursuant to this Section 2.1(b) with respect to the Letter of
Credit if (i) the Letter of Credit Bank has made payment pursuant to a Drawing
with respect to the Letter of Credit and the making of such payment constituted
gross negligence or willful misconduct on the part of the Letter of Credit Bank
or (ii) the Letter of Credit Bank increases the Issued Amount of the Letter of
Credit (other than as a result of the automatic reinstatement provisions
contained therein) after an Event of Default has been declared by any Bank or
the Majority Banks pursuant to Article VII hereof and written notice thereof has
been received by the Letter of Credit Bank or after an Event of Default
specified in Section 7.1(c) hereof has occurred. Each Bank's obligations to
reimburse the Letter of Credit Bank shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any Reimbursement Obligation of the Company is rescinded or must otherwise be
restored or returned by the Letter of Credit Bank upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company or upon or
a result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Company or any substantial part of its
property, or otherwise, all as though such payment had not been made. Upon
receipt of a notice of its obligation to reimburse the Letter of Credit Bank
prior to 11:00 a.m. (New York time) on a Business Day, a Bank shall make such
reimbursement on such Business Day; if such notice is


                                      -11-


received after 11:00 a.m. (New York time), reimbursement shall be due on the
next Business Day. The failure of any Bank to honor its obligations hereunder
shall not relieve any other Bank of its duty to honor its obligations hereunder.
Upon the written request of a Bank, the Letter of Credit Bank shall promptly
deliver to such Bank a copy of the Letter of Credit and copies of all material
documents delivered to the Letter of Credit Bank in connection with any Drawing
with respect to the Letter of Credit.

         (c)      Each payment made by a Bank to the Letter of Credit Bank
pursuant to paragraph (b) above shall be treated as the purchase by such Bank of
a participating interest in the Company's Reimbursement Obligation under Section
2.3 hereof in an amount equal to such payment. Each Bank, so long as it has made
the payment required to be made by it pursuant to Section 2.1(b) hereof, shall
share in accordance with its pro rata share of the Total Commitments of the
Banks in any interest which accrues pursuant to Section 2.3(b) hereof. All
amounts recovered by the Agent hereunder and which are applied by the Agent to
the Reimbursement Obligations of the Company under Section 2.3 hereof shall be
distributed by the Agent to the Banks who have made the payments required to be
made by them pursuant to Section 2.1(b) hereof pro rata in accordance with their
respective share of the Total Commitments of the Banks.

         (d)      If and to the extent that any Bank shall fail to make
available to the Letter of Credit Bank the amount required to be paid by such
Bank pursuant to Section 2.1(b) hereof, the Letter of Credit Bank shall be
subrogated to the rights of such Bank under this Agreement to the extent of such
failure and shall thereafter (until such Bank shall make such amount available
to the Letter of Credit Bank) be entitled to receive all amounts owing to such
Bank hereunder and to the percentage of voting rights of such Bank under this
Agreement equal to the percentage the amount such Bank failed to pay bears to
the Issued Amount of the Letter of Credit and the aggregate unpaid principal
amount of all outstanding Reimbursement Obligations and Loans at such time. If
any Bank fails to reimburse the Letter of Credit Bank as provided in Section
2.1(b) hereof or delays in making such payment, such unreimbursed amount shall
bear interest at a rate per annum equal to (i) from the date due to the date
three Business Days after such payment is due, the Federal Funds Rate and (ii)
from the date three Business Days after the date such payment is due to the date
such payment is made, the Base Rate in effect for each such day plus 2%.

         Section 2.2. Method of Issuance of Amendments to the Letter of Credit.

         (a)      Notice of Amendment. The Company shall give the Agent written
notice or telephonic notice confirmed in writing at least three Business Days
prior to the requested date of an amendment to the Letter of Credit, and the
Agent shall give immediate notice thereof to the Letter of Credit Bank and to
each Bank.

         (b)      Issuance. Provided the Company has given the notice prescribed
by Section 2.2(a) and subject to the other terms and conditions of this
Agreement including, without limitation, Section 2.1(a) hereof, the Letter of
Credit Bank shall issue the requested amendment on the date requested by the
Company on behalf of the Banks for the benefit of the stipulated beneficiary and
shall deliver the original of such amendment to the beneficiary. The Letter of
Credit Bank


                                      -12-


shall deliver a copy of each amendment to the Letter of Credit to the Company
within a reasonable time after the date of issuance thereof.

         (c)      Reporting to Banks. The Agent shall provide such information
concerning the Letter of Credit as any Bank shall reasonably request. The Agent
shall promptly deliver to each Bank copies of the Letter of Credit as issued
hereunder and any amendment thereto and notice of any change in the Issued
Amount (other than a temporary decrease resulting from a Drawing thereunder to
pay accrued interest on the ESOP Notes). Other than as set forth in this
paragraph (c), the Agent shall have no duty to notify the Banks regarding the
issuance or other matters regarding the Letter of Credit issued hereunder. The
failure of the Agent to perform its requirements under this paragraph (c) shall
not relieve the Banks' reimbursement obligations under Section 2.1(b) hereof.

         Section 2.3.    Letter of Credit Reimbursement.

         (a)      Notice of Drawing. The Letter of Credit Bank shall promptly
notify the Company, the Agent and each Bank by telephone, telecopy, telex or
other telecommunication of any Drawing under the Letter of Credit and of the
anticipated payment date. On the payment date, the Letter of Credit Bank shall
confirm to the Company, the Agent and each Bank by telephone or telecopy that
payment of the Drawing is to be made by the Letter of Credit Bank on such date.

         (b)      Payments. The Company hereby agrees absolutely and
unconditionally to pay to the Agent for the account of the Letter of Credit
Bank, in the manner provided in Section 2.3(c):

                  (i)      On each date a Drawing is paid, an amount equal to
         the amount paid by the Letter of Credit Bank under the Letter of
         Credit; and

                  (ii)     If any Drawing shall be reimbursed to the Agent after
         2:00 p.m. (New York time) on the payment date, interest on any and all
         amounts required to be paid pursuant to clause (i) of this Section
         2.3(b) from and after the due date thereof to the date five days after
         such payment is due, payable on demand, at an annual rate of interest
         equal to the Base Rate and from the date five days after the due date
         thereof until payment in full, payable on demand, at an annual rate of
         interest equal to the Base Rate plus 2.00%.

         (c)      Method of Reimbursement. The Company shall reimburse the Agent
(which shall immediately forward such funds, in the form received, to the Letter
of Credit Bank) for each Drawing under the Letter of Credit in the following
manner:

                  (i)      the Company shall immediately reimburse the Agent in
         accordance with Section 2.9 hereof; or

                  (ii)     (A) if the Company has not reimbursed the Agent
         pursuant to subparagraph (i) above and (B) the conditions set forth in
         Section 3.2 hereof have been fulfilled and (C) sufficient funds are
         available within the limits of the amount of Loans that may be borrowed
         as provided in Section 2.5 hereof, with the proceeds of Loans; or


                                      -13-


                  (iii)    if an Event of Default has occurred and is
         continuing, the Agent may debit any deposit account of the Company
         maintained with the Agent and appropriate and apply an amount of funds
         in such account equal to the Reimbursement Obligations outstanding at
         such time in satisfaction of the Company's obligations set forth in
         subparagraph (i) above.

         (d)      Loans to Fund Drawings. Upon any Drawing, the Agent shall
notify the Banks if the Company has elected to reimburse the Letter of Credit
Bank using the proceeds of Loans. Upon receipt of such notice and if the
conditions set forth in subparagraph (c)(ii) above have been satisfied, each
Bank agrees to deliver to the Agent its pro rata share of the amount of Loans
necessary to reimburse the Letter of Credit Bank for any payment made by the
Letter of Credit Bank pursuant to such Drawing not later than one Business Day
after receipt of such notice. Any funds delivered to the Agent under this
paragraph (d) shall be delivered in the manner set forth in the fourth sentence
of Section 2.6 hereof.

         (e)      Obligations Absolute. The obligations of the Company under
this Article II (and, if applicable in the event of the failure of the Company
to so reimburse the Letter of Credit Bank, subject to the proviso in the second
sentence of Section 2.1(b) hereof, the obligations of the Banks under this
Article II) shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including, without limitation, the following
circumstances:

                  (i)      any lack of validity or enforceability of all or any
         of this Agreement, the Notes, the ESOP Notes, the Indenture and other
         related documents and any other agreements relating to the Letter of
         Credit (the "Related Documents");

                  (ii)     any amendment or waiver of or any consent to or
         departure from the terms of the Related Documents;

                  (iii)    the existence of any claim, set-off, defense or other
         rights which the Company may have at any time against any direct or
         indirect beneficiary of the Letter of Credit, any Bank, the Letter of
         Credit Bank, the Agent or any other Person, whether in connection with
         the Related Documents or any unrelated transaction;

                  (iv)     any statement or any other document presented under
         the Letter of Credit proving to be forged, fraudulent, invalid or
         insufficient in any respect or any statement therein being untrue or
         inaccurate in any respect whatsoever;

                   (v) payment by the Letter of Credit Bank under the Letter of
         Credit against presentation of a sight draft or certificate which does
         not comply with the terms of the Letter of Credit, provided that such
         payment shall not have constituted gross negligence or willful
         misconduct of the Letter of Credit Bank; and

                  (vi)     any other circumstance or happening whatsoever,
         whether or not similar to any of the foregoing, provided that such
         other circumstance or happening shall not


                                      -14-


         have been the result of gross negligence or willful misconduct of the
         Letter of Credit Bank.

         Section 2.4.    Letter of Credit Bank.

         (a)      Liability of Letter of Credit Bank to Other Banks. The Letter
of Credit Bank shall not be liable to any Bank or to any other participant in
the Letter of Credit for any error in judgment or for any action taken or
omitted to be taken by the Letter of Credit Bank except for actions of the
Letter of Credit Bank constituting gross negligence or willful misconduct.

         (b)      Liability of the Letter of Credit Bank to Company/Banks. The
Company assumes all risks of the acts or omissions of any beneficiary of the
Letter of Credit with respect to its use of the Letter of Credit. Neither the
Letter of Credit Bank, any Bank nor any of their respective officers or
directors shall be liable or responsible to the Company or the Banks for:

                  (i)      the use which may be made of the Letter of Credit or
         for any acts or omissions of any beneficiary in connection therewith;

                  (ii)     the validity, sufficiency or genuineness of documents
         presented under the Letter of Credit even if such documents should in
         fact prove to be in any or all respects invalid, insufficient,
         fraudulent or forged;

                  (iii)    payment by the Letter of Credit Bank against
         presentation of documents which do not comply with the terms of the
         Letter of Credit, including failure of any documents to bear any
         reference or adequate reference to the Letter of Credit; or

                  (iv)     any other circumstances whatsoever in making or
         failing to make payment under the Letter of Credit;

except only that the Company (and, if applicable, the Banks) shall have a claim
against the Letter of Credit Bank to the extent, but only to the extent, of any
direct, as opposed to consequential, damages suffered by the Company (and, if
applicable, the Banks) which were caused by (i) the Letter of Credit Bank's
willful misconduct or gross negligence in determining whether documents
presented under the Letter of Credit comply with the terms of the Letter of
Credit or (ii) the Letter of Credit Bank's willful misconduct or gross
negligence in failing to pay under the Letter of Credit after the presentation
to it by the beneficiary of the Letter of Credit of a sight draft and
certificate strictly complying with the terms and conditions of the Letter of
Credit.

         Section 2.5. Loans. (a) Subject to the terms and conditions hereof,
during the period from the Effective Date to the Termination Date, each Bank
severally and not jointly agrees to make Loans to the Company in an aggregate
principal amount at any one time outstanding up to, but not exceeding, such
Bank's Commitment; provided, however, that any given borrowing of Loans made
pursuant to this Section 2.5 shall not exceed the Available Commitment at the
time of such borrowing; provided, further that Loans shall only be available to
the Company, and the


                                      -15-


Company agrees that the proceeds of the Loans shall be applied solely, to pay
concurrently with a Drawing under the Letter of Credit the related Reimbursement
Obligation.

         (b)      Each Loan shall mature and become due and payable by the
Company on the date occurring one year after the date the related Drawing under
the Letter of Credit was paid or, if earlier, on the Termination Date.

         Section 2.6. Notice and Place of Borrowing for Loans. The Company shall
give written, facsimile or telephonic (confirmed immediately in writing) notice
to the Agent, such notice to be given not later than 11:00 a.m. New York time on
a Business Day which is at least the Required Number of days prior to each
borrowing of Loans and to contain the date of such borrowing, the amount of such
borrowing, the Interest Rate option selected, and, where applicable, the length
of the Interest Period. Upon receiving notice from the Company, the Agent shall
promptly give written or facsimile notice to each Bank, such notice to contain
the date of such borrowing, the amount to be borrowed from such Bank, the
Interest Rate option selected, and, where applicable, the length of the Interest
Period. Funds are to be disbursed pursuant to this Agreement at the Main Office
of the Agent. Not later than 11:00 a.m. New York time on the date of borrowing
of Loans as specified in the notice from the Agent to the Banks, each Bank shall
have made available at the Main Office of the Agent, in immediately available
funds, the amount of Loans to be advanced by such Bank, and the Agent shall
immediately pay such funds to the Letter of Credit Bank. Unless the Agent shall
have received notice from a Bank prior to the date of any such borrowing that
such Bank will not make available to the Agent such Bank's ratable portion of
such borrowing, the Agent may assume that such Bank has made such portion
available to the Agent on the date of such borrowing in accordance with this
Section 2.6, and the Agent may, in reliance upon such assumption, make available
to the Letter of Credit Bank on such date a corresponding amount. If and to the
extent such Bank shall not have made such ratable portion available to the
Agent, such Bank and the Company severally agree to repay to the Agent
immediately upon demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the Letter
of Credit Bank and until the date such amount is repaid to the Agent, at (i)
with respect to the Company, the interest rate applicable at the time to the
type of Loan comprising such borrowing, or (ii) with respect to the Bank, at the
applicable Federal Funds Rate. If such Bank shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Bank's Loan as
part of such borrowing for purposes of this Agreement.

         Section 2.7. Evidence of Indebtedness. (a) Each Bank shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Company to such Bank resulting from the Reimbursement
Obligations and each Loan made by such Bank from time to time, including the
amounts of principal and interest payable and paid to such Bank from time to
time hereunder.

         (b)      The Agent shall also maintain accounts in which it will record
(a) the amount of each Reimbursement Obligation and each Loan made hereunder,
the type thereof and the Interest Period with respect thereto, (b) the amount of
any principal or interest due and payable or to become due and payable from the
Company to the Letter of Credit Bank and each Bank


                                      -16-


hereunder and (c) the amount of any sum received by the Agent hereunder from the
Company and each Bank's share thereof.

         (c)      The entries maintained in the accounts maintained pursuant to
paragraphs (i) and (ii) above shall be prima facie evidence of the existence and
amounts of the obligations therein recorded; provided, however, that the failure
of the Agent or any Bank to maintain such accounts or any error therein shall
not in any manner affect the obligation of the Company to repay the Obligations
in accordance with their terms.

         (d)      Any Bank may request that its Loans be evidenced by a
promissory note or notes in the form of Exhibit A hereto with blanks
appropriately completed (each, a "Note"). In such event, the Company shall
prepare, execute and deliver to such Bank a Note or Notes payable to the order
of such Bank. Thereafter, the Loans evidenced by such Note or Notes and interest
thereon shall at all times (including after any assignment pursuant to Section
10.6) be represented by one or more Notes payable to the order of the payee
named therein or any assignee pursuant to Section 10.6, except to the extent
that any such Bank or assignee subsequently returns any such Note for
cancellation and requests that such Loans once again be evidenced as described
in subsections (a) and (b) above.

         Section 2.8. Interest. The Company shall pay interest on the
outstanding principal amount of each Loan for the period commencing on the date
of such Loan until such Loan shall be paid in full pursuant to the terms of this
Agreement at the rates and times set forth below.

         (a) Interest on Eurodollar Rate Loans. Subject to the provisions of
subsection (c) below, interest on each Eurodollar Rate Loan shall be payable (i)
on the last day of each Interest Period with respect thereto; provided, however,
that if such Interest Period is for a period in excess of three months, then
such interest shall also be payable on the date three months after the first day
of such Interest Period, (ii) on the date of conversion of such Eurodollar Rate
Loan to a Base Rate Loan and (iii) at maturity of such Loan, at an interest rate
per annum during the Interest Period for such Loan equal to the Eurodollar Rate
for the Interest Period in effect for such Eurodollar Rate Loan. Each
determination by the Agent of an interest rate hereunder shall be conclusive and
binding on the Banks and the Company for all purposes, absent manifest error.

         (b)      Interest on Base Rate Loans. Subject to the provisions of
subsection (c) immediately below, interest on each Base Rate Loan shall be
payable monthly in arrears on the last Business Day of each calendar month and
at maturity at an interest rate per annum equal to the Base Rate plus the
Applicable Margin.

         (c)      Interest Upon Event of Default. Any payment of principal or
interest on any Loan which is not paid when due (whether by acceleration or
otherwise), as herein provided, shall bear interest (to the extent permitted by
law) at that rate which is two percent (2%) above the Base Rate in effect on
each day thereafter until paid in full and such interest shall be payable on
demand.


                                      -17-


         (d)      Prepayment. Upon prepayment of any Loan hereunder, interest
accrued and unpaid on the amount so prepaid shall become due on the date of such
prepayment.

         (e)      Computations. Interest on Base Rate Loans shall be computed on
the basis of a year of 365/366 days and an actual day month. Interest on
Eurodollar Rate Loans shall be computed on the basis of a year of 360 days and
an actual day month.

         Section 2.9. Place of Payment. Each payment (whether required or
voluntary and whether of principal or interest or both) on each Reimbursement
Obligation and Loan and each payment of fees or other amounts owing by the
Company hereunder shall be payable, on or before 11:00 a.m., New York time, on
the due date of each payment, in immediately available funds, to the Agent at
its Main Office at such account as the Agent shall from time to time notify the
Company in writing. The Agent shall then immediately transmit the applicable pro
rata share of such payment so received by the Agent in immediately available
funds to the Letter of Credit Bank or each Bank entitled thereto, as the case
may be, in the manner specified by the Letter of Credit Bank or such Bank. Any
required payment which would otherwise be due on a day not a Business Day shall
be made on the immediately succeeding Business Day.

        Section 2.10. Voluntary Prepayment. The Company may voluntarily prepay,
at any time and from time to time prior to maturity on one Business Day's prior
notice to the Agent, any part or the whole of the principal of the Loans;
provided, however, that any voluntary prepayment shall be in a minimum amount of
$5,000,000. Upon any such prepayment, the Company shall simultaneously pay all
accrued and unpaid interest on the amount of principal voluntarily prepaid.
However, any such prepayment of a Eurodollar Rate Loan shall be made only on the
last day of the Interest Period therefor. All voluntary prepayments provided for
in this Section 2.10 shall be without premium or penalty.

        Section 2.11. Pro Rata Treatment. Except for Section 2.17 hereof, and
except with respect to payments to be made to a Bank pursuant to Sections 2.13,
2.18, 8.1, 8.3 or 10.3 and any other indemnity in favor of a Bank or Banks
hereunder, each borrowing from, payment to, and utilization of and reduction of
the Commitments of, the Banks hereunder shall be prorated among the Banks
according to the respective Commitments of the Banks as the same may be adjusted
from time to time under Section 2.16, 2.17 or 2.18 hereof. Each borrowing of
Loans hereunder shall (in the aggregate) be in the amount necessary to reimburse
the Agent for the account of the Letter of Credit Bank as provided in Section
2.3(c)(i). Except as otherwise provided herein, (i) payments with respect to the
outstanding principal of, or accrued interest on, the Loans shall be made pro
rata to only those Banks that funded such Loans and not to any defaulting Bank
or a Bank not otherwise participating in such Loan and (ii) all payments to be
made by the Company for the account of each of the Banks on account of
principal, interest and fees shall be made without set-off or counterclaim.

        Section 2.12. Initial Determination of Interest Rate and Conversion of
Loans Between Eurodollar Rate and Base Rate. Prior to the initial or any
subsequent borrowing, the Company will specify the Interest Rate to be
applicable to such borrowing, and on any Business Day or Eurodollar Business
Day, as applicable, the Company may convert on a pro rata basis among


                                      -18-


the Banks any outstanding Base Rate Loans or Eurodollar Rate Loans into the
other type of Loans, subject to the following limitations:

                  (a)      No such conversion of any Eurodollar Rate Loan may be
         made except on the last day of an Interest Period with respect thereto;

                  (b)      The Company shall give the Agent the Required Number
         of days notice for such borrowing or conversion; and

                  (c)      The Company may not select an Interest Period for any
         Eurodollar Rate Loan that extends beyond its maturity date.

If, at the end of an Interest Period of a Eurodollar Rate Loan, the Company has
failed to specify in a timely manner the Interest Rate option applicable to such
Loan for the period after the expiration of the then current Interest Period,
the Company shall be deemed to have selected that such Loan shall be a Base Rate
Loan and, at the end of such Interest Period, such Loan shall automatically
convert to a Base Rate Loan.

        Section 2.13. Failure to Borrow. The Company shall indemnify and hold
harmless each Bank in respect of any funding costs and/or losses in the event
that any borrowing notified to the Banks pursuant to Section 2.6, relative to
Eurodollar Rate Loans, shall not be consummated because of the Company's failure
to satisfy one or more of the applicable conditions precedent in Article III or
because the Company fails to borrow such Loans at the specified time.

        Section 2.14. Fees

         (a)      Letter of Credit Fees. The Company hereby agrees to pay to the
Agent, for the account of the Banks, to be distributed to the Banks pro rata in
accordance with their respective Commitments, a letter of credit fee on the
Issued Amount of the Letter of Credit at a per annum rate equal to the
Applicable Letter of Credit Fee in effect from time to time (as calculated in
accordance with the definition thereof), such fee to be calculated on the Issued
Amount from the date of issuance to the earlier of (x) the date of expiration or
termination of the Letter of Credit or (y) the date of the final Drawing with
respect to the Letter of Credit, based on a year of 360 days and an actual day
month, and payable quarterly in arrears on the last day of each March, June,
September and December during the term of this Agreement and on the Termination
Date, commencing on June 30, 2000.

         (b)      Arrangement Fee. The Company shall pay to the Agent for its
own account an arrangement fee and, if applicable, closing fee as set forth in
the Fee Letter.

         (c)      Fronting Fee. The Company agrees to pay to the Agent, for the
account of the Letter of Credit Bank, a fronting fee as set forth in the Fee
Letter.

        Section 2.15. Termination of Credit Facility. Unless earlier terminated
pursuant to the terms hereof, the Commitments of the Banks, and the Credit
Facility, shall terminate on the Termination Date. Accordingly, the Company
shall pay the entire outstanding principal amount


                                      -19-


of, and all accrued but unpaid interest on, the Reimbursement Obligations, the
Loans and Notes, together with any and all other amounts owing by the Company to
the Banks, the Letter of Credit Bank and the Agent hereunder or under the Notes,
on the Termination Date.

        Section 2.16. Reductions of Commitments. (a) Optional. The Company shall
have the right at any time or from time to time upon not less than two Business
Days' prior written notice to the Agent to reduce the Total Commitments of the
Banks, in whole or in part, provided that each partial reduction shall be in an
aggregate amount of not less than $1,000,000 and an integral multiple of
$500,000, and shall reduce the respective Commitments of all the Banks
proportionately; provided, however, that the Company shall not reduce the Total
Commitments of the Banks to an amount which is less than the aggregate of (i)
the aggregate principal amount of all Eurodollar Rate Loans having Interest
Periods ending after the effective date of the reduction plus (ii) the Issued
Amount of the Letter of Credit plus (iii) the aggregate outstanding
Reimbursement Obligations; and further, provided, that in no event shall the
Total Commitments of the Banks be reduced to an amount less than $100,000,000,
unless the Total Commitments of the Banks are terminated in full. The Agent
shall give prompt written notice to each Bank of each such reduction. Upon any
optional reduction of the Total Commitments of the Banks, the Company shall
prepay such amount of each Bank's outstanding Loans, if any, as may be necessary
so that after such prepayment the sum of the aggregate unpaid principal amount
of such Bank's Loans, such Bank's pro rata share of unpaid Reimbursement
Obligations, and such Bank's liability in respect of the Letter of Credit does
not exceed the amount of such Bank's Commitment as then reduced. The Company
shall not terminate the Total Commitments of the Banks unless concurrent with
such termination, the Company shall repay all outstanding Loans, Reimbursement
Obligations, Letter of Credit Fees, accrued interest and other amounts owing
hereunder and shall return or cause to be returned to the Letter of Credit Bank
the Letter of Credit marked "cancelled." The Agent shall give prompt written
notice to each Bank of such termination.

         (b)      Mandatory. On each date that the Company repays or prepays a
Loan or Reimbursement Obligation (other than a Reimbursement Obligation incurred
in connection with a "B Drawing" (as defined in the Letter of Credit)), the
Total Commitments of the Banks shall automatically reduce by an aggregate amount
equal to the aggregate principal amount of such Loan being repaid or prepaid,
and shall automatically reduce the respective Commitments of all the Banks
proportionately. On each date on which the Issued Amount of the Letter of Credit
is permanently reduced (other than in connection with a Reimbursement Obligation
that is converted into a Loan), the Total Commitments of the Banks shall
automatically reduce in an amount equal to the amount of such reduction in the
Issued Amount, and shall automatically reduce the respective Commitments of all
the Banks proportionately.

         Section 2.17. Substitution of Banks.

         Section 2.17.1. (a) If any Bank shall default in the performance of its
Commitment, whether in whole or in part, or shall have appointed for it a
receiver or conservator at the direction or request of any regulatory agency or
authority, then:

                  (i)      such default shall not relieve any other Bank of its
         Commitment; and


                                      -20-


                  (ii)     the Company may, with the prior written approval of
         the Agent (such approval not to be unreasonably withheld) and the
         Letter of Credit Bank and shall, at the written request of the Letter
         of Credit Bank, with the prior written approval of the Agent (such
         approval not to be unreasonably withheld), terminate the Commitment of
         such defaulting Bank and arrange for the Commitment of the defaulting
         Bank to be assigned to one or more of the other Banks, and to the
         extent that such other Banks will not take over such Commitment,
         arrange for its assumption by one or more banks which are not at that
         time parties hereto, each of which banks shall, except as otherwise
         provided herein, upon execution and delivery to the Company of a
         counterpart hereof, become a Bank hereto to the extent of the
         Commitment taken over by it.

         (b)      If any Bank shall cease to have a long-term debt rating of
BBB- or higher by S&P and Baa3 or higher by Moody's (each, a "Downgraded Bank")
such Downgraded Bank shall immediately notify the Agent and Letter of Credit
Bank thereof and the Letter of Credit Bank may (i) with the prior written
approval of the Agent and the Company (such approvals not to be unreasonably
withheld), terminate the Commitment of such Downgraded Bank and arrange for the
Commitment of such Downgraded Bank to be assigned to one or more of the other
Banks, and to the extent that such other Banks will not take over such
Commitment, arrange for its assumption by one or more banks which are not at
that time parties hereto, each of which banks shall, except as otherwise
provided herein, upon execution and delivery to the Company of a counterpart
hereof, become a Bank hereto to the extent of the Commitment taken over by it or
(ii) if such Downgraded Bank's Commitment has not been assigned pursuant to
clause (i) above, immediately require such Downgraded Bank to fund (and each
Downgraded Bank hereby agrees in such event to fund) any unused portion of its
Commitment by payment of such amount to the Agent for deposit in an account in
the name of the Letter of Credit Bank, maintained at the Main Office or such
other office as the Agent may specify by notice to such Downgraded Bank and the
Letter of Credit Bank (each, a "Downgrade Collateral Account").

      Section 2.17.2. Loans previously made hereunder by a Downgraded Bank,
defaulting or withdrawing Bank, or any portion thereof, which are included in
the Commitment taken over by any other Bank or Banks or by a bank or banks not
then parties hereto, shall be prepaid by the Company without penalty or premium.

      Section 2.17.3. From time to time, the Company may with the written
consent of the Letter of Credit Bank replace a non-defaulting Bank (the
"Replaced Bank") with another financial institution (or institutions) desiring
to be a Bank hereunder (the "New Bank(s)") and/or with one or more Banks already
a party hereto ("Existing Bank(s)") so long as (a) the Replaced Bank consents in
writing to such replacement and receives all amounts owing to such Replaced Bank
hereunder on the effective date of such replacement, (b) the New Bank(s) and/or
Existing Bank(s), as the case may be, assume(s) all of the obligations of a Bank
hereunder having a Commitment equal to the Replaced Bank's by executing, in the
case of a New Bank(s), a letter agreement in substantially the form of Exhibit
B-1 attached hereto or, in the case of an Existing Bank(s), a letter agreement
in substantially the form of Exhibit B-2 hereto, (c) the Commitment(s) of the
New Bank(s), together with the additional Commitment(s) of the Existing Bank(s)
assumed by the Existing Bank(s) pursuant hereto, is equal to the Commitment of
the Replaced Bank and (d) the Company and the Letter of Credit Bank acknowledge
and consent


                                      -21-


that the New Bank(s) shall become a Bank hereunder (and/or that the Existing
Bank(s) shall have an additional Commitment hereunder equal to that of the
Replaced Bank) by signing the respective acknowledgments contained in the
appropriate letter agreement referred to in subparagraph (c) above.

      Section 2.17.4. Upon the increase in any Bank's Commitment or any bank or
banks becoming a party to this Agreement as herein provided, the Company shall
immediately furnish to all Banks which are then parties hereto notice of (a) the
increased Commitment of such Bank, or (b) the names and addresses of such bank
or banks together with the amount of the Commitment of each such bank or banks.

      Section 2.17.5. The respective amounts of the Commitments hereunder shall
be adjusted from time to time to reflect any changes made pursuant to this
Section 2.17 and notice of such adjustments shall be given by the Company at the
time thereof to each Bank or bank then a party hereto. Such adjusted amounts of
Commitments shall thereupon become the basis for pro rata treatment under
Section 2.11 of this Agreement.

      Section 2.17.6. Upon the termination in whole of the Commitment of any
Bank, and the prepayment of all Loans previously made under such Commitment, all
as provided in this Section 2.17, such Bank shall cease to be a party to this
Agreement except as otherwise provided herein.

      Section 2.17.7. If any Downgraded Bank shall be required pursuant to
2.17.1(b) above to fund the unused portion of its Commitment into a Downgrade
Collateral Account, then the Agent shall apply the monies in the Downgrade
Collateral Account applicable to the Loans and Reimbursement Obligations payable
by such Downgraded Bank pursuant to Article II at the times for, in the manner
required in respect of and subject to the conditions precedent to such Loan or
Reimbursement Obligation, as applicable. The deposit of monies in such Downgrade
Collateral Account by any Downgraded Bank shall not constitute a Loan pursuant
to Section 2.5 (and such Downgraded Bank shall not be entitled to interest on
such monies except as provided below in this Section 2.17.7) unless and until
(and then only to the extent that) such monies are used to make Loans or fund
Reimbursement Obligations. Proceeds in such Downgrade Collateral Account shall
be invested in Permitted Investments, as directed by the applicable Downgraded
Bank by written notice to the Letter of Credit Bank and the Agent, the income of
which shall be for the account of such Downgraded Bank. The income that has
accrued from such investments and received by the Letter of Credit Bank shall be
released to such Downgraded Bank on the last Business Day of each month. Unless
required to be released by the following sentence, any amounts received by the
Agent in respect of the Commitment of a Downgraded Bank (whether as a repayment
of Loans or Reimbursement Obligations or otherwise) shall be deposited in the
Downgrade Collateral Account for such Downgraded Bank. All amounts remaining in
such Downgrade Collateral Account shall be released to such Downgraded Bank no
later than the Business Day immediately following the earliest of (x) the
effective date of any replacement of such Downgraded Bank or removal of such
Downgraded Bank as a party to this Agreement, (y) the date on which such
Downgraded Bank shall furnish the Agent and the Letter of Credit Bank with
confirmation that such Downgraded Bank shall have long-term debt ratings at
least equal to the Required Ratings and (z) the Business Day


                                      -22-


immediately following the expiration of the Termination Date. As used in this
Section 2.17 "Permitted Investments" means investments in direct obligations of
the United States of America or of any agency or instrumentality thereof whose
obligations constitute full faith and credit obligations of the United State of
America provided that any such obligation matures within thirty days from the
date of purchase.

        Section 2.18. Capital Requirements. If, as a result of the adoption
after the date of this Agreement, of any applicable law, rule or regulation
affecting capital adequacy or capital maintenance, or any change after the date
of this Agreement in the interpretation or administration of any law, rule or
regulation affecting capital adequacy or capital maintenance in existence as of
the date hereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by such
Bank or the Letter of Credit Bank with any request or directive affecting
capital adequacy or capital maintenance (whether or not having the force of law)
of any such authority, central bank or comparable agency, any Bank or the Letter
of Credit Bank determines that such adoption, change or compliance has or would
have the effect of reducing the rate of return on such Bank's or the Letter of
Credit Bank's capital as a consequence of its Commitment or Loans or its
commitment to issue, participate in or maintain the Letter of Credit to a level
below that which such Bank or the Letter of Credit Bank could have achieved but
for such adoption, change or compliance (taking into consideration such Bank's
or the Letter of Credit Bank's policies with respect to capital adequacy) by an
amount deemed by such Bank or the Letter of Credit Bank to be material, such
Bank or the Letter of Credit Bank shall give prompt notice to the Company and
the Agent, and then from time to time, within 15 days after submission by such
Bank or the Letter of Credit Bank to the Company (with a copy to the Agent) of a
written request therefor, the Company shall pay to such Bank or the Letter of
Credit Bank such additional amount or amounts as will compensate such Bank or
the Letter of Credit Bank for such reduction. Any request submitted by a Bank or
the Letter of Credit Bank to the Company pursuant to this Section 2.18 shall
contain such calculations of the amounts requested therein as such Bank or the
Letter of Credit Bank shall deem reasonable in view of its customary practices,
and shall be submitted as soon as practicable, but in any event the initial
request shall be submitted not more than 90 days after such Bank or the Letter
of Credit Bank becomes aware of the event by reason of which such request is
being submitted. Subsequent requests by such Bank shall be submitted quarterly.
If any Bank requests payment of any amount from the Company pursuant to this
Section 2.18, the Company may, pursuant to arrangements and documentation
satisfactory to the Company and the Agent, prepay the outstanding Loans, fees,
and any other amounts due to such Bank in full and terminate the Commitment of
such Bank and the Company shall, with the prior written consent of the Letter of
Credit Bank at its option, either arrange for all or part of the Commitment of
such Bank to be taken over by one or more of the other Banks or, to the extent
such other Banks do not take over such Commitment or part thereof, arrange for
it to be taken over in whole or in part by a bank or banks not a party hereto,
each of which banks shall, except as otherwise provided herein upon execution
and delivery to the Company of a counterpart hereof, become a full party hereto
to the extent of the Commitment taken over by it. Upon any bank or banks
becoming a party to this Agreement as herein provided, the Company shall
immediately furnish to all Banks which are then parties hereto the names and
addresses of such bank or banks together with the amount of the Commitment of
each such bank or banks. The respective amounts of the Commitments hereof shall
be adjusted from time to time to reflect


                                      -23-


any changes made pursuant to this Section 2.18 and notice of such adjustments
shall be given by the Company at the time thereof to each Bank then a party
hereto. Such adjusted amounts of Commitments shall thereupon become the basis
for pro rata treatment under Section 2.11 of this Agreement. Upon the
termination in whole of the Commitment of any Bank, and the prepayment of all
Loans previously made under such Commitment, all as provided in this Section
2.18, such Bank shall cease to be a party to this Agreement except as otherwise
provided herein.

        Section 2.19. Change in Control. Upon the occurrence of a Change in
Control and at any time during the ninety (90) day period thereafter, the
Company shall, upon the written request of the Agent, deposit with the Agent, in
an interest bearing account, as collateral, Dollars in an amount equal to the
sum of the Issued Amount, outstanding Reimbursement Obligations and the
aggregate outstanding principal amount of any Loans owing under this Agreement
(the "Change in Control Collateral"). The Change in Control Collateral shall be
applied against amounts due to the Agent, the Letter of Credit Bank and the
Banks resulting from any Drawing. All Change in Control Collateral shall be held
in the account with the Agent until the expiration of the Letter of Credit and
payment of all Reimbursement Obligations and Loans in connection therewith, at
which time the remaining Change in Control Collateral and any interest accrued
thereon shall be returned to the Company.

         Section 2.20. Administration Fees. The Company agrees to pay to the
Agent an annual administrative fee to compensate the Agent for the
administration of the Credit Facility and for other services, as set forth in
the Fee Letter.


                                   ARTICLE III


                    CONDITIONS TO EFFECTIVENESS OF AGREEMENT,
                 FOR BORROWINGS AND ISSUANCE OF LETTER OF CREDIT

         Section 3.1. Effectiveness, Initial Borrowing and Issuance of Letter of
Credit. This Agreement shall not become effective and the Letter of Credit Bank
shall not be obligated to issue the Letter of Credit hereunder until the Company
shall have furnished to the Agent the following, each dated (unless otherwise
indicated) the date of this Agreement:

                  (a)      Agreement. The Agent shall have received counterparts
         of this Agreement duly executed and delivered by the Company, the
         Letter of Credit Bank and each Bank listed on the signature pages
         hereto.

                  (b)      Opinion. The Agent shall have received from (i) the
         General Counsel, an Associate General Counsel or an Assistant General
         Counsel of the Company, an opinion dated the Effective Date and
         addressed to the Agent, the Letter of Credit Bank and the Banks in
         substantially the form of Exhibit E-1 hereto and (ii) Davis Polk &
         Wardwell, New York counsel to the Company, an opinion dated the
         Effective Date and addressed to the Agent, the Letter of Credit Bank
         and the Banks in substantially the form of Exhibit E-2 hereto.


                                      -24-


                  (c)      Corporate Proceedings. The Letter of Credit Bank and
         the Banks shall be satisfied that all corporate proceedings of the
         Company taken in connection with the transactions contemplated by this
         Agreement shall be in form and substance reasonably satisfactory to the
         Letter of Credit Bank and the Banks.

                  (d)      Financial Statements. The Agent shall have received a
         copy of the Company's (i) annual report on Form 10-K for the year ended
         June 30, 1999, as filed with the U.S. Securities and Exchange
         Commission, and (ii) quarterly report on Form 10-Q for the quarter
         ended March 31, 2000, as filed with the U.S. Securities and Exchange
         Commission.

                  (e)      Consents. The Letter of Credit Bank and the Banks
         shall be reasonably satisfied that all necessary governmental and third
         party approvals, if any, required to be obtained by the Company in
         connection with the transactions contemplated by this Agreement and
         otherwise referred to herein shall have been obtained and remain in
         full force and effect.

                  (f)      No Adverse Change. Nothing shall have occurred since
         March 31, 2000 (and the Letter of Credit Bank and the Banks shall have
         become aware of no facts or conditions not previously known) which the
         Letter of Credit Bank or the Banks shall determine, in their reasonable
         good faith judgment, could have a material adverse effect on their
         rights or remedies hereunder, or on the business, financial condition
         or results of operations of the Company and its Subsidiaries taken as a
         whole.

                  (g)      No Litigation. The Letter of Credit Bank and the
         Banks shall be reasonably satisfied that, on the Effective Date, no
         judgment, order, injunction or other restraint shall have been issued
         or filed which restrains, and no hearing seeking injunctive relief or
         other restraint is pending or has been noticed which seeks to restrain,
         the Letter of Credit Bank from issuing the Letter of Credit or the
         Company from consummating the transactions described herein.

                  (h)      No Default; Representations and Warranties. The
         Letter of Credit Bank and the Banks shall be reasonably satisfied that
         on the Effective Date: (a) there shall exist no Default or Event of
         Default and (b) all representations and warranties of the Company
         contained herein shall be true and correct in all material respects
         with the same effect as though such representations and warranties had
         been made on and as of the Effective Date, except to the extent such
         representations and warranties relate to an earlier date, in which case
         such representations and warranties shall be true and correct in all
         material respects as of such earlier date.

                  (i)      Notes. If requested by a Bank, a Note, payable to the
         order of such requesting Bank in the amount of its Commitment, duly
         executed and delivered by the Company; and


                                      -25-


                  (j)      Fees. The up-front fees for the account of the Banks
         as set forth in the letter from Bayerische Hypo- und Vereinsbank AG,
         New York Branch to the Banks dated April 28, 2000; and

                  (k)      Existing Credit Agreement. Evidence of arrangements
         reasonably satisfactory to the Agent for the contemporaneous
         termination of the Credit Agreement dated as of June 6, 1996 and as
         amended to date, by and among the Company, the financial institutions
         from time to time party thereto, ABN AMRO Bank N.V., as Letter of
         Credit Bank and ABN AMRO Bank N.V., as Agent, payment in full of any
         outstanding reimbursement obligations or loans thereunder and
         cancellation of the "Letter of Credit" issued thereunder.

         All agreements, certificates, legal opinions and other documents and
papers referred to in this Section 3.1, unless otherwise specified, shall (x) be
delivered to the Agent for the account of the Letter of Credit Bank and each
Bank and, in the case of this Agreement, in sufficient counterparts for each
Bank and (y) be reasonably satisfactory in form and substance to the Letter of
Credit Bank and the Banks.

         Section 3.2. All Borrowings. The Banks shall not be obligated to make
any Loan, including the initial Loan, and the Letter of Credit Bank shall not be
obligated to issue or amend the Letter of Credit, unless at the time thereof the
Company shall have furnished to the Agent an Officer's Certificate bearing that
date, and stating that:

                  (a)      There exists on that date no Default or Event of
         Default;

                  (b)      There exists on that date no event of default or
         default under any instrument evidencing or any agreement given in
         connection with Funded Debt of the Company;

                  (c)      Such borrowing or amendment or issuance of the Letter
         of Credit will not contravene any agreement, indenture or instrument to
         which the Company is a party or by which it may be bound and which is
         material to the financial condition of the Company;

                  (d)      The representations and warranties contained in
         Sections 4.1, 4.2, 4.3, 4.5, 4.6, 4.9(a), 4.9(c), 4.10, 4.11, 4.13, and
         4.14 hereof are true on and as of such date;

                  (e)      No Change in Control shall have occurred; and

                  (f)      The extension(s) of credit being made on such date
         are legal, valid and binding obligations of the Company and the
         officers of the Company requesting such advances are duly authorized
         and empowered to do so.

         Further, any conversion of a Loan from one type to another as
contemplated by Section 2.12 hereof shall be deemed to be a representation by
the Company that the matters referred to in paragraphs (a) through (f) above
continue to be true and correct.

                                      -26-




                                   ARTICLE IV


                         REPRESENTATIONS AND WARRANTIES

         The Company hereby represents, covenants and warrants to the Agent, the
Letter of Credit Bank and each of the Banks as follows:

         Section 4.1.     Organization; Standing, Etc. The Company is a
corporation duly organized and existing under the laws of the State of Delaware,
has the corporate power to own its property and carry on its business as being
conducted, and is duly qualified to do business as a foreign corporation and is
in good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary.

         Section 4.2.      Authorization; No Violation. The execution, delivery
and performance by the Company of this Agreement (i) has been duly authorized by
all necessary corporate action and does not require any consent or approval,
authorization, permit or license from any federal, state or other regulatory
authority which has not been obtained, or violate any law, regulation, order,
judgment, decree or determination having applicability to the Company or its
organizational documents, or result in a breach of, or constitute a default
under any existing indenture or credit agreement or any other agreement or
instrument to which the Company is a party or by which its properties may be
bound or affected except where the failure to have such consent or approval or
such violation, breach or default could not reasonably be expected to result in
a material adverse effect on the business, financial condition or results of
operations of the Company and its Subsidiaries taken as a whole, and (ii) will
not conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, the Certificate of Incorporation or Bylaws of
the Company or of any agreement or instrument to which the Company is now a
party, which breach would have a material adverse effect on the business,
financial condition or results of operations of the Company and its Subsidiaries
taken as a whole.

         Section 4.3.      Enforceability. This Agreement has been duly executed
and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).

         Section 4.4.      Financial Statements. The Company has furnished the
Banks with the following financial statements, identified by the certificate of
a principal financial officer of the Company: (i) balance sheets of the Company
as at June 30, 1999 and March 31, 2000, and income and reinvested earnings
statements of the Company for the fiscal year or fiscal quarter, as the case may
be, ended on such dates, respectively, certified, in the case of financial
statements for the year ended June 30, 1999, by Arthur Andersen LLP. Such
financial statements are true and correct and have been prepared in accordance
with GAAP (except, in the case of the quarterly financial statements, the
absence of complete footnotes and subject to normal year-end audit adjustments).
The balance sheets and their accompanying notes present fairly the condition of
the Company as of the dates thereof, and the income and reinvested


                                      -27-


earnings statements present fairly the results of the operations of the Company
for the periods indicated. There has been no material adverse change in the
business, financial condition or results of operations of the Company and its
Subsidiaries taken as a whole since March 31, 2000.

         Section 4.5.      Litigation. There is no action or proceeding pending
or threatened against the Company before any court or administrative agency
which, in the reasonable opinion of the Company, is likely to be determined in a
manner which would result in any material adverse change in the business,
financial condition or results of operations of the Company and its Subsidiaries
taken as a whole and the Company is not in default with respect to any order,
writ, injunction or decree of any court or administrative agency, which would
have a material adverse effect on the Company and its Subsidiaries taken as a
whole.

         Section 4.6.      Business; Status as Air Carrier. (a) The Company is a
duly certificated air carrier and there are in force any certificates or other
appropriate authority issued by appropriate governmental authorities necessary
to authorize the Company to engage in intrastate, interstate, overseas and
foreign air transportation of persons, property and mail over the routes
operated by the Company; and

                   (b)     no proceedings are pending or threatened, by or
         before any public body, agency or authority, domestic or foreign,
         including but not limited to proceedings to alter, amend, modify,
         suspend or revoke such certificates in whole or in part, which might
         seriously affect adversely the income from, title to, or possession of,
         any of the properties of the Company, to an extent which would
         constitute a material adverse change in the business or condition of
         the Company.

         Section 4.7.      Funded Debt. The Company does not have outstanding
any Funded Debt except as set forth on Schedule I to this Agreement; and there
exists no default under the provisions of any instrument evidencing such
indebtedness or agreement relating thereto.

         Section 4.8.      Title to Properties, Etc.. The Company and its
Subsidiaries have good and marketable title to their properties and assets,
including the properties and assets reflected in the balance sheets described in
Section 5.3 hereof, subject to no mortgage, pledge, encumbrance, lien or charge
of any kind except mortgages, pledges, encumbrances, liens or charges permitted
by Section 6.1 hereof.

         Section 4.9.      Tax Returns and Payments. (a) The Company has filed
all federal income tax returns which are required to be filed, and has paid all
taxes as shown on said returns and on all assessments received by it to the
extent that such taxes (other than those which the Company is contesting in good
faith by appropriate proceedings being diligently conducted) have become due.

         (b)      The federal income tax liability of the Company has been
finally determined by the Internal Revenue Service and satisfied for all fiscal
years prior to and including the fiscal year ended June 30, 1992.


                                      -28-


         (c)      All other tax returns and reports of the Company which are
required to be filed have been duly filed, and all taxes and government charges
(other than those for which payment may be withheld without penalty or those
which the Company is contesting in good faith by appropriate proceedings being
diligently conducted) upon the Company, its assets, income or franchises which
are due and payable have been paid.

        Section 4.10.      Use of Proceeds. The proceeds of a Drawing under the
Letter of Credit are intended to be used solely to pay the principal of and
interest and premium on the ESOP Notes and the proceeds of any Loan will be used
solely to repay any Reimbursement Obligation. The Company is not engaged,
principally or as one of the Company's important activities, in the business of
purchasing or carrying any "margin stock" as such term is defined in Regulation
U of the Board of Governors of the Federal Reserve System.

        Section 4.11.      Governmental Regulation. No consent, approval,
authorization, permit or license from any federal, state or other regulatory
authority is required in connection with the making, delivery or performance of
this Agreement or the Notes by the Company.

        Section 4.12.      Subsidiaries. Schedule II is a complete and correct
list of all Subsidiaries as of the date hereof, all of which are corporations
duly incorporated, in good standing and with corporate power to transact the
business presently conducted by them. Except as disclosed in Schedule II, the
Company owns, directly or indirectly through one or more Subsidiaries, all the
shares of each of the Subsidiaries (except directors' qualifying shares, if
any), and all such shares are validly issued, fully paid and non-assessable and
are free and clear of all liens and rights of others whatsoever.

        Section 4.13.      ERISA. The Company and each Subsidiary have met their
minimum funding requirements under ERISA with respect to all their employee
benefit plans covered by the minimum funding requirements of ERISA, and have not
incurred any material liability to the Pension Benefit Guaranty Corporation (or
any entity succeeding to any or all of said Corporation's functions under ERISA)
under ERISA in connection with any such plan.

        Section 4.14.      Environmental Matters. The Company and its
Subsidiaries are in substantial compliance with all applicable federal, state
and local environmental laws, regulations and ordinances governing their
respective business, properties or assets with respect to discharges into the
ground and surface water, emissions into the ambient air and generation,
storage, transportation and disposal of waste materials or process by-products,
except such noncompliances as are not likely to have a material adverse effect
on the property, assets, business, operations or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole. All licenses,
permits or registrations required for the business of the Company and its
Subsidiaries under any federal, state or local environmental laws, regulations
or ordinances have been secured, and the Company and each Subsidiary are in
substantial compliance therewith, except such licenses, permits or registrations
the failure to secure or to comply therewith are not likely to have a material
adverse effect on the property, assets, business, operations or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole.


                                      -29-


                                    ARTICLE V


                              AFFIRMATIVE COVENANTS

         The Company covenants and agrees with the Agent, the Letter of Credit
Bank and each Bank that until all of its obligations hereunder have been
discharged and the obligations of the Letter of Credit Bank to issue or amend
the Letter of Credit and the Banks to make Loans terminated and the Letter of
Credit has expired or otherwise terminated:

         Section 5.1.      Insurance. The Company will, and cause each of its
Airline Subsidiaries to, keep adequately insured, by financially sound and
reputable insurers, all property of the character usually insured by
corporations engaged in the same or similar businesses similarly situated,
against loss or damage of the kind customarily insured against by such
corporations, and carry adequate liability insurance and other insurance of a
kind generally carried by corporations engaged in the same or similar businesses
similarly situated; provided, however, that nothing herein contained shall be
construed to mean that a deductibility clause in any such insurance, which, in
effect, results in self-insurance of a level or portion of losses considered
reasonable by the Company's management, shall render such insurance inadequate;
and provided, further, that in the case of a lease to the United States
Government or an agency thereof of any aircraft or other property, indemnity
therefrom by the United States Government will be considered adequate insurance
against the risks that are the subject of any such indemnity.

         Section 5.2.      Payment of Taxes. The Company will, and will cause
each of its Airline Subsidiaries to, duly file all federal income tax returns
and all other tax returns and reports which, to the knowledge of the officers of
the Company are required to be filed and pay when due all taxes and governmental
charges assessed against it, its assets, income or franchises, except to the
extent and so long as contested in good faith.

         Section 5.3.      Financial Statements.  The Company will deliver to
the Agent, the Letter of Credit Bank and the Banks:

                   (a)     As soon as practicable (and in any event within two
         (2) months after the end of each quarterly period (other than the last
         quarterly period) in each fiscal year) an income statement of the
         Company for the period from the beginning of the current fiscal year to
         the end of such quarterly period, and a balance sheet of the Company as
         at the end of such quarterly period, setting forth in each case in
         comparative form figures for the corresponding period in the preceding
         fiscal year, all in reasonable detail and certified by a principal
         financial officer of the Company, subject to changes resulting from
         year-end adjustments; and a statement as of the end of such quarterly
         period of the calculations made by the Company establishing its
         compliance with the provisions of Sections 6.1, 6.2 and 6.4 hereof, in
         sufficient detail to permit the Banks to determine how the conclusions
         on such statement were arrived at, certified by an authorized financial
         officer of the Company as accurate in all material respects;


                                      -30-


                   (b)     As soon as practicable and in any event within three
         (3) months after the end of each fiscal year, an income statement and a
         statement of reinvested earnings of the Company for such year, and a
         balance sheet of the Company as at the end of such year, setting forth
         in each case in comparative form corresponding figures from the
         preceding annual audit, all in reasonable detail and satisfactory in
         scope to the Banks and certified by independent certified public
         accountants of national standing selected by the Company; and a
         statement as of the end of such fiscal year of the calculations made by
         the Company establishing compliance with the provisions of Sections
         6.1, 6.2 and 6.4 hereof, in sufficient detail to permit the Banks to
         determine how the conclusions on such statement were arrived at,
         certified by an authorized financial officer of the Company as accurate
         in all material respects;

                   (c)     Copies of all financial statements, reports and
         returns which it shall send to its stockholders;

                   (d)     Promptly after the sending or filing thereof, copies
         of all periodic reports, if any, which the Company shall have filed
         with the Securities and Exchange Commission (or any governmental agency
         or agencies substituted therefor) under Section 13 or Section 15(d) of
         the Securities Exchange Act of 1934, as amended, or with any national
         securities exchange; and

                   (e)     With reasonable promptness such other financial data
         as any Bank may reasonably request through the Agent.

         Section 5.4.      Maintenance of Equipment. The Company will, and will
cause each of its Airline Subsidiaries to, maintain substantially all of its
equipment (except surplus or obsolete equipment) in good operating order.

         Section 5.5.      Inspection. The Borrower will permit any Person
designated by any of the Letter of Credit Bank or any Bank in writing, to visit
and inspect any of the properties, corporate books and financial records of the
Company and its Subsidiaries at the Letter of Credit Bank's or such Bank's
expense, and to discuss the affairs, finances, and accounts of any such
corporation with the principal officers of the Company, all at such reasonable
times and as often as such Bank may reasonably request. This covenant shall be
subject to applicable governmental and industrial security regulations.

         Section 5.6.      Security. In the event the Company secures by
mortgage, pledge, encumbrance, lien or other charge any debt other than as
permitted by Section 6.1 hereof, the Company shall secure equally and ratably
the indebtedness incurred hereunder.

         Section 5.7.      Notice of Any Default or Event of Default. As soon as
practicable (but in any event not more than five (5) days) after the Chairman of
the Board, the President, or a principal financial officer of the Company
obtains knowledge of a Default or an Event of Default as specified in Article
VII hereof, the Company will deliver to the Agent, the Letter of Credit Bank and
each Bank an Officer's Certificate specifying the nature thereof, the period of


                                      -31-


existence thereof and what action the Company has taken or proposes to take with
respect thereto.

         Section 5.8.      ERISA Reporting Requirements. With respect to any
employee benefit plan subject to Title IV of ERISA, the Company shall, if
requested by the Agent, provide the Agent with copies of the most recent annual
reports or returns (IRS Form 5500), audited or unaudited financial statements
and actuarial valuations with respect to such plans. In addition, the Company
shall provide the Agent copies of any notice filed with the Pension Benefit
Guaranty Corporation with respect to any "Reportable Event" as defined in
Section 4043 of ERISA, and the Agent shall forward copies of any such notice to
the Letter of Credit Bank and the Banks.

         Section 5.9.      Ratings. The Company will notify the Agent promptly
after the Company becomes aware of any public announcement of the occurrence of
any change in the S&P Rating or the Moody's Rating.


                                   ARTICLE VI


                               NEGATIVE COVENANTS

         Until all of its obligations hereunder have been discharged and the
obligations of the Letter of Credit Bank to issue or amend the Letter of Credit
and the Banks to make Loans terminated and the Letter of Credit has expired or
otherwise terminated, the Company covenants that it will not and will not permit
any Subsidiary to:

         Section 6.1.      Liens.    Create, assume or suffer to exist any
mortgage, pledge, encumbrance, lien or charge of any kind upon any of its
property or assets, whether now owned or hereafter acquired, except: (i)
mortgages, pledges, encumbrances, liens or charges where the aggregate
indebtedness secured by such mortgages, pledges, encumbrances, liens or charges
at any time does not exceed the sum of (a) the greater of $3,000,000,000 (USD
Three Billion) or fifteen percent (15%) of Equity plus (b) the amount
outstanding under the obligations described on Schedule I hereof as "Secured";
(ii) liens for taxes not yet due or which are being contested in good faith;
(iii) other liens, charges and encumbrances incidental to the conduct of its
business or the ownership of its property and assets which were not incurred to
secure the repayment of borrowed money or other advances or credit, and which do
not in the aggregate materially detract from the value of its property or assets
or materially impair the use thereof in the operation of its business; (iv)
liens imposed by law, such as carriers', warehousemen's, mechanics',
materialmen's and vendors' liens, for sums not yet due or already due but the
validity of which is being contested in good faith; (v) mortgages, pledges,
encumbrances, liens or other charges on property or assets of a Subsidiary to
secure obligations of such Subsidiary to the Company or another Subsidiary; (vi)
any mortgage, pledge, encumbrance, lien or other charge required by Section 5.6
hereof; (vii) any mortgage, pledge, encumbrance, lien or other charge existing
at the date hereof on any property owned or leased by the Company or any
Subsidiary at that date securing obligations outstanding on that date; (viii)
any mortgage, pledge, encumbrance, lien or other charge on any property, shares
of stock or obligation existing at the time of acquisition thereof (including
acquisition through merger or consolidation) or


                                      -32-


(ix) any mortgage, pledge, encumbrance, lien or other charge on aircraft or
aircraft engines (but no other assets) now owned or acquired by the Company or
any Subsidiary after the date hereof to secure the payment of all or any part of
the purchase price thereof or to secure any obligation incurred or for which a
firm commitment is obtained prior to, at the time of, or after, the acquisition
of such property for the purpose of financing all or any part of the purchase
price thereof.

         Section 6.2.      Debt. Create, incur, assume or suffer to exist, for
the Company and the Subsidiaries taken together, (a) Current Debt in an
aggregate principal amount at any one time outstanding in excess of 100% of all
accounts receivable of the Company and its Subsidiaries outstanding as of the
last day of the second calendar month next preceding the month in which such
calculation of Current Debt is made, all computed in accordance with GAAP; or
(b) Convertible Subordinated Debt in excess of 33.3% of Equity; or (c) Funded
Debt, Current Debt (other than Convertible Subordinated Debt) and all Guaranty
Liabilities (as defined below) in an amount at any one time which exceeds 150%
of Equity at such time. For purposes of this Section 6.2, "Guaranty Liabilities"
shall mean all liabilities of the Company and any Subsidiary of the Company as
guarantor, surety, accommodation endorser or other accommodation party on behalf
of any Person where the underlying obligation of such Person covered by, or the
subject of, such guaranty or contingent undertaking would constitute Current
Debt or Funded Debt, as defined herein, if such Person were the Company;
provided, however, that (x) guarantees or other contingent undertakings by the
Company on behalf of any Subsidiary, by any Subsidiary on behalf of any other
Subsidiary, or by any Subsidiary on behalf of the Company and (y) the contingent
undertakings as set forth on Schedule III hereto, shall not constitute Guaranty
Liabilities.

         Section 6.3.      Mergers; Disposition of Assets. Merge or consolidate
with any corporation or sell, lease or transfer or otherwise dispose of all or
substantially all of its assets in any transaction or series of related
transactions, except that (i) any Subsidiary may merge or consolidate with the
Company or any one or more other Subsidiaries; (ii) any Subsidiary may sell,
lease, transfer or otherwise dispose of any of its assets to the Company or
another Subsidiary; (iii) any Subsidiary may sell or otherwise dispose of all or
substantially all of its assets, provided that (a) such sale or other
disposition is for a consideration which represents fair value (as determined in
good faith by the Company) at the time of such sale or disposition, and (b) the
assets so disposed of do not constitute all or substantially all of the
aggregate assets of the Company and the Subsidiaries; (iv) the Company may
dispose of aircraft in the ordinary course of its business, provided that such
sale or other disposition is for a consideration which represents fair value (as
determined in good faith by the Company) at the time of such sale or
disposition; and (v) the Company may merge or consolidate with another
corporation, provided that (a) the Company shall be the continuing or surviving
corporation, (b) a majority of the board of directors of the Company for a
period of six (6) months after the effective date of such merger consists of
individuals who were directors of the Company twelve (12) months prior to such
effective date, and (c) immediately after such merger or consolidation there
shall exist no Event of Default as defined in Article VII hereof.

         Section 6.4.      Leases. Enter into or permit to remain in effect any
flight equipment lease agreements which, as of the close of any fiscal year,
cause the Company's consolidated aircraft


                                      -33-


rentals for such fiscal year, as determined in accordance with GAAP, to exceed
eight percent (8%) of the Company's consolidated operating revenues for such
fiscal year, provided that any such lease agreements as may be necessary in
connection with interchange agreements between the Company and other airline
related businesses shall not be included in such calculation.


                                   ARTICLE VII


                                    DEFAULTS

         Section 7.1.    Events of Default.  Upon the occurrence of any one of
the following Events of Default:

                   (a)     Default in any interest payment or principal payment
         or mandatory prepayment on any Loan, any Reimbursement Obligation or
         any Letter of Credit Fee when due and the continuance thereof for five
         (5) days; or

                   (b)     Default in the payment of any fee or charge (other
         than those specified in (a) above), when the same is due hereunder and
         the continuance thereof for ten (10) days after the Company's receipt
         of written notice that any such amount is past due; or

                   (c)     The Company shall institute a voluntary case seeking
         liquidation or reorganization under Chapter 7 or Chapter 11,
         respectively, of the United States Bankruptcy Code, or shall consent to
         the institution of an involuntary case thereunder against it; or the
         Company shall otherwise institute any similar proceeding under any
         other applicable federal or state law, or shall consent thereto; or the
         Company shall apply for, or by consent or acquiescence there shall be
         an appointment of, a custodian, receiver, liquidator, sequestrator,
         trustee or other officer with similar powers, for the Company, or for
         all or a material part of its properties; or the Company shall make an
         assignment for the benefit of creditors; or the Company shall have
         ceased to pay its debts generally as they become due; or if an
         involuntary case shall be commenced seeking the liquidation or
         reorganization of the Company under Chapter 7 or Chapter 11,
         respectively, of the United States Bankruptcy Code or any similar
         proceeding shall be commenced against the Company under any other
         applicable federal or state law and (i) the petition commencing the
         involuntary case is not timely controverted, (ii) the petition
         commencing the involuntary case is not dismissed within forty-five (45)
         days of its filing, (iii) an interim trustee is appointed to take
         possession of all or a portion of the property and/or to operate all or
         any part of the business of the Company, or (iv) an order for relief
         (other than the petition itself) shall have been issued or entered
         therein; or a decree or order of a court having jurisdiction in the
         premises for the appointment of a custodian, receiver, liquidator,
         sequestrator, trustee or other officer having similar powers for the
         Company or for all or a part of its properties, shall have been
         entered; or any other similar relief shall be granted against the
         Company under any applicable federal or state law; or


                                      -34-


                   (d)     Default in the due observance or performance  by the
         Company or any Subsidiary of any covenant, condition or agreement
         contained in Sections 6.1, 6.2, 6.3 and 6.4; or

                   (e)     Default in the due observance or performance by the
         Company or any Subsidiary (to the extent applicable to the Subsidiary)
         of any covenant contained in this Agreement (other than those specified
         in (a), (b) and (d) above) and such default remains unremedied for a
         period of 30 days after written notice thereof from the Agent, the
         Letter of Credit Bank or any Bank to the Company; or

                   (f)     Any representation or warranty made by the Company
         herein or in any certificate furnished to the Letter of Credit Bank or
         the Banks hereunder proves to have been false or breached in any
         material respect on the date as of which made, or any statement or
         certificate furnished by the Company pursuant hereto shall prove to
         have been false in any material respect at any date as of which the
         facts therein set forth were stated or certified; or

                   (g)     Seizure under any legal process of a substantial
         share of the assets of the Company if release is not obtained within
         thirty (30) days of such seizure; or

                   (h)     (i) Default in any payment of principal or interest
         on any other obligation for borrowed money or the deferred purchase
         price of property beyond any period of grace provided with respect
         thereto, or in the payment of any capital leases, or (ii) default in
         the performance or observance of any other agreement, term or condition
         contained in any agreement under which any such obligation is created,
         if the effect of such default is to cause, or permit the holder or
         holders of such obligation (or a trustee acting on behalf of such
         holder or holders) to cause, such obligation to become due prior to its
         stated maturity, provided in each case such obligations or agreements
         have aggregate outstanding amounts of $75,000,000 or more; or

                   (i)     The Company shall have failed to meet its minimum
         funding requirements under ERISA with respect to any of its employee
         benefit plans which are covered by Title IV of ERISA (or to which
         Section 412 of the Internal Revenue Code of 1986, as amended, applies),
         which failure has resulted in a material liability for excise tax under
         Section 4971 of said Code; or any of its plans aforesaid shall be the
         subject of voluntary or involuntary termination proceedings which may
         result in an uninsured payment or repayment liability of the respective
         corporation to the Pension Benefit Guaranty Corporation (or any entity
         succeeding to any or all of its functions under said Act) in an amount
         which is material in relation to the net worth of the Company;

then, in the event that an Event of Default under (a) or (b) above should occur,
any Bank may, at its option, by a written notice to the Company with copies to
the Agent and to each other Bank, if such Event of Default be continuing at the
time such notice is received by the Company, either: (i) declare the obligation
of such Bank to extend credit to the Company hereunder to be immediately
terminated, whereupon such obligation shall terminate (provided that any such
termination shall not affect such Bank's obligations under Section 2.1 hereof);
or (ii) declare


                                      -35-


any Loan and Reimbursement Obligations held by it to be forthwith due and
payable whereupon such Loans and Reimbursement Obligations, with accrued
interest thereon, shall become forthwith due and payable without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Company; or (iii) demand that the Company immediately
deposit as cash collateral with the Agent, for such Bank's account, an amount
equal to such Bank's pro rata share of the Issued Amount of the Letter of
Credit; or (iv) all of the foregoing. In the event that an Event of Default
under (a), (b), or (d) through (i) above should occur, if such Event of Default
be continuing, the Majority Banks may, at their option, by written notice to the
Company, exercise the remedies listed in (i), (ii), (iii) and/or (iv) above and
may direct the Letter of Credit Bank to deliver the Notice of Non-Reinstatement
as provided in the Letter of Credit on behalf of all the Banks. In the event
that an Event of Default under (c) above should occur, the Total Commitments of
the Banks shall automatically terminate and the principal of and accrued
interest on the Loans then outstanding, all unpaid Reimbursement Obligations and
any accrued fees, together with an amount equal to the Issued Amount of the
Letter of Credit (without regard to whether a draft has been presented under the
Letter of Credit) to be held as cash collateral by the Agent for the
Reimbursement Obligations of the Company with respect to the Letter of Credit,
shall automatically become due and payable, without protest, presentment, notice
or demand, all of which are expressly waived by the Company and the Majority
Banks may direct the Letter of Credit Bank to deliver the Notice of
Non-Reinstatement as provided in the Letter of Credit.


                                  ARTICLE VIII


                                YIELD PROTECTION

         Section 8.1.      Increased Cost of Eurodollar Rate Loans. (a) If, as a
result of any change after the date of this Agreement in (including the
introduction of any new) applicable United States, state or foreign laws or
regulations or the adoption or making of any interpretations, directives or
requests thereof or thereunder by any court or governmental authority charged
with the interpretation or administration thereof, one or more of the following
events occur (herein called "Increased Cost Changes"):

                   (i)     the basis of taxation of payments to any Bank of the
         principal of or interest on any Eurodollar Rate Loan or any other
         amounts payable under this Agreement in respect thereof (other than
         taxes imposed on the aggregate net income of such Bank or of its
         Eurodollar Lending Office by the jurisdiction in which the Bank has its
         principal office or such Eurodollar Lending Office) is changed; or

                  (ii)     any reserve, special deposit or similar requirements
         against the assets of, deposits with or for the account of, or credit
         extended by, any Bank are imposed, modified or deemed applicable; or

                 (iii)     any other condition affecting this Agreement or any
         Eurodollar Rate Loan is imposed on any Bank or (in the case of
         Eurodollar Rate Loans) the London interbank market;


                                      -36-


and such Bank determines that, by reason thereof, the cost to such Bank of
making or maintaining any of the Eurodollar Rate Loans is increased by an amount
reasonably determined by such Bank, or any amount receivable by such Bank
hereunder in respect of any of the Eurodollar Rate Loans is reduced by an amount
reasonably determined by such Bank (such increases in cost and reductions in
amounts receivable being herein called "Increased Costs"), then the Company
shall pay to such Bank on the next interest payment date for the affected
Eurodollar Rate Loans such additional amount or amounts (which shall be set
forth in a notice from such Bank to the Company stating the cause and amount of
such Increased Costs) as will compensate such Bank for such Increased Costs.
Each Bank will immediately notify the Company of any event of which such Bank
has knowledge that will entitle such Bank to compensation pursuant to this
Section 8.1(a) and will exercise reasonable diligence to designate a different
Eurodollar Lending Office, and/or take other measures which will avoid the need
for such compensation for Increased Costs and will not result in material cost
to such Bank, or be otherwise disadvantageous (in such Bank's sole
determination) to such Bank.

         (b)      Without limiting the effect of the foregoing, the Company
shall pay (without duplication as to amounts paid under Section 8.1(a) hereof)
to any Bank on each interest payment date as to Eurodollar Rate Loans so long as
such Bank may be required to maintain reserves against "Eurocurrency
liabilities" under Regulation D of the Board of Governors of the Federal Reserve
System an additional amount (determined by such Bank and notified to the Company
through the Agent) equal to the sum of the products of the following for each
Eurodollar Rate Loan for each day on which such Bank is required to maintain
such reserve during the Interest Period for such Loan for which interest is
being paid:

                   (i)     the principal amount of such Eurodollar Rate Loan
         outstanding on such day; times

                  (ii)     the remainder of (x) a fraction the numerator of
         which is LIBOR (expressed as a decimal) used to determine the
         Eurodollar Rate for such Eurodollar Rate Loan for such Interest Period
         as provided in this Agreement and the denominator of which is one minus
         the effective rate (expressed as a decimal) at which such reserve
         requirements are imposed on such Bank on such day minus (y) such
         numerator; times

                 (iii)     1/360.

         (c)      Determination by any Bank for purposes of this Section 8.1 of
the effect of any Increased Cost Changes on such Bank's costs of making or
maintaining Eurodollar Rate Loans or on amounts receivable by it in respect of
Eurodollar Rate Loans, and of the additional amounts required to compensate such
Bank in respect thereof, shall be conclusive, provided that such determinations
are made reasonably and in good faith.

         (d)      If the Company is required to pay additional amounts to any
Bank under paragraph (a) or (b) of this Section 8.1, the Company may (in
addition to paying such additional amounts to such Bank) at the Company's option
at any time, subject to the provisions of Section 8.3 hereof, convert all of the
Eurodollar Rate Loans of such Bank which are affected by such Increased Costs to
Base Rate Loans in accordance with this Agreement.


                                      -37-


         Section 8.2.      Change of Law. Notwithstanding any other provision
herein, in the event that any change in applicable law, rule or regulation or in
the interpretation or administration thereof (including the issuance of any new
law, rule, regulation or interpretation, or any new administration thereof), of
or in any jurisdiction whatsoever, shall make it unlawful for any Bank to make
or maintain a Eurodollar Rate Loan (or to convert Base Rate Loans into
Eurodollar Rate Loans), or shall materially restrict the authority of any Bank
to purchase or sell, or to take deposits of, Eurodollars, then the obligation of
such Bank to make Eurodollar Rate Loans (and the right of the Company to convert
Base Rate Loans of such Bank into Eurodollar Rate Loans) shall be suspended for
the duration of such illegality or restriction and the Company shall forthwith
convert all Eurodollar Rate Loans of such Bank then outstanding to Base Rate
Loans in accordance with the terms of this Agreement.

         Section 8.3.      Funding Losses. The Company shall indemnify each Bank
against, and reimburse such Bank on demand for, any loss or expense incurred or
sustained by such Bank, as reasonably determined by such Bank, as a result of
any payment or prepayment (whether by reason of a voluntary prepayment by the
Company or by reason of a mandatory prepayment of the Loans by reason of an
Event of Default or other mandatory prepayment provision relating to all
outstanding Loans set forth herein) or conversion of a Eurodollar Rate Loan made
by such Bank on a day other than the last day of an Interest Period for such
Loan.

         Section 8.4.      Increased Cost of Maintaining Letter of Credit. (a)
If, as a result of any change after the date of this Agreement in (including the
introduction of any new) applicable United States, state or foreign laws or
regulations or the adoption or making of any interpretations, directives or
requests thereof or thereunder by any court or governmental authority charged
with the interpretation or administration thereof, one or more of the following
events occur (herein called "Increased Letter of Credit Cost Changes"):

                   (i)     any reserve, special deposit or similar requirements
         against the Letter of Credit are imposed, modified or deemed
         applicable; or

                  (ii)     any other condition regarding the issuance,
         maintenance of, or participation in the Letter of Credit are imposed
         upon the Letter of Credit Bank or any other Bank, and the result of any
         such event shall be to increase the cost to the Letter of Credit Bank
         or such other Bank of issuing, maintaining, or participating in the
         Letter of Credit;

and the Letter of Credit Bank or such other Bank determines that, by reason
thereof, the cost to the Letter of Credit Bank or such Bank of issuing,
maintaining, or participating in the Letter of Credit is increased by an amount
reasonably determined by the Letter of Credit Bank or such Bank, then, within
fifteen (15) days of the Letter of Credit Bank or such Bank obtaining knowledge
of such change in law, regulation or interpretation thereof, the Letter of
Credit Bank or such Bank shall so notify the Company, and upon receipt of such
notice from the Letter of Credit Bank or such Bank, the Company shall promptly
pay to the Letter of Credit Bank or the Bank, from time to time as specified by
the Letter of Credit Bank or the Bank, additional amounts which shall be
sufficient to compensate the Letter of Credit Bank or such Bank for such
increased cost.


                                      -38-


         (b)      Determinations by the Letter of Credit Bank or any Bank for
purposes of this Section 8.4 of the effect of any Increased Letter of Credit
Cost Change, and of the additional amounts required to compensate the Letter of
Credit Bank or such Bank in respect thereof, shall be conclusive, provided that
such determinations are made reasonably and in good faith.

         Section 8.5.      Mandatory Repayment or Conversion on Certain Events.
On the last day of an Interest Period during which any Orderly Replacement Event
occurs (which relates to all Banks) and no later than four Eurodollar Business
Days after any Immediate Replacement Event relating to one or more Banks, all
outstanding Eurodollar Rate Loans of such Banks shall, at the option of the
Company, be either: (a) prepaid in full by the Company, together with any
accrued and unpaid interest thereon, or (b) converted to Base Rate Loans. Each
Bank shall promptly notify the Company and Agent of any Immediate Replacement
Event and any Orderly Replacement Event known to such Bank.

         Section 8.6.    Survival.  The obligations of the Company under
Sections 8.1 through 8.4 of this Agreement shall survive the repayment of the
Loans and all Reimbursement Obligations and the cancellation of the Notes.


                                   ARTICLE IX


                                    THE AGENT

         Section 9.1.      Authorization and Action. Each Bank hereby appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement and the Notes as are delegated to it
as Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto, and the Agent hereby accepts such authorization
and appointment. As to any matters not expressly provided for by this Agreement
and the Notes or provided for with specific reference to this Section 9.1
(including, without limitation, enforcement or collection of the Obligations),
the Agent shall not be required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from action) upon the instructions of the
Majority Banks and such instructions shall be binding upon all Banks and all
holders of the Notes; provided, however, that the Agent shall not be required to
take any action which exposes the Agent to liability or which is contrary to
this Agreement or the Notes or applicable law. As to any provisions of this
Agreement under which action may be taken or approval given by the Majority
Banks, the action taken or approval given by the Majority Banks shall be binding
upon all Banks to the same extent and with the same effect as if each Bank had
joined therein. The Agent shall be entitled to rely upon any note, notice,
consent, certificate, affidavit, letter, teletype message, facsimile
transmission, statement, order or other document believed by it to be genuine
and correct and to have been signed or sent by the proper Person or Persons and,
in respect of legal matters, upon the opinion of counsel selected by the Agent.
The Agent may deem and treat the payee of any Note as the owner thereof for all
purposes hereof unless and until a written notice of the assignment or transfer
thereof shall have been filed with the Agent. Any request, authority or consent
of any Person who at the time of making such request or giving such authority or
consent is the holder of any Note shall be conclusive and binding on any


                                      -39-


subsequent holder, transferee or assignee of such Note or of any note or notes
issued in exchange therefor. The relationship between the Agent and the Banks is
and shall be that of agent and principal only, and nothing contained in this
Agreement or any other Loan Document shall be construed to constitute the Agent
as a trustee or fiduciary for any Bank or the Company.

         Section 9.2.      Agent's Reliance, Etc. Neither the Agent nor any of
its directors, officers, agents or employees shall be liable to any Bank for any
action taken or omitted to be taken by it or by such directors, officers, agents
or employees under or in connection with this Agreement or the Notes, except for
its or their own gross negligence or willful misconduct. Without limitation of
the generality of the foregoing, the Agent: (i) may consult with legal counsel,
independent public accountants and other experts selected by it and shall not be
liable to any Bank for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such experts; (ii) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations made in or in connection with this
Agreement or the Notes; (iii) shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or conditions
of this Agreement or the Notes on the part of the Company or to inspect the
property (including the books and records) of the Company; (iv) shall not be
responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the
Notes, or any other instrument or document furnished pursuant thereto; and (v)
shall incur no liability under or in respect to this Agreement or the Notes by
acting upon any notice, consent, certificate or other instrument or writing
(which may be by facsimile transmission, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.

         Section 9.3.      Agent and Affiliates. With respect to its Commitment,
the Loans made by it and the Notes issued to it, if any, the Agent shall have
the same rights and powers under this Agreement as any other Bank and may
exercise the same rights and powers under this Agreement as any other Bank and
may exercise the same as though it were not the Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include the Agent in its
individual capacity. Unrelated to its role as Agent as set forth herein, the
Agent and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with, the Company, and any Person who may do
business with or own securities of the Company, all as if it were not the Agent
and without any duty to account therefor to the Banks.

         Section 9.4.      Representations of the Banks. Each Bank acknowledges
that it has, independently and without reliance upon the Agent, or any affiliate
or subsidiary of the Agent, the Letter of Credit Bank, or any other Bank and
based on the financial statements referred to in Section 4.4 hereof and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement; and that such Bank
has actively engaged in the negotiation of all of the terms of this Agreement.
Each Bank also acknowledges that it will, independently and without reliance
upon the Agent, the Letter of Credit Bank or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement or the Notes. The Agent has no duty or responsibility, either
initially or on a continuing basis, to provide any Bank with any credit or other
information with respect to the Company whether coming into its possession as of
the date of this Agreement or at any time


                                      -40-


thereafter, or to notify any Bank of any Event of Default except as provided in
Section 9.5 hereof. This Agreement and all instruments or documents delivered in
connection with this Agreement have been reviewed and approved by such Bank and
such Bank has not relied on the Agent as to any legal or factual matter in
connection therewith or in connection with the transactions contemplated
thereunder.

         Section 9.5.      Events of Default. In the event of the occurrence of
any Default or Event of Default, any Bank knowing of such event may (but shall
have no duty to), or the Company pursuant to Section 5.7 hereof shall, give the
Agent and Letter of Credit Bank written notice specifying such Event of Default
or other event and expressly stating that such notice is a "notice of default".
Neither the Agent nor the Letter of Credit Bank shall be deemed to have
knowledge of such events unless the Agent or Letter of Credit Bank, as
applicable, has received such notice. In the event that the Agent receives such
a notice of the occurrence of an Event of Default, the Agent shall give written
notice thereof to the Banks. The Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed in writing by
the Majority Banks; provided, however, that, unless and until the Agent shall
have received such directions, the Agent may take such action, or refrain from
taking such action, with respect to such Event of Default as it shall deem
advisable and in the best interest of the Banks.

         Section 9.6.      Right to Indemnity. Except for action expressly
required of the Agent hereunder, the Agent shall be fully justified in failing
or refusing to take any action hereunder unless it shall first be indemnified to
its satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.

         Section 9.7.      Indemnification. The Banks hereby agree to indemnify
the Agent and the Letter of Credit Bank (to the extent not reimbursed by the
Company), ratably according to their respective Commitments, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent
and/or the Letter of Credit Bank in any way relating to or arising out of this
Agreement, the Notes and/or the Letter of Credit or any action taken or omitted
by the Agent and/or the Letter of Credit Bank under this Agreement, the Notes
and/or the Letter of Credit; provided, however, that no Bank shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Agent's or the Letter of Credit Bank's gross negligence or willful misconduct.
Without limitation of the foregoing, each Bank agrees to reimburse the Agent
and/or the Letter of Credit Bank promptly upon demand for its ratable share of
any reasonable out-of-pocket expenses (including reasonable counsel fees)
incurred by the Agent and/or the Letter of Credit Bank in connection with the
administration, or enforcement of, or the preservation of any rights under, this
Agreement, the Notes and/or the Letter of Credit, to the extent that the Agent
or the Letter of Credit Bank is not reimbursed for such expenses by the Company.

         Section 9.8.      Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Banks and the Company and may be removed at
any time with or without cause by the Majority Banks. Upon any such resignation
or removal, the Company shall have the right to appoint a successor Agent,
subject to confirmation by the Majority Banks. If no


                                      -41-


successor Agent shall have accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation or the Majority Banks' removal
of the Agent, the Agent may, on behalf of the Banks, appoint a successor Agent
who shall be willing to accept such appointment. In any event, such successor
Agent shall be a commercial bank organized or licensed under the laws of the
United States of America or of any State thereof and shall have a combined
capital and surplus of at least $1,000,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Agent, and the retiring or removed Agent
shall be discharged from its duties and obligations as agent under this
Agreement. After any Agent's resignation or removal hereunder as Agent, the
provisions of this Article IX shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.


                                    ARTICLE X


                                  MISCELLANEOUS

        Section 10.1.      Rights and Remedies. No delay or failure of the
Banks, the Letter of Credit Bank or the Agent or any one of them or of the
Company in exercising any rights, powers or privileges hereunder shall affect
such right, power or privilege, nor shall any single or partial exercise thereof
preclude any further exercise thereof, or the exercise of any other right, power
or privilege. The rights and remedies of the Banks, the Letter of Credit Bank
and the Agent or any one of them and of the Company under this Agreement are
cumulative and not exclusive of any rights or remedies which they would
otherwise have. Failure on the part of any Bank, the Letter of Credit Bank, the
Agent or the Company to exercise any right, power or privilege given it
hereunder shall not be the breach of any obligation of the Bank or the Company
to any other party to this Agreement or to any other Person.

        Section 10.2.      Notices. Except as otherwise expressly provided for
herein, notices, which may be given or are required to be given hereunder, shall
be in writing and may be mailed, postage prepaid, addressed as follows or sent
by telex or facsimile:

                   (a)     If to the Company, both to:

                                    Delta Air Lines, Inc.
                                    Hartsfield Atlanta International Airport
                                    Atlanta, Georgia  30320
                                    Attention:  Treasurer
                                    Facsimile:  (404) 715-2817

                                    And to:

                                    Delta Air Lines, Inc.
                                    Hartsfield Atlanta International Airport
                                    Atlanta, Georgia  30320
                                    Attention:  General Counsel, Law Department
                                    Facsimile:  (404) 773-1657


                                      -42-


                   (b)     If to Agent:

                                    Bayerische Hypo- und Vereinsbank AG, New
                                      York Branch
                                    150 East 42nd Street, 29th Floor
                                    New York, New York 10017
                                    Attention:  Marianne Weinzinger
                                    Facsimile:  (212) 672-5530

                                     And to:

                                    Bayerische Hypo- und Vereinsbank AG, New
                                      York Branch
                                    150 East 42nd Street, 28th Floor
                                    New York, New York 10017
                                    Attention: Letter of Credit Department
                                    Facsimile:  (212) 672-5506

                                    Bayerische Hypo- und Vereinsbank AG, New
                                      York Branch
                                    150 East 42nd Street, 30th Floor
                                    New York, New York 10017
                                    Attention:  Agency Services
                                    Facsimile:  (212) 672-5523

                   (c)     If to any Bank or the Letter of Credit Bank other
         than the Agent at that address or facsimile number designated in
         writing to the Company and the Agent from time to time.

A party may specify a different address or facsimile number by furnishing such
change in writing to all other parties hereto. Additionally, notice may, in lieu
of being given by mail or facsimile, be delivered personally to any officer of
any party to whose attention it could have been addressed.

        Section 10.3.      Expenses, Indemnification, Etc. (a) The Company shall
pay all reasonable costs, expenses, taxes and fees (i) incurred by the Agent in
connection with the preparation, execution and delivery of this Agreement, the
Notes and all other documents incident hereto or thereto (collectively, the
"Loan Documents") including, without limitation (but subject to the provisions
of the Fee Letter), the reasonable costs and professional fees of Chapman and
Cutler, Chicago, Illinois, whether or not any transaction contemplated hereby
shall be consummated, and any and all stamp, intangible or other taxes that may
be payable or determined in the future to be payable in connection therewith,
(ii) incurred by the Agent in connection with the preparation, execution and
delivery of any waiver, amendment or consent by the Banks, the Letter of Credit
Bank or the Agent relating to the Loan Documents including, without limitation,
reasonable costs and professional fees of counsel for the Agent; and (iii)
actually incurred by the Agent, the Letter of Credit Bank or any of the Banks in
enforcing the Loan Documents including, without limitation, reasonable
attorneys' fees of counsel for the Agent, the Letter of Credit Bank or the
Banks.


                                      -43-


         (b)      The Company shall indemnify the Agent, the Letter of Credit
Bank and each Bank and hold the Agent, the Letter of Credit Bank and each Bank
(and all directors, officers, employees and agents of any of the foregoing (the
Agent, the Letter of Credit Bank, the Banks and such directors, officers,
employees and agent each referred to as an "Indemnified Party")) harmless
against, any and all costs, losses, liabilities, claims, damages or expenses
incurred by an Indemnified Party, whether jointly or severally, and whether or
not such Indemnified Party is designated a party thereto, arising out of or by
reason of, or relating directly or indirectly to, (i) any investigation,
litigation or other proceeding, pending or threatened, regarding any actions or
failure to act by the Company involving this Agreement or any transaction
contemplated hereby, (ii) any actual or proposed use by the Company or any of
its Subsidiaries of the proceeds from any borrowing hereunder or the Letter of
Credit, or (iii) the Agent's, any Bank's, the Letter of Credit Bank's or the
Company's entering into and complying with this Agreement or in issuing or
delivering the Notes or the Letter of Credit and including, without limitation,
the reasonable fees and disbursements of such Indemnified Party's separate
counsel incurred in connection with any such investigation, litigation or other
proceeding (which shall be advanced by the Company on request notwithstanding
any claim or assertion that the Indemnified Party is not entitled to
indemnification hereunder upon receipt of an undertaking to reimburse the
Company if it is actually and finally determined by a court of competent
jurisdiction that the party is not so entitled). However, the indemnity of the
Company set forth herein shall not cover the costs, losses, liabilities, claims,
damages or expenses (x) incurred by an Indemnified Party arising out of the bad
faith or willful misconduct of such Indemnified Party (as actually and finally
determined by a court of competent jurisdiction) or (y) incurred by the Agent in
connection with a suit, claim or cause of action brought against the Agent by a
Bank pursuant to which such Bank alleges that the Agent has failed to perform
the ministerial duties of the Agent as expressly set forth herein (such as
administering the funding and collection of Loans, determining interest rates
and the like).

         (c)      The Agent, the Letter of Credit Bank and each Bank agree that
in the event that any investigation, litigation, suit, action or proceeding is
asserted or threatened in writing or instituted against it or any other
Indemnified Party for which the Agent, the Letter of Credit Bank or any Bank may
desire indemnity or defense hereunder, the Agent, the Letter of Credit Bank or
such Bank shall promptly notify the Company thereof in writing and agree, to the
extent appropriate, to consult with the Company with a view to minimizing the
cost to the Company of its obligations under this Section 10.3.

         (d)      No action taken by legal counsel chosen by an Indemnified
Party in defending against any such investigation, litigation, suit, action or
proceeding or requested remedial, removal or response action shall vitiate or in
any way impair the obligations and duties of the Company hereunder to indemnify
and hold harmless each Indemnified Party; provided, however, that if the Company
is required to indemnify any Indemnified Party pursuant hereto, such Indemnified
Party shall not settle or compromise any such investigation, litigation, suit,
action or proceeding without the prior written consent of the Company (which
consent shall not be unreasonably withheld or delayed) so long as the Company
has provided evidence reasonably satisfactory to such Indemnified Party that the
Equity of the Company and its Subsidiaries on a consolidated basis is not less
than zero.


                                      -44-


         (e)      The obligations of the Company under this Section 10.3 shall
survive transfer, payment or satisfaction of any Loan, Reimbursement Obligation
and Note and any amendment, supplementation, modification or termination of this
Agreement.

        Section 10.4.      Amendments to This Agreement and the Notes. Any
provisions of this Agreement and the Notes may be amended, terminated, waived or
otherwise modified in writing by the Company and the Majority Banks, and any
such amendment, termination, waiver or other modification shall be binding upon
all of the Banks to the same extent and with the same effect as if each Bank had
joined therein; provided, however, that, notwithstanding the foregoing: (a) any
provisions of this Agreement and the Notes with respect to any change in (i) the
expressed maturity date of the whole or any portion of principal or interest
payable hereunder or on any Loan or under any Note, (ii) the rate of interest
payable on any Loan or on the Reimbursement Obligations, (iii) the amount of any
Commitment (except as permitted in Sections 2.17 and 10.6), (iv) the amount or
due date of any fees payable hereunder, or (v) the due date of any principal of,
or interest on, any Loan, or the date on which any Reimbursement Obligation is
due and payable, or (vi) this Section 10.4, may be amended or otherwise modified
only in a writing signed by the Company and all of the Banks; (b) any Event of
Default described in Sections 7.1(a), 7.1(b) or 7.1(c) may be waived only in a
writing signed by all of the Banks; (c) no provisions of Article IX shall be
amended, modified, or waived without the consent of the Agent and Letter of
Credit Bank; and (d) no provisions of Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6, 2.7
or 2.8 shall be amended, modified or waived without the consent of the Letter of
Credit Bank. The definition of "Majority Banks" as set forth herein shall not be
changed without the unanimous consent of the Banks.

        Section 10.5.      Agreement as to Right of Set-off, Sharing of Losses.
So long as any Loan or Reimbursement Obligation is outstanding, each Bank agrees
that, if it has received payment on any Loan or Reimbursement Obligation,
whether by set-off or otherwise, including, but not limited to, any payment
received by such Bank under any applicable bankruptcy, insolvency or similar
laws, in a greater proportion than payments made on all such Obligations then
outstanding to the Banks, the Bank so receiving such greater proportionate
payment agrees to purchase a portion of the Loans or Reimbursement Obligations
or participations therein held by the other Banks, so that after such purchase
each Bank will hold an unpaid balance on its Loans or Reimbursement Obligations
or participations therein bearing the same proportion to the then outstanding
aggregate principal amount of the Loans and Reimbursement Obligations as such
Bank's Commitment bears to the Banks' aggregate Commitments; provided that if
any amount so received by any Bank in payment of the Loans or Reimbursement
Obligations or participations therein held by it shall be, as a result of the
reversal of the exercise of any such right (whether by court order or voluntary
action on the part of such Bank), returned to the Company or other Subsidiary or
paid as directed by such court order by such Bank, then each other Bank which
shall have theretofore received its share of any such payment pursuant to this
Section 10.5 shall, upon demand, promptly repay, without interest, the amount of
such share to such Bank, or, if the Bank exercising such right shall not have
made the purchases provided for in this Section 10.5 prior to such reversal, the
other Banks shall have no further rights under this Section 10.5 in respect to
such amount. Except as provided in this Section and in Sections 9.6 and 9.7, no
Bank shall be responsible to any other Bank for losses or claims which such Bank
may incur in connection with the transactions contemplated by this Agreement.
The Company


                                      -45-


agrees that any Bank so purchasing a participation from another Bank pursuant to
this Section 10.5 may exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Bank were the
direct creditor of the Company in the amount of such participation.

        Section 10.6.      Successors and Assigns; Participations. (a) This
Agreement shall be binding upon the Company, the Agent, the Letter of Credit
Bank and the Banks and their respective successors and assigns, and shall inure
to the benefit of the Company and the Banks and their respective successors and
assigns. The Company may not assign its rights or obligations hereunder, except
as permitted by Section 6.3 hereof. Other than by virtue of operation of law, no
Bank shall assign any portion of its Commitment hereunder unless (a) if the
assignee is not a Bank hereunder nor an affiliate of such assigning Bank, the
portion of the Bank's Commitment to be assigned is equal to or greater than
$5,000,000 (or such lesser amount as the Company may approve in its sole
discretion), (b) the assigning Bank has received the prior written approval of
the Company, the Agent and the Letter of Credit Bank to the proposed assignment
(which consents of the Company and the Agent shall not be unreasonably
withheld); (c) the Agent has been paid an assignment fee of $3,500 by the
assigning Bank; and (d) the bank which has received the assignment of the
Commitment, the assigning Bank, the Company and the Agent shall have executed an
Assumption Agreement substantially in the form of Exhibit C hereto. Upon
compliance with the provisions set forth above, such financial institution shall
thereupon and thereafter be deemed to be a Bank for all purposes hereunder, and
the Agent shall give notice to all of the Banks of the assignment.

         (b)      Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans or Reimbursement Obligations. In the event of any such
grant by a Bank of a participating interest to a Participant, whether or not
upon notice to the Company and the Agent, such Bank shall remain responsible for
the performance of its obligations hereunder, and the Company and the Agent
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement. Any agreement pursuant
to which any Bank may grant such a participating interest shall provide that
such Bank shall retain the sole right and responsibility to enforce the
obligations of the Company hereunder including, without limitation, the right to
approve any amendment, modification or waiver of any provision of this
Agreement; provided that such participation agreement may provide that such Bank
will not agree to any modification, amendment or waiver of this Agreement
described in clause (i), (ii), (iv) or (v) of Section 10.4 without the consent
of the Participant. The Company agrees that each Participant shall, to the
extent provided in its participation agreement, be entitled to the benefits of
Article VIII with respect to its participating interest; provided that no
Participant shall be entitled to receive any greater payment thereunder than the
Bank which granted it a participating interest would be entitled to receive. An
assignment or other transfer which is not permitted by subsection (a) above or
(c) below shall be given effect for purposes of this Agreement only to the
extent of a participating interest granted in accordance with this subsection.

         (c)      Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Notes to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.


                                      -46-


        Section 10.7.      Holidays. When any payment hereunder falls due on a
day that is not a Business Day, such payment shall be made as herein provided on
the next succeeding Business Day. Interest shall continue to accrue on the
principal to be paid until it is paid.

        Section 10.8.      Governing Law; Submission to Jurisdiction; Venue. (a)
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

         (b)      Any legal action or proceeding against the Company with
respect to this Agreement may be brought in any court of the State of New York
sitting in the Borough of Manhattan or in the United States District Court for
the Southern District of New York, and, by execution and delivery of this
Agreement, the Company hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts for such purposes.

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

        Section 10.9.      Right of Setoff. If an Event of Default shall have
occurred and be continuing, the Agent, on behalf of itself, the Letter of Credit
Bank and each Bank, is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held any
other indebtedness at any time owing by the Agent to or for the credit or the
account of the Company against any and all of the obligations of the Company
then existing under this Agreement held by the Agent. The right of the Agent
under this Section 10.9 is in addition to other rights and remedies which the
Agent, the Letter of Credit Bank or such Bank may have. Promptly following any
exercise of the right of setoff, the Agent shall give the Company written notice
thereof.

       Section 10.10.      Execution and Effective Date. This Agreement may be
executed in any number of counterparts, and any party hereto may execute this
Agreement by signing any such counterpart. The Company shall deliver one such
executed counterpart to the Agent and the Letter of Credit Bank and each Bank
shall deliver one such executed counterpart to the Agent for further delivery to
the Company. This Agreement shall be effective as of the Effective Date.

       Section 10.11.      Representations of Banks. Each Bank represents for
itself only that it is acquiring the Loans, Reimbursement Obligations and Notes
to be acquired by it hereunder for its own account in the ordinary course of
extending credit as a banking institution and not with a view to the
distribution or resale thereof, subject, nevertheless, to any requirement of law
that the disposition of the property of a Bank shall at all times be within its
control.


                                      -47-


       Section 10.12.      Severability. Any provision of this Agreement or of
the Notes which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or thereof
or affecting the validity or enforceability of such provisions in any other
jurisdiction.

       Section 10.13.      Entire Agreement. This Agreement and the Notes
express the entire understanding of the parties with respect to the transactions
contemplated hereby. Neither this Agreement, the Notes nor any term hereof or
thereof may be changed, waived, discharged or terminated orally or in writing,
except as provided in Section 10.4 hereof.


                                      -48-


         IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Agreement to be duly executed.

                                    DELTA AIR LINES, INC.


                                    By:      /s/  M. Michele Burns
                                       -----------------------------------------
                                    Title:        Senior Vice President -
                                          --------------------------------------
                                                  Finance and Treasurer
                                           -------------------------------------


                                      -49-



Commitment:  $50,963,733            BAYERISCHE HYPO- UND VEREINSBANK AG,
                                      New York Branch, in its individual
                                      capacity as a Bank and as Agent and Letter
                                      of Credit Bank


                                    By:      /s/  Marianne Weinzinger
                                       -----------------------------------------
                                    Title:        Director
                                          --------------------------------------


                                    By:      /s/  Felicia Pierson
                                       -----------------------------------------
                                    Title:        Associate Director
                                          --------------------------------------


                                      -50-


Commitment:  $23,000,000            ABN AMRO BANK N.V.


                                    By:      /s/  Claudia C. Heldring
                                       -----------------------------------------
                                       Title:      Group Vice President
                                             -----------------------------------


                                    By:      /s/  Carla S. Waggoner
                                       -----------------------------------------
                                       Title:      Assistant Vice President
                                             -----------------------------------


                                      -51-



Commitment:  $23,000,000            BANK ONE, NA


                                    By:      /s/  Kenneth Kramer
                                       -----------------------------------------
                                       Title:      Managing Director
                                             -----------------------------------


                                      -52-



Commitment:  $23,000,000            BANQUE NATIONALE DE PARIS



                                    By:      /s/  John Stacy
                                       -----------------------------------------
                                       Title:      Senior Vice President
                                             -----------------------------------


                                      -53-



Commitment:  $23,000,000            CREDIT INDUSTRIEL ET COMMERCIAL



                                    By:      /s/  Eric Longuet
                                       -----------------------------------------
                                       Title:      Vice President
                                             -----------------------------------



                                    By:      /s/  Albert Calo
                                       -----------------------------------------
                                       Title:      Vice President
                                             -----------------------------------


                                      -54-



Commitment:  $23,000,000            CREDIT LYONNAIS, New York Branch



                                    By:      /s/  Pascal Poupelle
                                       -----------------------------------------
                                       Title:      President and COO
                                             -----------------------------------


                                      -55-



Commitment:  $11,500,000            DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG



                                    By:      /s/  J.W. Somers
                                       -----------------------------------------
                                       Title:      Senior Vice President
                                             -----------------------------------



                                    By:      /s/  Gary Franke
                                       -----------------------------------------
                                       Title:      Vice President
                                             -----------------------------------


                                      -56-



Commitment:  $23,000,000            THE INDUSTRIAL BANK OF JAPAN, LIMITED



                                    By:      /s/  Minami Miure
                                       -----------------------------------------
                                       Title:      Senior Vice President
                                             -----------------------------------


                                      -57-



Commitment:  $23,000,000            THE MITSUBISHI TRUST & BANKING
                                      CORPORATION



                                    By:      /s/  Scott J. Paige
                                       -----------------------------------------
                                       Title:      Senior Vice President
                                             -----------------------------------


                                      -58-



Commitment:  $23,000,000            THE SANWA BANK, LIMITED



                                    By:      /s/  Michael J. Lawrence
                                       -----------------------------------------
                                       Title:      Senior Vice President
                                             -----------------------------------


                                      -59-



 Commitment:  $17,000,000           BANCA COMMERCIALE ITALIANA,
                                      New York Branch



                                    By:      /s/  Charles Dougherty
                                       -----------------------------------------
                                       Title:      Vice President
                                             -----------------------------------



                                    By:      /s/  J. Dickerhof
                                       -----------------------------------------
                                       Title:      Vice President
                                             -----------------------------------


                                      -60-




Commitment:  $17,000,000            THE GOVERNOR AND COMPANY OF THE BANK OF
                                      IRELAND



                                    By:      /s/  Fiona O'Connor
                                       -----------------------------------------
                                       Title:      Senior Manager
                                             -----------------------------------



                                    By:      /s/  Conor Barrett
                                       -----------------------------------------
                                       Title:      Assistant Manager
                                             -----------------------------------


                                      -61-



Commitment:  $17,000,000            THE BANK OF TOKYO-MITSUBISHI, LTD. --
                                           New York Branch



                                    By:      /s/  Joseph P. Devoe
                                       -----------------------------------------
                                       Title:      Attorney-in-fact
                                             -----------------------------------


                                      -62-



Commitment:  $17,000,000            THE CHASE MANHATTAN BANK



                                    By:      /s/  Richard C. Smith
                                       -----------------------------------------
                                       Title:      Vice President
                                             -----------------------------------


                                      -63-



Commitment:  $17,000,000            CITIBANK, N.A.



                                    By:      /s/  Henry J. Matthews
                                       -----------------------------------------
                                       Title:      Vice President
                                             -----------------------------------


                                      -64-



Commitment:  $17,000,000            COMMERZBANK AG



                                    By:      /s/  Harry Yergey
                                       -----------------------------------------
                                       Title:  Senior Vice President and Manager
                                              ----------------------------------


                                    By:      /s/  Subash Viswanathan
                                       -----------------------------------------
                                       Title:      Vice President
                                             -----------------------------------


                                      -65-



Commitment:  $17,000,000            LANDESBANK SACHSEN GIROZENTRALE



                                    By:      /s/  Stefan Pfisterer
                                       -----------------------------------------
                                       Title:      Assistant Director
                                             -----------------------------------



                                    By:      /s/  Hermann Stengel
                                       -----------------------------------------
                                       Title:      Assistant Director
                                             -----------------------------------


                                      -66-



Commitment:  $17,000,000            NORDDEUTSCHE LANDESBANK GIRZENTRALE,
                                         New York Branch and/or Cayman Islands
                                         Branch



                                    By:      /s/  Stephanie Finnen
                                       -----------------------------------------
                                       Title:      Vice President
                                             -----------------------------------



                                    By:      /s/  Stephen K. Hunter
                                       -----------------------------------------
                                       Title:      Senior Vice President
                                             -----------------------------------


                                      -67-



Commitment:  $17,000,000            WESTDEUTSCHE LANDESBANK GIROZENTRALE,
                                      New York Branch



                                    By:      /s/  Alan S. Bookspan
                                       -----------------------------------------
                                       Title:      Director
                                             -----------------------------------



                                    By:      /s/  Walter T. Duffy III
                                       -----------------------------------------
                                       Title:      Associate Director
                                             -----------------------------------


                                      -68-



Commitment:  $10,000,000            THE DAI ICHI KANGYO BANK, LIMITED



                                    By:      /s/  Robert P. Gallagher, Jr.
                                       -----------------------------------------
                                       Title:      Vice President
                                             -----------------------------------


                                      -69-



Commitment:  $11,500,000            DEUTSCHE VERKEHRSBANK AG



                                    By:      /s/  Constance Laudenschlager
                                       -----------------------------------------
                                       Title:      Assistant Vice President
                                             -----------------------------------



                                    By:      /s/  Christian Wulf
                                       -----------------------------------------
                                       Title:      Assistant Vice President
                                             -----------------------------------


                                      -70-


                                    EXHIBIT A


                                  FORM OF NOTE

$-----------------                                         ------------, -------

         FOR VALUE RECEIVED, DELTA AIR LINES, INC., a Delaware corporation (the
"Maker"), promises to pay to the order of ____________________________ (together
with any successor and assign thereof or any subsequent holder hereof referred
to herein as the "Holder") in lawful money of the United States the lesser of
(a) _________________ Dollars or (b) the aggregate unpaid principal amount of
all Loans which are still outstanding and which were made to the Maker by the
Holder pursuant to that certain Credit Agreement dated as of May 19, 2000 (as
the same may be amended, modified or supplemented from time to time, the "Credit
Agreement"; terms used herein and not defined herein have their respective
defined meanings as set forth in the Credit Agreement) by and among the Maker,
the Banks party thereto and Bayerische Hypo- und Vereinsbank AG, New York
Branch, as Agent, at the Main Office of the Agent, or at such other place as is
otherwise specified in the Credit Agreement. The Maker shall repay the principal
amount of this Note on the dates and at the times set forth in the Credit
Agreement. The outstanding principal amount hereof shall bear interest at the
rates and shall be payable at the times set forth in the Credit Agreement.

         This Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the Credit Agreement. To the extent provided in the Credit
Agreement, this Note is subject to voluntary prepayment, in whole or in part,
without premium or penalty.

         Upon the occurrence of an Event of Default, the aggregate unpaid
principal amount of all Loans evidenced hereby which are still outstanding and
accrued interest thereon may become due and payable in the manner and with the
effect provided in the Credit Agreement.

         Time is of the essence of this Note, and in case this Note is not paid
when due, and is subsequently collected by law or through an attorney at law, or
under advice therefrom, the Maker agrees to pay all costs of collection incurred
by the Holder including, without limitation, the reasonable fees and
disbursements of counsel to the Holder.

         The undersigned and all endorsers or other parties to this Note hereby
waive presentment, demand for payment, protest and notice of nonpayment.

         This Note shall be construed and performance thereof shall be
determined according to the laws of the State of New York.


         IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Note as of the date first written above.

                                    DELTA AIR LINES, INC.


                                    By
                                      ------------------------------------------
                                      Name:
                                           -------------------------------------
                                      Title:
                                            ------------------------------------


                                      A-2


                                   EXHIBIT B-1


             FORM OF NOTICE AND AGREEMENT REGARDING ADDITION OF BANK

                                                                          [Date]

Bayerische Hypo- und Vereinsbank AG,
   New York Branch, as Agent
150 East 42nd Street, 30th Floor
New York, New York  10017
Attention:  Agency Services

Delta Air Lines, Inc.
Administrative Center
Hartsfield Atlanta International Airport
Atlanta, Georgia  30320
Attention:  Treasurer

Ladies and Gentlemen:

         Reference is made to that certain Credit Agreement dated as of May 19,
2000 (as amended, modified or supplemented from time to time, the "Credit
Agreement") by and among Delta Air Lines, Inc. (the "Company"), the Banks party
thereto and Bayerische Hypo- und Vereinsbank AG, New York, as Agent. Terms used
herein and not defined herein have their respective defined meanings as set
forth in the Credit Agreement.

          1.      Pursuant to Section 2.17.3 of the Credit Agreement, the
undersigned hereby requests that it become a Bank under the Credit Agreement.
The proposed Commitment of the undersigned as a Bank under the Credit Agreement
would equal $___________. The undersigned proposes that the undersigned shall
become a Bank under the Credit Agreement on the later of (a) the date of consent
by the Company and the Letter of Credit Bank and (b) ___________________ (the
"Effective Date").

          2.      Effective upon the Effective Date, the undersigned hereby
assumes all of the obligations of a Bank having a Commitment of $______________
under the Credit Agreement as if the undersigned were an original Bank and
signatory under the Credit Agreement including, but not limited to, the
obligation of a Bank to make Loans to the Company thereunder and to reimburse
the Agent, for the account of the Letter of Credit Bank, for Drawings under the
Letter of Credit to the extent of the Commitment of the undersigned, and to
indemnify the Agent as provided therein. In this connection, the undersigned
hereby represents that it has received and reviewed a copy of the Credit
Agreement and hereby ratifies and approves all of the terms and conditions of
the Credit Agreement and the other documents executed and delivered in
connection therewith.


                                     B-1-1


          3.      For purposes of delivering any notice to the  undersigned as a
Bank under the Credit Agreement, the following sets forth the address of the
undersigned for such purpose:

                                    -----------------------------
                                    -----------------------------
                                    -----------------------------
                                    Telecopy No.
                                                -----------------
                                    Attention:
                                              -------------------

          4.      The undersigned acknowledges that it has, independently and
without reliance upon the Agent, or on any affiliate or subsidiary thereof, or
any other Bank and based on the financial statements supplied by the Company and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to become a Bank under the Credit Agreement. The
undersigned also acknowledges that it will, independently and without reliance
upon the Agent or any other Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Credit Agreement or its respective
Note. The Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide the undersigned with any credit or other
information with respect to the Company or to notify the undersigned of an Event
of Default except as provided in Section 9.5 of the Credit Agreement. The
undersigned has not relied on the Agent as to any legal or factual matter in
connection therewith or in connection with the transactions contemplated
thereunder.

          5.      This letter agreement shall not be binding against the
undersigned unless and until the Company and the Agent have executed their
consent to the foregoing at the space provided below.

          6.      THIS LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

          7.      This letter agreement may be executed in any number of
counterparts each of which, when taken together, shall constitute one and the
same agreement.


                                    Very truly yours,

                                    [FINANCIAL INSTITUTION]


                                    By:
                                       -----------------------------------------
                                        Name
                                            ------------------------------------
                                        Title:
                                              ----------------------------------

         The Company hereby agrees that, on the Effective Date,
_____________________ ("______________") shall be a Bank under the Credit
Agreement having a Commitment equal to


                                     B-1-2


$________________ pursuant to the terms and conditions set forth above. The
Company agrees that ____________________________ shall have all of the rights
and remedies of a Bank under the Credit Agreement as if __________________ were
an original Bank signatory under the Credit Agreement including, but not limited
to, the right of a Bank to receive payments of principal and interest with
respect to the Loans made by the Banks and to receive the commitment and other
fees payable to the Banks as provided in the Credit Agreement. Further,
_______________________ shall be entitled to the indemnification provisions from
the Company in favor of the Banks as provided in the Credit Agreement.

                                    DELTA AIR LINES, INC.


                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------



         The Agent hereby consents to ___________________ becoming a Bank under
the Credit Agreement pursuant to the foregoing terms and conditions [and
confirms that each of the Banks also consent thereto].

                                    BAYERISCHE HYPO- UND VEREINSBANK AG,
                                      New York Branch, as Agent


                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------


                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

         The Letter of Credit Bank hereby consents to ___________________
becoming a Bank under the Credit Agreement pursuant to the foregoing terms and
conditions.


                                     B-1-3


                                    BAYERISCHE HYPO- UND VEREINSBANK AG,
                                      New York Branch, as Letter of Credit Bank


                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                     B-1-4


                                   EXHIBIT B-2


                       FORM OF AGREEMENT OF EXISTING BANK
                            TO REPLACE REPLACED BANK


Bayerische Hypo- und Vereinsbank AG,
   New York Branch, as Agent
150 East 42nd Street, 30th Floor
New York, New York  10017

Attention:  Agency Services

Ladies and Gentlemen:

         Reference is made to that certain Credit Agreement dated as of May 19,
2000 (as amended, modified or supplemented from time to time, the "Credit
Agreement") by and among Delta Air Lines, Inc. (the "Company"), the Banks party
thereto and Bayerische Hypo- und Vereinsbank AG, New York Branch, as Agent.
Terms used herein and not defined herein have their respective defined meanings
as set forth in the Credit Agreement.

         Pursuant to Section 2.17.3 of the Credit Agreement, the undersigned
Bank (the "Existing Bank") hereby agrees to assume [$___________] of the
obligations and Commitment of ________________________________ (the "Replaced
Bank") under the Credit Agreement. Accordingly, the Commitment of the Existing
Bank shall be increased from $_______________ to $________________. Except for
the increase in the Commitment contemplated hereby, the Existing Bank shall
continue to have all of the rights, remedies, duties and obligations of a Bank
under the Credit Agreement.

                                    Very truly yours,

                                    [EXISTING BANK]


                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                     B-2-1


         The Company hereby consents to the above-described increase in the
Commitment of [Insert Bank] under the Credit Agreement.

                                    DELTA AIR LINES, INC.


                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

         The Letter of Credit Bank hereby consents to the above-described
increase in the Commitment of [Insert Bank] under the Credit Agreement.

                                    BAYERISCHE HYPO- UND VEREINSBANK AG,
                                      New York Branch, as Letter of Credit Bank


                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------


                                     B-2-2


                                    EXHIBIT C


                   FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

         AGREEMENT dated as of __________, ______, among _______________________
(the "Assignor"), _______________________ (the "Assignee"), DELTA AIR LINES,
INC., (the "Company") and BAYERISCHE HYPO- UND VEREINSBANK AG, NEW YORK BRANCH,
as Agent (the "Agent").


                                   WITNESSETH:

         WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Credit Agreement dated as of May 19, 2000 among the Company, the
Assignor and the other Banks party thereto, as Banks, Bayerische Hypo- und
Vereinsbank AG, New York Branch, as Letter of Credit Bank and the Agent (as
amended, modified or supplemented from time to time, the "Credit Agreement");

         WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Company and participate in Drawings made under
the Letter of Credit in an aggregate principal amount at any time outstanding
not to exceed $______________.

         WHEREAS, Loans made to the Company by the Assignor and Reimbursement
Obligations owed to the Assignor under the Credit Agreement in the aggregate
principal amount of $__________ are outstanding at the date hereof and a
description of the interest rates and interest periods of such Loans and
Reimbursement Obligations is attached as Schedule 1 hereto; and

         WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $ __________ (the "Assigned
Amount"), together with a corresponding portion of the outstanding Loans and
Reimbursement Obligations owed to Assignor, and the Assignee proposes to accept
assignment of such rights and assume the corresponding obligations from the
Assignor on such terms;

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

           Section 1.     Definitions.  All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.

           Section 2.     Assignment. The Assignor hereby assigns and sells to
the Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount


of the Loans made by the Assignor outstanding at the date hereof and
Reimbursement Obligations owed to Assignor outstanding at the date hereof. Upon
the execution and delivery hereof by the Assignor, the Assignee, the Company and
the Agent and the payment of the amounts specified in Section 3 required to be
paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed
to the rights and be obligated to perform the obligations of a Bank under the
Credit Agreement with a Commitment in an amount equal to the Assigned Amount,
and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced
by a like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee. The
assignment provided for herein shall be without recourse to the Assignor.

           Section 3.      Payments. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in Federal funds the amount heretofore agreed between them.* It
is understood that fees accrued to the date hereof with respect to the Assigned
Amount are for the account of the Assignor and such fees accruing from and
including the date hereof are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives any amount under the
Credit Agreement which is for the account of the other party hereto, it shall
receive the same for the account of such other party to the extent of such other
party's interest therein and shall promptly pay the same to such other party.

           Section 4.      Consent of the Company. This Agreement is conditioned
upon the consent of the Company, Agent and Letter of Credit Bank pursuant to
Section 10.6(a) of the Credit Agreement. The execution of this Agreement by the
Company, Agent and Letter of Credit Bank is evidence of this consent. Pursuant
to Section 10.6(a) the Company agrees to execute and deliver a Note payable to
the order of the Assignee to evidence the assignment and assumption provided for
herein.

           Section 5.      Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Company, or the validity and enforceability of the obligations of the Company in
respect of the Credit Agreement or any Note. The Assignee (i) acknowledges that
it has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Company and (ii) designates as its address for
notices the office set forth beneath its name on the signature page hereof.

           Section 6.    Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

- --------
* Amount should combine principal together with accrued interest and breakage
  compensation, if any, to be paid by the Assignee, net of any portion of any
  upfront fee to be paid by the Assignor to the Assignee. It may be preferable
  in an appropriate case to specify these amounts generically or by formula
  rather than as a fixed sum.


                                      -2-


           Section 7.      Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.

         IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.



                                                            , as Assignor
                                    ------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------



                                                            , as Assignee
                                    ------------------------

                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------

                                       Address for Notices:


                                       ----------------------

                                       ----------------------

                                       ----------------------

                                       Attention:
                                                 -------------------------------
                                       Telephone:
                                                 -------------------------------
                                       Telecopy:
                                                --------------------------------


         The undersigned consent to the foregoing assignment.

                                    DELTA AIR LINES, INC.


                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------


                                      -3-


                                    BAYERISCH HYPO- UND VEREINSBANK AG, NEW
                                      YORK BRANCH, as Agent


                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------


                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------



                                    BAYERISCH HYPO- UND VEREINSBANK AG, NEW
                                      YORK BRANCH, as Letter of Credit Bank


                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------


                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------


                                      -4-


                                    THE AGENT:

                                    BAYERISCHE HYPO- UND VEREINSBANK AG,
                                      New York Branch, as Agent



                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------




                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------



                                    THE LETTER OF CREDIT BANK:



                                    BAYERISCHE HYPO- UND VEREINSBANK AG,
                                      New York Branch, as Letter of Credit Bank



                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------



                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------


                                      -5-



                                    EXHIBIT D


                     IRREVOCABLE DIRECT-PAY LETTER OF CREDIT





                                    May 19, 2000

IRREVOCABLE LETTER OF CREDIT NO. SB103387

Wilmington Trust Company,
  as Trustee
Rodney Square North
1100 N. Market Street
Wilmington, Delaware  19890

Attention:  Corporate Trust Administration

         At the request and for the account of our customer, Delta Air Lines,
Inc., a Delaware corporation (the "Company"), we hereby establish in your favor,
as Trustee (the "Trustee") under the Indenture of Trust dated as of August 1,
1993 (the "Indenture") among the Company, the Trustee and Fidelity Management
Trust Company, as ESOP Trustee, relating to $290,194,981 in aggregate original
and outstanding principal amount of Series C Guaranteed Serial ESOP Notes Due
2009 (the "Series C Notes"), issued by the Delta Family-Care Savings Plan and
the trust established thereunder (together, the "ESOP") pursuant to several Note
Purchase Agreements, each dated February 22, 1990 and each as amended by
Amendment No. 1 thereto dated as of July 27, 1999, among the ESOP, as issuer,
the Company, as guarantor, and the respective purchasers named therein
(collectively, the "Note Purchase Agreements"), our direct-pay Irrevocable
Letter of Credit No. SB103387 (the "Letter of Credit") in the initial amount of
$420,963,733 (as reduced or reinstated from time to time in accordance with the
provisions hereof, the "Stated Amount"), of which

                   (i)     an amount not exceeding $290,194,981 (as reduced from
         time to time in accordance with the terms hereof, the "Principal
         Component"), may be drawn upon with respect to payment of the unpaid
         principal amount of the Series C Notes or the portion of the Purchase
         Price (as defined in the Indenture) of the Series C Notes equal to the
         principal amount of Series C Notes tendered for purchase pursuant to
         Section 3.01 of the Indenture (hereinafter referred to as "Tendered
         Series C Notes"),


                                  Page 1 of 20


                  (ii)     (x)      an amount not exceeding $32,506,675 (as
         reduced or reinstated from time to time in accordance with the terms
         hereof, the "Interest Component") may be drawn upon with respect to
         payment of interest accrued on the Series C Notes, or the portion of
         the Purchase Price of Tendered Series C Notes representing interest on
         such Series C Notes, on or prior to their stated maturity date, and

                 (iii)     an amount not exceeding $98,262,077 (as reduced from
         time to time in accordance with the terms hereof, the "Premium
         Component") may be drawn upon with respect to payment of the Make Whole
         Premium Amount (as defined in the Note Purchase Agreements) payable in
         connection with a redemption of Series C Notes or the portion of the
         Purchase Price of Tendered Series C Notes representing the Make Whole
         Premium Amount on the principal amount of such Tendered Series C Notes.

The Stated Amount, and the Principal Component, Interest Component and Premium
Component, which components constitute the Stated Amount, shall be reduced from
time to time, effective upon our receipt of notice from the Trustee in the form
of Exhibit D, Exhibit E or Exhibit F attached hereto, by the applicable amounts
specified in such notice. This Letter of Credit shall be effective immediately
and shall expire on May 19, 2003 (the "Scheduled Expiration Date") unless
terminated earlier in accordance with the provisions hereof or unless renewed or
extended. All drawings under this Letter of Credit will be paid with our own
funds.

         Funds under this Letter of Credit will be made available to you against
receipt by us of the following items at the times required below:

                   (A)     your  sight  draft  payable on the date such draft is
         drawn on us, stating on its face: "Drawn under Bayerische Hypo- und
         Vereinsbank AG, New York Branch, Irrevocable Letter of Credit No.
         SB103387" and

                   (B)     (i)      if the drawing is being made with respect to
         the payment of principal of the Series C Notes or the portion of the
         Purchase Price of Tendered Series C Notes equal to the principal amount
         of such Tendered Series C Notes (an "A Drawing"), receipt by us of your
         written certificate in the form of Exhibit A attached hereto
         appropriately completed and signed by your Authorized Officer; (ii) if
         the drawing is a drawing contemplated by the second sentence of Section
         2.05(a) of the Indenture (a "B Drawing"), receipt by us of your written
         certificate in form of Exhibit B-1 attached hereto appropriately
         completed and signed by your Authorized Officer; (iii) if the drawing
         is not a drawing referred to in clause (ii) above and is being made
         with respect to the payment of Interest or the portion of any Purchase
         Price of Tendered Series C Notes representing Interest (also a "B
         Drawing"), receipt by us of your written certificate in the form of
         Exhibit B-2 attached hereto appropriately completed and signed by your
         Authorized Officer; or (iv) if the drawing is being made with respect
         to the payment of the Make Whole Premium Amount on any Series C Notes
         or the portion of any Purchase Price of Tendered Series C Notes
         representing the Make Whole Premium Amount (a "C


                                  Page 2 of 20


         Drawing"), receipt by us of your written certificate in the form of
         Exhibit C attached hereto appropriately completed and signed by your
         Authorized Officer.

Presentation of such draft(s) and certificate(s) shall be made at our office
located at 150 East 42nd Street, 28th Floor, New York, New York 10017,
Attention: Letter of Credit Department, or at any other office which may be
designated by us by written notice delivered to you.

         If a drawing is made by you hereunder at or prior to 10:00 A.M.,
Eastern time, on a business day, and provided that the requirement set forth
above has been strictly satisfied and that such drawing and the documents
presented in connection therewith conform to the terms and conditions hereof,
payment shall be made to you, or to your designee, of the amount specified in
immediately available funds, not later than 4:00 P.M., Eastern time, on the same
business day or not later than 10:00 A.M., Eastern time, on such later business
day as you may specify. If a drawing is made by you hereunder at or prior to
4:00 P.M., Eastern time, on a business day, and provided that the requirement
set forth above has been strictly satisfied and that such drawing and the
documents presented in connection therewith conform to the terms and conditions
hereof, payment shall be made to you, or to your designee, of the amount
specified in immediately available funds, not later than 10:00 A.M., Eastern
time, on the next succeeding business day or not later than 10:00 A.M., Eastern
time, on such later business day as you may specify. If a demand for payment
made by you hereunder does not, in any instance, conform to the terms and
conditions of this Letter of Credit, we shall give you prompt notice that the
demand for payment was not effected in accordance with the terms and conditions
of this Letter of Credit, stating the reasons therefor and that we will upon
your instructions hold any documents at your disposal or return the same to you.
Upon being notified that the demand for payment was not effected in conformity
with this Letter of Credit, you may attempt to correct any such non-conforming
demand for payment to the extent that you are entitled to do so.

         Demands for payments hereunder honored by us shall not, in the
aggregate, exceed the Stated Amount, as the Stated Amount may have been
reinstated by us as provided in the next paragraph. Each (x) "A Drawing" honored
by the Bank hereunder shall pro tanto reduce the Principal Component by the
amount in the related certificate, (y) "B Drawing" honored by the Bank hereunder
shall pro tanto reduce the Interest Component by the amount thereof stated in
the related certificate in the form of Exhibit B-1 or Exhibit B-2, as the case
may be, and (z) "C Drawing" honored by the Bank hereunder shall pro tanto reduce
the Premium Component. In addition, upon our honoring of any "A Drawing" in
connection with the payment of principal of Notes or the portion of the Purchase
Price of Tendered Series C Notes equal to the principal amount of such Tendered
Series C Notes, the Interest Component shall be reduced by an amount that bears
the same proportion to $32,506,675 as the principal amount of Series C Notes
paid or purchased with the funds so drawn bears to $290,194,981. Each reduction
referred to in this paragraph shall result in a corresponding reduction in the
Stated Amount and the amount available to be drawn under this Letter of Credit.


                                  Page 3 of 20


         All amounts drawn under this Letter of Credit and paid by us which are
identified in a Certificate for "B Drawing" in the form of Exhibit B-1 or
Exhibit B-2 accompanying the draft pursuant to which such payment was made shall
be automatically reinstated on the tenth calendar day following the date of
payment by us of the amount so drawn and shall not result in a reduction in the
Stated Amount of this Letter of Credit or the Interest Component of this Letter
of Credit unless, prior to the expiration of such ten day period, we shall have
delivered to you at your address to which this Letter of Credit is addressed (or
to such other address as you shall have specified in writing to us) a Notice of
Non-Reinstatement in the form attached as Exhibit I.

         Only you or your successor as Trustee may make a drawing under this
Letter of Credit. Upon the payment to you, your designee or your account of the
amount demanded hereunder, we shall be fully discharged of our obligation under
this Letter of Credit with respect to such demand for payment and we shall not
thereafter be obligated to make any further payments under this Letter of Credit
in respect of such demand for payment to you or any other person who may have
made to you or makes to you a demand for payment of principal of, interest or
Make Whole Premium Amount on, any Series C Note. By paying to you an amount
demanded in accordance herewith, we make no representation as to the correctness
of the amount demanded in any sight draft(s) or your calculations or your
representations in any certificate required under this Letter of Credit.

         This Letter of Credit applies only to the payment of principal of and
Make Whole Premium Amount, if any, and up to 390 days' interest accruing on the
Series C Notes.

         Upon the earliest of (i) the Scheduled Expiration Date, (ii) the
honoring by us of (x) a drawing hereunder with respect to the Purchase Price of
any Series C Notes or (y) the final drawing otherwise available hereunder, and
(iii) our receipt of a certificate signed by your Authorized Officer in the form
of Exhibit G attached hereto, this Letter of Credit shall automatically
terminate and shall be delivered to us for cancellation.

         Communications with respect to this Letter of Credit shall be in
writing and shall be addressed to us at the address set forth in the seventh
preceding paragraph, specifically referring thereon to this Letter of Credit by
number.

         Notwithstanding anything to the contrary contained in Rule 6 of the ISP
98 (as defined below), this Letter of Credit is transferable in its entirety
(but not in part) to any transferee who has succeeded you as Trustee under the
Indenture and may be successively so transferred. Transfer of this Letter of
Credit to such transferee shall be effected by the presentation to us of this
Letter of Credit accompanied by a certificate in the form of Exhibit H attached
hereto appropriately completed.

         As used herein (a) "Authorized Officer" shall mean any person signing
as one of your Vice Presidents, Assistant Vice Presidents, Senior Financial
Services Officers or Financial Services Officers and (b) "business day" shall
mean any day other than (i) a Saturday, Sunday


                                  Page 4 of 20


or legal holiday in the State of New York or (ii) a day on which banks in New
York, New York are authorized or required to close.


                                  Page 5 of 20


         This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein
(including, without limitation, the Series C Notes), except only the drafts(s)
and certificate(s) referred to herein; and any such reference shall not be
deemed to incorporate herein by reference any document, instrument or agreement
except for such draft(s) and certificate(s).

         This Letter of Credit is subject to the International Standby Practices
1998, published by the Institute of International Banking Law and Practice, Inc.
(the "ISP 98"). This Letter of Credit shall be deemed to be a contract made
under the laws of the State of New York and shall, as to matters not governed by
the ISP 98, be governed by and construed in accordance with the laws of such
State.

                                    Very truly yours,

                                    BAYERISCHE HYPO- UND VEREINSBANK AG,
                                      New York Branch



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                  Page 6 of 20



                                                                       EXHIBIT A


                           CERTIFICATE FOR "A DRAWING"

         The undersigned, a duly authorized officer of _________________________
(the "Trustee"), hereby certifies to Bayerische Hypo- und Vereinsbank AG, New
York Branch (the "Bank"), with reference to Irrevocable Letter of Credit No.
SB103387 (the "Letter of Credit"; any capitalized term used herein and not
defined herein shall have its respective meaning as set forth in the Letter of
Credit) issued by the Bank in favor of the Trustee, that:

                  (1)      The Trustee is the Trustee under the Indenture for
         the holders of the Series C Notes.

                  (2)      The Trustee is making a drawing under the Letter of
         Credit with respect to the payment of (check one)

                           [  ]  principal of the Series C Notes

                           [  ]  the portion of the Purchase Price of the
                                 Tendered Series C Notes equal to the
                                 principal amount of such Tendered Series C
                                 Notes.

                  (3)      The amount of the payment identified in paragraph (2)
         above, that is, or within two business days of the date hereof will be,
         due and payable is $____________ and the amount of the draft
         accompanying this Certificate does not exceed such amount and such
         amount does not exceed the amount available on the date hereof to be
         drawn under the Letter of Credit in respect of the payment identified
         in paragraph (2) above.

                  (4)      The amount of the draft accompanying this Certificate
         was computed in accordance with the terms and conditions of the Series
         C Notes, the Note Purchase Agreements, the Indenture and the Letter of
         Credit.

                  (5)      Upon receipt by the undersigned of the amount
         demanded hereby, (a) the undersigned will apply the same directly to
         the payment when due of the principal of the Series C Notes or the
         portion of the Purchase Price of Tendered Series C Notes representing
         the principal amount of such Tendered Series C Notes, as indicated in
         paragraph (2) above, (b) no portion of said amount shall be applied by
         the undersigned for any other purpose and (c) no portion of said amount
         shall be commingled with other funds held by the undersigned.


                                  Page 7 of 20


         IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _______ day of __________________, ______.

                                    [NAME OF TRUSTEE]



                                    By
                                      Title:


                                  Page 8 of 20



                                                                     EXHIBIT B-1


                           CERTIFICATE FOR "B DRAWING"

         The undersigned, a duly authorized officer of
_____________________________ (the "Trustee"), hereby certifies to Bayerische
Hypo- und Vereinsbank AG, New York Branch (the "Bank"), with reference to
Irrevocable Letter of Credit No. SB103387 (the "Letter of Credit"; any
capitalized term used herein and not defined herein shall have its respective
meaning as set forth in the Letter of Credit) issued by the Bank in favor of the
Trustee, that:

                  (1)      The Trustee is the Trustee under the Indenture for
         the holders of the Notes.

                  (2)      The Trustee is making a drawing under the Letter of
         Credit with respect to the payment of (check one)

                           [  ]  interest accrued on the Series C Notes since
                                 the most recent Interest Payment Date (as
                                 defined in the Indenture)

                           [  ]  the Monthly Interest Drawing Amount (as defined
                                 in the Indenture).

                  (3)      The amount of the payment identified in paragraph (2)
         above that has so accrued in accordance with the terms of the Series C
         Notes is: $____________, and the amount of the draft accompanying this
         Certificate does not exceed such amount and such amount does not exceed
         the amount available on the date hereof to be drawn under the Letter of
         Credit in respect of the payment identified in paragraph (2) above.

                  (4)      The amount of the draft accompanying this Certificate
         was computed in accordance with the terms and conditions of the Series
         C Notes, the Note Purchase Agreements, the Indenture and the Letter of
         Credit.

                  (5)      Upon receipt by the undersigned of the amount
         demanded hereby, (a) the undersigned will deposit the same in the
         Interest Reserve Account (as defined in the Indenture), (b) no portion
         of said amount shall be applied by the undersigned for any other
         purpose and (c) no portion of said amount shall be commingled with
         other funds held by the undersigned.


                                  Page 9 of 20


         IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _______ day of __________________, ____.

                                    [NAME OF TRUSTEE]



                                    By
                                      Title:


                                 Page 10 of 20



                                                                     EXHIBIT B-2


                           CERTIFICATE FOR "B DRAWING"

         The undersigned, a duly authorized officer of __________ (the
"Trustee"), hereby certifies to Bayerische Hypo- und Vereinsbank AG, New York
Branch (the "Bank"), with reference to Irrevocable Letter of Credit No. SB103387
(the "Letter of Credit"; any capitalized term used herein and not defined herein
shall have its respective meaning as set forth in the Letter of Credit) issued
by the Bank in favor of the Trustee, that:

                  (1)      The Trustee is the Trustee under the Indenture for
         the holders of the Series C Notes.

                  (2)      The Trustee is making a drawing under the Letter of
         Credit with respect to the payment of (check one)

                           [  ]   Interest accrued on the Series C Notes

                           [  ]   the portion of the Purchase Price of
                                  Tendered Series C Notes representing
                                  Interest on such Notes.

                  (3)      The amount of the payment identified in paragraph (2)
         above that is, or within two business days of the date hereof will be,
         due and payable is: $__________, and the amount of the draft
         accompanying this Certificate does not exceed such amount and such
         amount does not exceed the amount available on the date hereof to be
         drawn under the Letter of Credit in respect of the payment identified
         in paragraph (2) above.

                  (4)      The amount of the draft accompanying this Certificate
         was computed in accordance with the terms and conditions of the Series
         C Notes, the Note Purchase Agreements, the Indenture and the Letter of
         Credit.


                                 Page 11 of 20


                  (5)      Upon receipt by the undersigned of the amount
         demanded hereby, (a) the undersigned will apply the same directly to
         the payment when due of interest on the Series C Notes or the portion
         of the Purchase Price representing interest on Tendered Series C Notes,
         as indicated in paragraph (2) above, (b) no portion of said amount
         shall be applied by the undersigned for any other purpose and (c) no
         portion of said amount shall be commingled with other funds held by the
         undersigned.

         IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the ________ day of ____________ ______.

                                    [NAME OF TRUSTEE]


                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                 Page 12 of 20




                                                                       EXHIBIT C


                           CERTIFICATE FOR "C DRAWING"

         The undersigned, a duly authorized officer of __________ (the
"Trustee"), hereby certifies to Bayerische Hypo- und Vereinsbank AG, New York
Branch (the "Bank"), with reference to Irrevocable Letter of Credit No. SB103387
(the "Letter of Credit"; any capitalized term used herein and not defined herein
shall have its respective meaning as set forth in the Letter of Credit) issued
by the Bank in favor of the Trustee, that:

                  (1)      The Trustee is the Trustee under the Indenture for
         the holders of the Series C Notes.

                  (2)      The Trustee is making a drawing under the Letter of
         Credit with respect to the payment of (check one)

                           [  ]     the Make Whole Premium Amount payable in
                                    connection with a redemption or repurchase
                                    of Series C Notes

                           [  ]     the portion of the Purchase Price of
                                    Tendered Series C Notes representing the
                                    Make Whole Premium Amount on the principal
                                    amount of such Tendered Series C Notes.

                  (3)      The amount of the payment identified in paragraph (2)
         above, that is, or within two business days of the date hereof will be,
         due and payable is $_________, and the amount of the draft accompanying
         this Certificate does not exceed such amount.

                  (4)      The amount being drawn under the draft accompanying
         this Certificate is $___________, and such amount does not exceed the
         amount available on the date hereof to be drawn under the Letter of
         Credit in respect of the payment identified in paragraph (2) above.

                  (5)      The amount of the draft accompanying this Certificate
         was computed in accordance with the terms and conditions of the Series
         C Notes, the Note Purchase Agreements, the Indenture and the Letter of
         Credit.


                                 Page 13 of 20


                  (6)      Upon receipt by the undersigned of the amount
         demanded hereby, (a) the undersigned will apply the same directly to
         the payment when due of the Make Whole Premium Amount on the Series C
         Notes or the portion of the Purchase Price of Tendered Series C Notes
         representing the Make Whole Premium Amount on the principal amount of
         such Tendered Series C Notes, as indicated in paragraph (2) above, (b)
         no portion of said amount shall be applied by the undersigned for any
         other purpose and (c) no portion of said amount shall be commingled
         with other funds held by the undersigned.

         IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _________ day of ____________ ______.

                                    [NAME OF TRUSTEE]


                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                 Page 14 of 20



                                                                       EXHIBIT D


            INSTRUCTION TO REDUCE STATED AMOUNT AND PREMIUM COMPONENT


                               -------------, ----



Bayerische Hypo- und Vereinsbank AG,
   New York Branch
150 East 42nd Street, 28th Floor
New York, New York 10017
Attention:  Letter of Credit Department


         Re:         Irrevocable Letter of Credit No. SB103387

Gentlemen:

         We refer to the above-referenced Irrevocable Letter of Credit (the
"Letter of Credit"), issued to us in our capacity as Trustee under the Indenture
of Trust (the "Indenture") dated as of August 1, 1993 among Delta Air Lines,
Inc. (the "Company"), Fidelity Management Trust Company and Wilmington Trust
Company. Terms used herein and not otherwise defined herein are used herein as
defined in the Letter of Credit.

         Pursuant to Section 2.04(b) of the Indenture, we hereby authorize and
instruct you to reduce each of the Stated Amount and the Premium Component by
$__________(1)

                                    Very truly yours,

                                    [Name of Trustee]


                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------
- ----------------
(1)      Insert amount of Premium Component reduction specified in the Officer's
         Certificate delivered pursuant to Section 2.04(b) of the Indenture.


                                 Page 15 of 20



                                                                       EXHIBIT E


                       INSTRUCTION TO REDUCE STATED AMOUNT
                      AND PRINCIPAL AND INTEREST COMPONENTS


                               -------------, ----


Bayerische Hypo- und Vereinsbank AG,
   New York Branch
150 East 42nd Street, 28th Floor
New York, New York 10017
Attention:  Letter of Credit Department


         Re:      Irrevocable Letter of Credit No. SB103387

Gentlemen:

         We refer to the above-referenced Irrevocable Letter of Credit (the
"Letter of Credit"), issued to us in our capacity as Trustee under the Indenture
of Trust (the "Indenture") dated as of August 1, 1993 among Delta Air Lines,
Inc. (the "Company"), Fidelity Management Trust Company and Wilmington Trust
Company. Terms used herein and not otherwise defined herein are used herein as
defined in the Letter of Credit.

         Pursuant to Section 2.04[(c)] [(d)] of the Indenture, we hereby
authorize and instruct you to reduce the Stated Amount by $__________,(1) and to
reduce

                   (i)     the Principal Component by $__________,(2) and

- ----------------

(1)      Insert sum of component reductions set forth below.

(2)      Insert, as appropriate, (x) aggregate principal amount of Notes
         specified as having been purchased by the Company or one or more of its
         Subsidiaries or Affiliates (as such terms are defined in the Note
         Purchase Agreements (as defined in the Indenture)), or the ESOP, in the
         Officer's Certificate delivered pursuant to Section 2.04(c) or (y)
         aggregate principal amount of Notes specified as covered by an Approved
         Credit Enhancement (as defined in the Note Purchase Agreements) other
         than the Letter of Credit in the Officer's Certificate delivered
         pursuant to Section 2.04(d).


                                 Page 16 of 20



                  (ii)     the Interest Component by $___________.(3)

                                    Very truly yours,

                                    [NAME OF TRUSTEE]


                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


- ---------------

(3)      Insert an amount that bears the same proportion to $32,506,675 as the
         principal amount of Series C Notes specified in the Officer's
         Certificate referred to above bears to $290,194,981.


                                 Page 17 of 20



                                                                       EXHIBIT F


                    INSTRUCTION TO REDUCE INTEREST COMPONENT


                               -------------, ----



Bayerische Hypo- und Vereinsbank AG,
   New York Branch
150 East 42nd Street, 28th Floor
New York, New York 10017
Attention:  Letter of Credit Department


         Re:      Irrevocable Letter of Credit No. SB103387

Gentlemen:

         We refer to the above-referenced Irrevocable Letter of Credit (the
"Letter of Credit"), issued to us in our capacity as Trustee under the Indenture
of Trust (the "Indenture") dated as of August 1, 1993 among Delta Air Lines,
Inc. (the "Company"), Fidelity Management Trust Company and Wilmington Trust
Company. Terms used herein and not otherwise defined herein are used herein as
defined in the Letter of Credit.

         Pursuant to Section 2.05(a) of the Indenture, we hereby authorize and
instruct you to reduce the Stated Amount by $__________(1), and to reduce the
Interest Component by $__________.

                                    Very truly yours,

                                    [NAME OF TRUSTEE]


                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------

- --------------
(1)      Insert amount of Interest Component reduction specified in the
         Officer's Certificate delivered pursuant to Section 2.05(a) of the
         Indenture.


                                 Page 18 of 20



                                                                       EXHIBIT G


                    INSTRUCTION TO TERMINATE LETTER OF CREDIT


                              -------------, ------



Bayerische Hypo- und Vereinsbank AG,
   New York Branch
150 East 42nd Street, 28th Floor
New York, New York 10017
Attention:  Letter of Credit Department


         Re:      Irrevocable Letter of Credit No. SB103387

Gentlemen:

         We refer to the above-referenced Irrevocable Letter of Credit, issued
to us in our capacity as Trustee under the Indenture of Trust (the "Indenture")
dated as of August 1, 1993, among Delta Air Lines, Inc., Fidelity Management
Trust Company and Wilmington Trust Company.

         [An event described in clause [(i)] [(ii)] [(iii)] [(iv)] [(v)] of
Section 2.04(a) of the Indenture has occurred] [ We have received an Officer's
Certificate (as defined in the Indenture) pursuant to clause (vi) of Section
2.04(a) of the Indenture to the effect that the Letter of Credit is to be
terminated on the date hereof]1 and we are returning the Letter of Credit
herewith marked canceled.

                                    Very truly yours,

                                    [NAME OF TRUSTEE]


                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------

- --------------
(1)      Bracketed language to be inserted as appropriate.


                                 Page 19 of 20




                                                                       EXHIBIT H


                             INSTRUCTION TO TRANSFER



Bayerische Hypo- und Vereinsbank AG,
   New York Branch
150 East 42nd Street, 28th Floor
New York, New York 10017
Attention:  Letter of Credit Department


         Re:      Irrevocable Letter of Credit No. SB103387

Gentlemen:

         For value received, the undersigned beneficiary hereby irrevocably
instructs you to transfer to:

                              (Name of Transferee)

                          -----------------------------
                                    (Address)

all rights of the undersigned beneficiary to draw under the above-captioned
Letter of Credit (the "Letter of Credit"). The transferee has succeeded the
undersigned as Trustee under the Indenture of Trust between Delta Air Lines,
Inc., Fidelity Management Trust Company, as ESOP Trustee, and Wilmington Trust
Company, as Trustee, dated as of August 1, 1993.

         By this transfer, all rights of the undersigned beneficiary in the
Letter of Credit are transferred to the transferee and the transferee shall
hereafter have the sole rights as beneficiary thereof.

         The Letter of Credit is returned herewith and in according therewith we
ask that this transfer be effected.

                                    Very truly yours,

                                    [                 ]
                                     -----------------

                                    By:
                                       -----------------------------------------
                                       [Name and Title]


                                 Page 20 of 20



                                                                       EXHIBIT I


                           NOTICE OF NON-REINSTATEMENT



[Name and address
of Trustee]


         Re:      Irrevocable Letter of Credit No. SB103387

         The undersigned, duly authorized officers of Bayerische Hypo-und
Vereinsbank, AG, New York Branch ("HypoVereinsbank"), with respect to the
Irrevocable Letter of Credit referred to above (the "Credit"), (a) hereby notify
you that an Event of Default (as therein defined) under the Credit Agreement (as
defined in the Indenture (as defined in the Credit)) has been declared by the
Majority Banks (as defined in the Credit Agreement) pursuant to Article VII of
the Credit Agreement and written notice thereof has been received by
HypoVereinsbank or an Event of Default specified in Section 7.1(c) of the Credit
Agreement has occurred and (b) hereby direct you to declare a Purchase Date in
accordance with the terms of the Indenture.

                                    Sincerely,

                                    BAYERISCHE HYPO- UND VEREINSBANK AG,
                                      New York Branch


                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------
Date:
     --------------------------

                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                 Page 21 of 20



                                                                     EXHIBIT E-1

              FORM OF OPINION OF ASSOCIATE GENERAL COUNSEL OF DELTA
                                  May 19, 2000



To the Banks, the Letter of Credit Bank
   and Agent Referred to Below
c/o Bayerische Hypo- und Vereinsbank AG,
   New York Branch, as Agent
150 East 42nd Street, 30th Floor
New York, New York 10017

Ladies and Gentlemen:

         This opinion is delivered to you in connection with the Credit
Agreement dated as of May 19, 2000 (the "Credit Agreement") among Delta Air
Lines, Inc., a Delaware corporation (the "Company"), each of the financial
institutions initially a signatory thereto, together with those assignees
pursuant to Section 10.6 thereof (the "Banks"), and Bayerische Hypo- und
Vereinsbank AG, New York Branch, as Letter of Credit Bank and Agent. This
opinion is given pursuant to clause (b) of Section 3.1 of the Credit Agreement.
Capitalized terms used herein and not otherwise defined herein have the same
meaning as ascribed to them in the Credit Agreement.

         In connection with the opinions expressed below, I or counsel under my
general supervision have examined the Credit Agreement and originals or copies,
certified or otherwise identified to my satisfaction, of such other agreements,
documents, certificates and statements of government officials and other papers
as I deemed necessary or advisable as a basis for such opinions. In all such
examinations, I have assumed the genuineness of all signatures (other than those
on behalf of the Company), the legal capacity of natural persons, the
authenticity of all documents submitted to me as originals and the conformity to
original documents of all documents submitted to me as certified or photostatic
copies, and as to certificates and telegraphic and telephonic confirmations
given by public officials, I have assumed the same to have been properly given
and to be accurate. I have also assumed that all documents and instruments
executed by the parties to this transaction (other than the Company) have been
duly and validly executed and delivered by such parties; that the agreements
entered into as part of this transaction are the legal, valid and binding
obligations of such parties, enforceable against such parties in accordance with
their terms; and that such parties have obtained all required


consents, permits and approvals required to enter into and perform such
documents and instruments.

         Based on the foregoing, and subject to any exceptions or qualifications
expressly noted herein, I am of the opinion that:

         1.       The Company is a corporation duly organized, existing, and in
good standing under the laws of the State of Delaware, and the execution,
delivery and performance of the Credit Agreement is within the Company's
corporate powers.

         2.       The Company has the necessary corporate power to carry on its
business as now being conducted.

         3.       The Company is an "air carrier" within the meaning of the
Federal Aviation Act of 1958, as amended, and has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each jurisdiction in the United States of America (other than
that of its incorporation) in which it has intrastate routes or has a principal
office or major overhaul facility and where the failure to so qualify would have
a material adverse effect on the financial condition or operations of the
Company and its subsidiaries, taken as a whole.

         4.       The Company has title to all of the flight equipment which it
owns free and clear of all liens and encumbrances except as permitted by the
Credit Agreement.

         5.       To my knowledge without independent inquiry, all leases of
flight equipment to which the Company is a party are valid and binding upon the
lessors.

         6.       No consent of stockholders of the Company to the mortgages,
pledges, encumbrances, liens or other charges referred to in Section 5.6 of the
Credit Agreement is required by law or by the Certificate of Incorporation or
By-laws of the Company or otherwise.

         7.       All corporate steps necessary to authorize the execution and
delivery of the Credit Agreement and the Company's performance thereunder have
been taken, and no consent, approval, authorization, permit or license from any
federal, state or other regulatory authority is required in connection
therewith. The Credit Agreement has been duly executed and delivered by the
Company.

         8.       The borrowings pursuant to the Credit Agreement, the issuance
of the Letter of Credit for the account of the Company and the execution and
delivery of the Credit Agreement by the Company will not violate any provision
of the General Corporation Law of the State of Delaware or the Company's
Certificate of Incorporation or By-laws or any material agreement,


                                      -2-


indenture, note or other instrument evidencing any indebtedness for money
borrowed to which the Company is a party or by which the Company or its assets
is bound.

         The foregoing opinions are subject to the qualification that I am
qualified to practice law in the State of Georgia and I do not purport to be an
expert on, or to express any opinion herein concerning, any laws other than the
laws of the State of Georgia, the General Corporation Laws of the State of
Delaware and the federal laws of the United States.

         The opinions expressed herein are furnished to you in connection with
the above matter, are for your sole benefit, and may not be relied upon by any
other person without my prior written consent.

                                    Sincerely,


                                      -3-



                                                                     EXHIBIT E-2

                    FORM OF OPINION OF DAVIS POLK & WARDWELL
                                  May 19, 2000



To the Banks, the Letter of Credit Bank
   and Agent Referred to Below
c/o Bayerische Hypo- undVereinsbank AG,
   New York Branch, as Agent
150 East 42nd Street, 30th Floor
New York, New York 10017

Ladies and Gentlemen:

         We have acted as counsel for Delta Air Lines, Inc., a Delaware
corporation (the "Company"), in connection with the Credit Agreement dated as of
May 19, 2000 (the "Credit Agreement"), among the Company, each of the financial
institutions initially a signatory thereto, together with those assignees
pursuant to Section 10.6 thereof (the "Banks"), and Bayerische Hypo- under
Vereinsbank AG, New York Branch, as Letter of Credit Bank and Agent. This
opinion is being rendered to you at the request of our client pursuant to clause
(b) of Section 3.1 of the Credit Agreement. Capitalized terms used herein and
not otherwise defined herein have the meanings given to them in the Credit
Agreement.

         We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and of the Company and other instruments, and have conducted
such other investigations of fact and law as we have deemed necessary for the
purposes of rendering this opinion. For purposes of this opinion, we have
assumed the authenticity of all documents submitted to us as originals, the
conformity to originals of all documents submitted to us as copies, the capacity
of all natural persons and the genuineness of all signatures.

         Based upon the foregoing, we are of the opinion that:

                  (i)      The execution, delivery and performance by the
         Company of the Credit Agreement are within the Company's corporate
         powers and the Credit Agreement has been duly executed and delivered by
         the Company pursuant to due authorization.

                  (ii)     The Credit Agreement constitutes a valid and binding
         obligation of the Company, enforceable against the Company in
         accordance with its terms, subject to bankruptcy, insolvency,
         fraudulent conveyance or similar laws affecting creditors' rights
         generally and general principles of equity (regardless of whether such
         enforceability is considered in a proceeding in equity or at law).


         We express no opinion, however, as to the validity, priority or
perfection of any security interest contemplated to be created pursuant to
Section 2.19, Section 5.6 or clause (iii) of the first sentence of Section 7.1
of the Credit Agreement.

         We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. Insofar as the foregoing opinion involves matters governed by the laws
of the State of Georgia, we have, with your consent, relied, without independent
verification, on the opinion of Leslie P. Klemperer, Esq., Associate General
Counsel of the Company, dated the date hereof and delivered to you.

         This opinion is rendered solely to you in connection with the above
matter at the request of the Company. This opinion may not be relied upon by you
for any other purpose or relied upon by or furnished to any other person without
our prior written consent.


                                    Very truly yours,


                                      -2-



                                   SCHEDULE I

                                 FUNDED DEBT(1)

         1.       6.65-9.15% Notes with maturities ranging from 2000 to 2004

         2.       [INTENTIONALLY OMITTED]

         3.       8.50% Notes due March 15, 2002

         4.       8.125% Notes due July 1, 2039

         5.       7.7% Notes due December 15, 2005

         6.       7.9% Notes due December 15, 2009

         7.       8.3% Notes due December 15, 2029

         8.       8.10% Guaranteed Serial ESOP Notes, payable in installments
                  between 2002 and 2009

         9.       10.125% Debentures due May 15, 2010

         10.      10.375% Debentures due February 1, 2011

         11.      9.00% Debentures due May 15, 2016

         12.      9.75% Debentures due May 15, 2021

         13.      9.25% Debentures due March 15, 2022

         14.      10.375% Debentures due December 15, 2022

         15.      Development Authority of Fulton County Loan Agreement dated
                  May 1, 1998

         16.      Development Authority of Fulton County Loan Agreement dated
                  September 1, 1992

         17.      Development Authority of Clayton County Loan Agreement dated
                  January 1, 1988

- --------------
(1)        All of which is unsecured except Item 18(b).


         18.      Capital Leasees:

                  (a)      Forty-One B737-200 Aircraft Leases
                  (b)      nine Western Aircraft Leases (4 B737-200; 3 B737-300
                           and 2 B727-200)

         19.      Credit Agreement, dated as of May 2, 1997, among the Company,
                  the several financial institutions which are parties hereto
                  and Nationsbank, N.A. (South) as Agent Bank.

         20.      Credit Agreement, dated as of March 22, 1999, among the
                  Company, the several financial institutions party thereto, The
                  Chase Manhattan Bank and Citibank, N.A.


                               SECURED OBLIGATIONS

         1.       $96,500,000 The Port Authority of New York and New Jersey
                  Special Project Bonds, Series 1R, Delta Air Lines, Inc.
                  Project

         2.       Nine Western Air Lines Capital Leases (4 B737-200; 3 B737-300
                  and 2 B727-200)

         3.       SATO Guaranty (pledge of Company's government receivables to
                  provide collateral for SATO credit agreement)

         4.       $58,000,000 Various Credit Agreements by 27 EMB-120 Brasilias
                  at Atlantic Southeast Airlines, Inc.

         5.       $100,600,000 Various Credit Agreements by 10 CJRs and 8
                  Brasilias at Comair Airlines, Inc.

         6.       JFK Financing*

         7.       Boston Financing*

- --------------

*        As of the Effective Date of this Agreement, the Company is considering
         various means for financing proposed airport facilities projects at
         Boston Logan International Airport (BOS) and John F. Kennedy
         International Airport (JFK). Since the Company has not yet determined
         the structure for such financings, the intent of these provisions is to
         include such financings in the lists set forth in these schedules once
         such financings occur, if ever, and to the extent applicable to the
         structures ultimately selected by the Company.


                                      -2-



                                   SCHEDULE II

                      SUBSIDIARIES OF DELTA AIR LINES, INC.

         Aero Assurance Ltd.

         ASA Holdings, Inc. (wholly-owned subsidiary of Delta Air Lines
         Holdings, Inc.)

         ASA Investments, Inc. (wholly-owned subsidiary of ASA Holdings, Inc.)

         Atlantic Southeast Airlines, Inc. (wholly-owned subsidiary of ASA
         Holdings, Inc.)

         CMD, Inc. (wholly-owned subsidiary of Comair Services, Inc.)

         Comair Acquisition Co., Inc. (wholly-owned subsidiary of Comair
         Holdings, Inc.)

         Comair Holdings, Inc. (wholly-owned subsidiary of Delta Air Lines
         Holdings, Inc.)

         Comair, Inc. (wholly-owned subsidiary of Comair Holdings, Inc.)

         Comair Investment Co., Inc. (wholly-owned subsidiary of Comair
         Holdings, Inc.)

         Comair Services, Inc. (wholly-owned subsidiary of Comair Holdings,
         Inc.)

         Comair Aviation Academy, Inc. (wholly-owned subsidiary of Comair
         Services, Inc.)

         Crown Rooms, Inc.

         Crown Rooms of Texas, Inc. (wholly-owned subsidiary of Crown Rooms,
         Inc.)

         CVG Aviation, Inc. (wholly-owned subsidiary of Comair Services, Inc.)

         DAL Aircraft Trading, Inc.

         DAL Foreign Sales, Inc.

         DAL Moscow, Inc. (wholly-owned subsidiary of Delta Air Lines Holdings,
         Inc.)

         DAL Receivables, LLC

         DASH Management, Inc.

         Delta Air Lines Holdings, Inc.


                                      -1-



         Delta Air Lines, Inc. and Pan American World Airways, Inc.-Unterst,
         tzungskasse GMBH

         Delta Air Lines Global Services, Inc.

         Delta Air Lines Receivables Corporation

         Delta Benefits Management, Inc. (formerly known as Delta Air Lines
         Funding Corporation) (Class B Shares, representing 10% of the equity in
         DBMI, are owned by Aon Group, Inc.)

         Delta Capital Markets, Inc.

         Delta Connection, Inc.

         Delta Loyalty Management Services, Inc. (formerly known as Delta Tel,
         Inc.)

         Delta Technology, Inc.

         Delta Ventures III, Inc. (wholly-owned subsidiary of Delta Air Lines
         Holdings, Inc.)

         Epsilon Trading, Inc.

         Guardant, Inc.

         Jason Vermoegensverwaltungs GmbH (wholly-owned subsidiary of TransQuest
         Holding, Inc.)

         TransQuest Holding, Inc. (wholly-owned subsidiary of Delta Technology,
         Inc.)

         TransQuest UK Ltd. (wholly-owned subsidiary of TransQuest Holding,
         Inc.)


                                      -2-



                                  SCHEDULE III

                              GUARANTY LIABILITIES

         $88,000,000 Regional Airports Improvement Corporation 6.35% Facilities
Sublease Refunding Revenue Bonds, Issue of 1996, Delta Air Lines, Inc. (Los
Angeles International Airport).

         SATO Guaranty (Company's allocable share of $25 million SATO revolving
credit facility, used by SATO to advance payments to participating airlines on
government receivables)

         JFK Financing*

         Boston Financing*


- --------------
*        As of the Effective Date of this Agreement, the Company is considering
         various means for financing proposed airport facilities projects at
         Boston Logan International Airport (BOS) and John F. Kennedy
         International Airport (JFK). Since the Company has not yet determined
         the structure for such financings, the intent of these provisions is to
         include such financings in the lists set forth in these schedules once
         such financings occur, if ever, and to the extent applicable to the
         structures ultimately selected by the Company.



                       FIRST AMENDMENT TO CREDIT AGREEMENT


         The First Amendment to Credit Agreement (the "Amendment") dated as of
August 29, 2001 among Delta Air Lines, Inc. (the "Company"), the Banks party
hereto, and Bayerische Hypo-und Vereinsbank AG, New York Branch, as Letter of
Credit Bank and Agent.


                              W I T N E S S E T H:

         WHEREAS, the Company, the Banks and Bayerische Hypo-und Vereinsbank AG,
New York Branch, as Letter of Credit Bank and Agent, have heretofore executed
and delivered a Credit Agreement dated as of May 19, 2000 (the "Agreement");

         WHEREAS, Moody's has required an increase of $5,731,052 in the Premium
Component of the Letter of Credit;

         WHEREAS, the Company has requested that the Banks increase the Total
Commitments of the Banks under the Agreement from $417,709,254 to $423,709,254
by increasing the Commitment of The Chase Manhattan Bank by $6,000,000; and

         WHEREAS, the parties hereto desire to amend the Agreement as provided
herein;

         NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree that the
Agreement shall be and hereby is amended as follows:

         1.       The definition "Total Commitments of the Banks" appearing in
Section 1.1 of the Agreement is hereby amended in its entirety and as so amended
shall read as follows:

                           "Total Commitments of the Banks" shall mean the
                  aggregate of each Bank's Commitment which on the date of the
                  First Amendment hereto totals $423,709,254.

         2.       Section 1.1 of the Agreement is hereby further amended by
inserting in proper alphabetical order the following new defined term:

                           "First Amendment" shall mean the First Amendment to
                  Credit Agreement dated as of August 29, 2001 among Delta Air
                  Lines, Inc., the Banks party thereto and Bayerische Hypo-und
                  Vereinsbank AG, New York Branch, as Letter of Credit Bank and
                  Agent.

         3.       The Commitment of The Chase Manhattan Bank appearing on its
signature page to the Agreement is hereby amended in its entirety and as so
amended shall be: $23,000,000.


         4.       The Company hereby requests that the Letter of Credit Bank
amend the Letter of Credit to increase the Issued Amount to $423,709,254 (such
increase to constitute an increase in the Premium Component referred to in the
Letter of Credit from $95,007,598 to $101,007,598) by executing an amendment to
the Letter of Credit in the form of Exhibit A hereto and deliver such amendment
to the Trustee. The Letter of Credit Bank hereby agrees that, effective on and
as of the date of effectiveness of this Amendment, the Letter of Credit shall be
so amended.

         5.       This Amendment shall become effective on the date the Agent
shall have received counterparts hereof executed by the Company, Letter of
Credit Bank and each Bank (or, in the case of any party as to which an executed
counterpart hereof shall not have been received, receipt by the Agent in form
satisfactory to it of facsimile or other written confirmation from such party of
execution of a counterpart hereof by such party).

         6.1.     To induce the Agent, Letter of Credit Bank and the Banks to
enter into this Amendment, the Company represents and warrants to the Agent,
Letter of Credit Bank and the Banks that: (a) the representations and warranties
contained in Sections 4.1, 4.2, 4.3, 4.5, 4.6, 4.9(a), 4.9(c), 4.10, 4.11, 4.13
and 4.14 of the Agreement, are true and correct in all material respects as of
the date hereof with the same effect as though made on the date hereof; (b)
after giving effect to this Amendment, no Default or Event of Default exists;
(c) this Amendment has been duly authorized by all necessary corporate action
and duly executed and delivered by the Company, and the Agreement, as amended by
this Amendment, and each of the other Loan Documents are the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as enforcement may be limited by
applicable bankruptcy, insolvency fraudulent conveyance, reorganization,
moratorium or other laws affecting the enforcement of creditors' rights
generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law); and (d) no consent or approval, authorization,
permit or license from any federal, state or other regulatory authority which
has not been obtained is required for, and in the absence of which would
materially adversely effect, the legal and valid execution and delivery or
performance by the Company of this Amendment or the performance by the Company
of the Agreement, as amended by this Amendment, or any other Loan Document to
which it is a party.

         6.2.     This Amendment may be executed in any number of counterparts
and by the different parties on separate counterparts and each such counterpart
shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same Amendment.

         6.3.     Except as specifically provided above, the Agreement and the
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed in all respects. The execution, delivery, and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power, or remedy of the Agent, Letter of
Credit Bank or any Bank under the Credit Agreement or any of the other Loan
Documents, nor constitute a waiver or modification of any provision of any of
the other Loan Documents.

         6.4.     All defined terms used herein and not defined herein shall
have the same meaning herein as in the Agreement or the Letter of Credit (as
defined in the Agreement).


                                      -2-



         6.5.     This Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the law of
the State of New York.

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.


                                    DELTA AIR LINES, INC.



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                    BAYERISCHE HYPO- UND VEREINSBANK AG,
                                       New York Branch, in its individual
                                       capacity as a Bank and as Agent and
                                       Letter of Credit Bank



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                      -3-



                                    ABN AMRO BANK N.V.



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------




                                    BANK ONE, NA



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    BANQUE NATIONALE DE PARIS



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                      -4-



                                    CREDIT INDUSTRIEL ET COMMERCIAL



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------




                                    CREDIT LYONNAIS, New York Branch



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------




                                    DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                      -5-



                                    THE INDUSTRIAL BANK OF JAPAN, LIMITED



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------




                                    THE MITSUBISHI TRUST & BANKING
                                      CORPORATION



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------




                                    THE SANWA BANK, LIMITED



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------




                                    THE TOKAI BANK LIMITED
                                    NEW YORK BRANCH



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                      -6-



                                    BANCA COMMERCIALE ITALIANA,
                                      New York Branch



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------




                                    THE GOVERNOR AND COMPANY OF THE BANK OF
                                    IRELAND



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------




                                    THE BANK OF TOKYO-MITSUBISHI, LTD. --
                                      New York Branch



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                      -7-



                                    THE CHASE MANHATTAN BANK



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------




                                    CITIBANK, N.A.



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------




                                    COMMERZBANK AG



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                      -8-



                                    LANDESBANK SACHSEN GIROZENTRALE



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    NORDDEUTSCHE LANDESBANK GIRZENTRALE,
                                      New York Branch and/or Cayman Islands
                                      Branch



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    WESTDEUTSCHE LANDESBANK GIROZENTRALE,
                                      New York Branch



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                      -9-



                                    THE DAI ICHI KANGYO BANK, LIMITED



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------




                                    DEUTSCHE VERKEHRSBANK AG



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------



                                    By:
                                       -----------------------------------------
                                       Title:
                                             -----------------------------------


                                      -10-



                                    EXHIBIT A


                       FIRST AMENDMENT TO LETTER OF CREDIT

Wilmington Trust Company
   As Trustee
Rodney Square North
1100 N. Market Street
Wilmington, Delaware 19890

Attention: Corporate Trust Administration


         Re:      Delta Air Lines, Inc.

Ladies and Gentlemen:

         Reference is hereby made to that certain Irrevocable Letter of Credit
No. SB103387 dated May 19, 2000 (the "Letter of Credit"), established by
Bayerische Hypo-Und Vereinsbank AG, New York Branch, in your favor as
beneficiary. We hereby notify you that the Letter of Credit is hereby amended as
follows:

         1.       The Stated Amount of the Letter of Credit (as defined in the
                  first paragraph of the Letter of Credit) is hereby amended to
                  be $423,709,254.

         2.       The amount available for drawing under the Letter of Credit as
                  the Premium Component (as defined in clause (iii) of the first
                  paragraph of the Letter of Credit) is hereby amended to be
                  $101,007,598.

         This Amendment is subject to the International Standby Practices 1998,
published by the Institute of International Banking Law and Practice, Inc. (the
"ISP 98"). This Amendment shall be deemed to be a contract made under the laws
of the State of New York and shall, as to matters not governed by the ISP 98, be
governed by and construed in accordance with the laws of such State.

         Except as specifically amended hereby, all the terms and conditions of
the Letter of Credit shall remain unchanged and in full force and effect. No
reference to this Amendment to Letter of Credit need be made in any document,
and all references to the Letter of Credit in any document shall be deemed to be
references to the Letter of Credit as amended hereby. This Amendment to Letter
of Credit may be executed in any number of counterparts and by different parties
hereto on separate counterparts, each of which when so executed shall be an
original but all of which shall constitute one and the same instrument.



         IN WITNESS WHEREOF, the undersigned have executed and delivered this
Amendment to Letter of Credit as of the ________ day of August, 2001.

                                    BAYERISCHE HYPO-UND VEREINSBANK AG,
                                      New York Branch


                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------


                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------



Accepted and agreed to as of this _______ day of August, 2001.

                                    WILMINGTON TRUST COMPANY, as Trustee


                                    By:
                                       -----------------------------------------
                                       Name:
                                            ------------------------------------
                                       Title:
                                             -----------------------------------


                                      -2-

                                                                     EXHIBIT 4.1

                      SECOND AMENDMENT TO CREDIT AGREEMENT


         THIS SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of November 9,
2001 (this "Second Amendment"), is made by and among DELTA AIR LINES, INC., a
Delaware corporation (the "Company") and the financial institutions parties
hereto (the "Banks").

                                  WITNESSETH:

         WHEREAS, the Company, the Banks and Bayerische Hypo-und Veresinbank
AG, New York Branch, as letter of credit bank and agent (the "Agent"), are
parties to that certain Credit Agreement dated as of May 19, 2000 (as amended,
the "Credit Agreement"), pursuant to which the Banks made certain financial
accommodations available to the Company;

         WHEREAS, the Company has requested that the Banks amend the Credit
Agreement in certain respects; and

         WHEREAS, the Banks are willing to so amend the Credit Agreement on the
terms and conditions set forth herein.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, the parties hereto
agree as follows:

         Section 1.   Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this Second Amendment have the
meanings provided in the Credit Agreement.

         Section 2.   Amendments To Credit Agreement. Effective on (and
subject to the occurrence of) the Effective Date, the Credit Agreement is
hereby amended in accordance with this Section 2. Except as so amended, the
Credit Agreement shall continue in full force and effect.

         (a)      Section 1.1 of the Credit Agreement is amended by inserting
in the proper alphabetical order the following new defined terms:

                  "AFFILIATE" shall mean, with respect to any Person, any other
         Person (i) directly or indirectly controlling or controlled by or
         under direct or indirect common control with such Person or (ii)
         directly or indirectly owning or holding fifteen percent (15%) or more
         of the capital stock in such Person.

                  "SECOND AMENDMENT" shall mean the Second Amendment to Credit
         Agreement dated as of November 9, 2001 among the Company and the Banks
         party thereto.





                  "SECOND AMENDMENT EFFECTIVE DATE" shall mean the "Effective
         Date" of the Second Amendment (as defined in the Second Amendment).

         (b)      Section 5.6 of the Credit Agreement is amended to read in its
entirety as follows:

                  Section 5.6. Security. In the event the Company secures by
         mortgage, pledge, encumbrance, lien or other charge (a) any debt other
         than as permitted by Section 6.1 hereof or (b) the debt under the
         Credit Agreement dated as of May 2, 1997, as heretofore amended (the
         "BANK OF AMERICA FACILITY"), among the Company, the financial
         institutions party thereto and Bank of America, N.A., as agent bank
         (or any syndicated revolving credit facility that replaces the Bank of
         America Facility), then the Company shall equally and ratably secure
         (together with any other indebtedness required to be so secured) the
         indebtedness incurred hereunder.

         (c)      Section 6.1 of the Credit Agreement is amended by:

                  (i)      deleting "$3,000,000,000 (USD Three Billion)" in
         subclause (i)(a) thereof and substituting in lieu thereof
         "$5,350,000,000 (USD Five Billion, Three Hundred Fifty Million) plus
         the aggregate amount (not to exceed $150,000,000 (USD One Hundred
         Fifty Million)) of any Class D enhanced equipment trust certificates
         issued by the Company after the Second Amendment Effective Date that
         are secured by only those aircraft that also secure other classes of
         enhanced equipment trust certificates"; and

                  (ii)     inserting at the end of subclause (i)(b) thereof
         "and marked thereon with an asterisk".

         (d)      Section 6.2 of the Credit Agreement is amended by:

                  (i)      inserting the following at the end of clause (a)
         thereof: ", provided that any calculation of "Current Debt" under this
         clause (a) shall not include up to $625,000,000 of secured debt
         obligations of the Company or any Subsidiary incurred and outstanding
         after the date hereof that would otherwise constitute "Current Debt"";
         and

                  (ii)     deleting "150%" in clause (c) thereof and
         substituting in lieu thereof "175%".

         (e)      Clause (b) of Section 10.6(a) of the Credit Agreement is
amended to read in its entirety as follows: "(b) (i) the assigning Bank has
provided the Company with prior written notice of the proposed assignment and
(ii) the assigning Bank has received the prior written approval of the Agent,
the Letter of Credit Bank and (except in the case of an assignment to (x) a
Bank or (y) an


                                       2



Affiliate of the assigning Bank) the Company to the proposed assignment (which
consents of the Agent and the Company shall not be unreasonably withheld);"

         Section 3.        Representations And Warranties. The Company hereby
represents and warrants that each of the representations and warranties of the
Company contained in the Credit Agreement are true and accurate in all material
respects as of the date hereof except for (i) any representations and
warranties that expressly relate solely to an earlier date, which
representations and warranties were true and accurate in all material respects
on and as of such earlier date, (ii) the representations and warranties
contained in Sections 4.7 of the Credit Agreement, which representations and
warranties were true and accurate in all material respects on and as of May 19,
2000, and (iii) (x) the changes in the business, financial condition or results
of operation of the Company and its Subsidiaries that have resulted directly or
indirectly from the terrorist attacks that occurred on September 11, 2001 and
related matters and (y) changes disclosed by the Company in a report on Form
10-K, 10-Q or 8-K filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934, as amended, prior to the date of this
Second Amendment in each case insofar as such changes affect the representation
and warranty contained in the last sentence of Section 4.4 of the Credit
Agreement. The Company further represents and warrants to the Agent, the Letter
of Credit Bank and each of the Banks that (i) it has the requisite corporate
power and authority to execute, deliver and perform this Second Amendment, (ii)
this Second Amendment constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms and (iii)
the execution, delivery and performance by the Company of this Second Amendment
(A) have been duly authorized by all necessary corporate action and do not
require any consent or approval, authorization, permit or license from any
federal, state or other regulatory authority which has not been obtained, or
violate any law, regulation, order, judgement, decree or determination having
applicability to the Company or its organizational documents, or result in a
breach of, or constitute a default under any existing indenture or credit
agreement or any other agreement or instrument to which the Company is a party
or by which its properties may be bound or affected, except where the failure
to have such consent or approval or such violation, breach of default could not
reasonably be expected to result in a material adverse effect on the business,
financial condition or results of operations of the Company and its
Subsidiaries taken as a whole, and (B) will not conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a default
under, the Certificate of Incorporation or Bylaws of the Company or of any
agreement or instrument to which the Company is now a party, which breach would
have a material adverse effect on the business, financial condition or results
of operations of the Company and its Subsidiaries taken as a whole.

         Section 4.        Amendment Of Schedule I. Schedule I of the Credit
Agreement, describing the "Funded Debt" and "Secured Obligations" of the
Company, is amended in its entirety to conform to Schedule I attached to this
Second Amendment. The Company represents and warrants to the Agent, the


                                       3



Letter of Credit Bank and each of the Banks that the Company does not have
outstanding any Funded Debt except as set forth on Schedule I to this Second
Amendment, and there exists no default under the provisions of any instrument
evidencing such indebtedness or agreement relating thereto.

         Section 5.        Effective Date. This Second Amendment shall be and
become effective on the date (the "Effective Date") on or prior to November 30,
2001 upon which (i) all of the conditions set forth in this Section 5 shall
have been satisfied and (ii) the Majority Banks and the Company shall have duly
executed counterparts of this Second Amendment and provided original copies
thereof to the Agent.

         (a)      Closing Certificate. The Agent shall have received an
Officer's Certificate, in form reasonably satisfactory to the Agent, certifying
that (i) before and after giving effect to this Second Amendment, no Default or
Event of Default exists or will be in existence and (ii) the representations
and warranties of the Company contained in this Second Amendment are true and
accurate in all material respects with the same effect as though such
representations and warranties had been made on and as of the Effective Date.

         (b)      Amendments to Other Facilities. (i) The Company shall have
entered into amendments effecting changes substantially similar to those
effected in Section 2 hereof with respect to the comparable provisions of (A)
the Credit Agreement dated as of May 2, 1997, as heretofore amended, among the
Company, the financial institutions party thereto and Bank of America, N.A., as
agent bank (such amendment, (the "BANK OF AMERICA AMENDMENT"), and (B) the
Reimbursement Agreement dated as of May 1, 2000 among the Company, the
financial institutions parties thereto and Commerzbank AG, New York Branch, as
agent and letter of credit fronting bank; (ii) the Bank of America Amendment
shall have become effective; and (iii) the Company shall have terminated the
commitments under (and repaid in full, together with any accrued interest, all
loans under) the Credit Agreement dated as of April 6, 2001 among the Company,
the banks parties thereto and Citicorp North America, Inc., as Administrative
Agent.

         (c)      Legal Opinion. The Company shall have delivered to the Agent
a legal opinion of counsel to the Company, in form and content reasonably
satisfactory to the Agent, opining that this Second Amendment has been duly
authorized, executed and delivered by the Company and is a valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms.

         (d)      Business Plan. The Company shall have provided to the Agent
and the Banks its updated business plan, including pro forma financial
statements and projections, for the fourth quarter of fiscal year 2001 and
fiscal year


                                       4



2002, including without limitation projected balance sheet, income statements
and statement of cash flow for the fourth quarter of fiscal year 2001 and
fiscal year 2002 on a quarterly basis, such materials being in substantially
the same form and content as the business plan and cash flow projections most
recently presented by the officers of the Company to the Board of Directors of
the Company, or any subcommittee thereof.

         (e)      Amendment Fee. The Agent shall have received from the
Company, for the account of each Bank (a "Consenting Bank") that has evidenced
its agreement hereto as provided in clause (ii) of Section 5 by 5:00 p.m.
(Atlanta, Georgia time) on the later of (i) November 9, 2001 and (ii) the date
on which the Agent issues a notice to the Banks stating that the condition set
forth in clause (ii) of Section 5 has been satisfied, an amendment fee in the
amount equal to 15 basis points (0.15%) on the aggregate amount of such
Consenting Bank's Commitment.

         (f)      Termination Date. Notwithstanding the terms of this Section
5, in the event that the Company shall fail to comply with each of the
conditions to effectiveness set forth in this Section 5 on or before November
30, 2001, this Second Amendment shall not become effective and each of the
signatures submitted by the Banks to the Agent shall be released.

         Section 6.        Miscellaneous.

         (a)      References to Credit Agreement. Each reference to the Credit
Agreement in the Credit Agreement or any of the other instruments, agreements,
certificates or other documents executed in connection therewith (collectively,
the "Loan Documents"), shall be deemed to be a reference to the Credit
Agreement, as amended hereby and as the same may be further amended, restated,
supplemented or otherwise modified from time to time in accordance with Section
10.4 thereof.

         (b)      Expenses of Agent. The Company agrees to pay, on demand, all
reasonable fees, costs and expenses incurred by the Agent in connection with
the preparation, negotiation and execution of this Second Amendment and any
other Loan Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including, without limitation, the
reasonable costs and fees of the Agent's legal counsel and any taxes or
expenses associated with or incurred in connection with any instrument or
agreement referred to herein or contemplated hereby.

         (c)      Benefits. This Second Amendment shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns.

         (d)      Governing Law. THIS SECOND AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES.


                                       5



         (e)      Effect. Except as expressly herein amended, the terms and
conditions of the Credit Agreement shall remain in full force and effect
without amendment or modification, express or implied. The entering into this
Second Amendment by the Banks shall not be construed or interpreted as an
agreement by the Banks to enter into any future amendment or modification of
the Credit Agreement or any of the other Loan Documents.

         (f)      Counterparts; Telecopied Signatures. This Second Amendment
may be executed in any number of counterparts and by different parties to this
Second Amendment on separate counterparts, each of which when so executed shall
be deemed to be an original and shall be binding upon all parties, their
successors and assigns. Any signature delivered or transmitted by a party by
facsimile transmission shall be deemed to be an original signature hereto.

         (g)      Further Assurances. The Company agrees to take such further
actions as the Agent shall reasonably request from time to time in connection
herewith to evidence or give effect to the amendments set forth herein or any
of the transactions contemplated hereby.

         (h)      Section Titles. Section titles and references used in this
Second Amendment shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreements among the parties hereto.

         (i)      Release of Claims. To induce the Banks to enter into this
Second Amendment, the Company hereby releases, acquits and forever discharges
the Banks, and all officers, directors, agents, employees, successors and
assigns of the Banks, from any and all liabilities, claims, demands, actions or
causes of actions of any kind or nature (if there be any), whether absolute or
contingent, disputed or undisputed, at law or in equity, or known or unknown,
that the Company now has or ever had against such Persons arising under or in
connection with, directly or indirectly, any of the Loan Documents.


                                       6



         IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to Credit Agreement to be executed under duly authorized officers as
of the date above written.


                           DELTA AIR LINES, INC.


                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           BAYERISCHE HYPO-UND VEREINSBANK AG, New York
                                Branch



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           ABN AMRO BANK N.V.



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------


                                       7



                           BANK ONE, NA



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           BNP PARIBAS (formerly BANQUE NATIONALE DE PARIS



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           CREDIT INDUSTRIEL ET COMMERCIAL



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           CREDIT LYONNAIS, New York Branch



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------


                                       8



                           DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           THE INDUSTRIAL BANK OF JAPAN, LIMITED



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           THE MITSUBISHI TRUST & BANKING CORPORATION



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           THE SANWA BANK, LIMITED



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------


                                       9



                           THE TOKAI BANK LIMITED, New York Branch



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           INTESA Bci, New York Branch



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           THE BANK OF TOKYO-MITSUBISHI, LTD.



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------


                                       10



                           THE CHASE MANHATTAN BANK



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           CITIBANK, N.A.



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           COMMERZBANK AG



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           LANDESBANK SACHSEN GIROZENTRALE



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------


                                       11



                           NORDDEUTSCHE LANDESBANK GIRZENTRALE, New York
                                Branch and/or Cayman Islands Branch



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           WESTDEUTSCHE LANDESBANK GIROZENTRALE, New York
                                Branch



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           THE DAI ICHI KANGYO BANK, LIMITED



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                                        12



                           DEUTSCHE VERKEHRSBANK AG



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                           By:
                              -------------------------------------------------
                           Name:
                                -----------------------------------------------
                           Title:
                                 ----------------------------------------------



                                       13

                                                                 SCHEDULE I
                                                            TO SECOND AMENDMENT
                                                            TO CREDIT AGREEMENT


                      FUNDED DEBT AND SECURED OBLIGATIONS


A.       FUNDED DEBT (1)

         1.       6.65-9.15% Notes with maturities ranging from 2002 to 2004.

         2.       8.50% Notes due March 15, 2002.

         3.       8.125% Notes due July 1, 2039.

         4.       7.70% Notes due December 15, 2005.

         5.       7.90% Notes due December 15, 2009.

         6.       8.30% Notes due December 15, 2029.

         7.       8.10% Guaranteed Serial ESOP Notes, payable in installments
                  between 2002 and 2009.

         8.       7.379% Equipment Notes (Series A-1, 2000-1) due in
                  installments between 2001 and 2010.

         9.       7.570% Equipment Notes (Series A-2, 2000-1) due November 18,
                  2010.

         10.      7.920% Equipment Notes (Series B, 2000-1) due November 18,
                  2010.

         11.      7.779% Equipment Notes (Series C, 2000-1) due November 18,
                  2005.

         12.      10.125% Debentures due May 15, 2010.

         13.      10.375% Debentures due February 1, 2011.

         14.      9.00% Debentures due May 15, 2016.

         15.      9.75% Debentures due May 15, 2021.

         16.      9.25% Debentures due March 15, 2022.

         17.      10.375% Debentures due December 15, 2022.

- ---------
(1)      All of which is unsecured except for Items 8-11 and 27-31.




         18.      Development Authority of Fulton County Loan Agreement dated
                  May 1, 1998.

         19.      Development Authority of Fulton County Loan Agreement dated
                  September 1, 1992.

         20.      Development Authority of Clayton County Loan Agreement dated
                  May 1, 2000 (Series A, B, C).

         21.      Capital Leases:

                  (a)      Forty-One B737-200 Aircraft Leases
                  (b)      Nine Western Aircraft Leases (4 B737-200; 3 B737-300
                           and 2 B727-200)

         22.      Credit Agreement, dated as of May 2, 1997, among the Company,
                  the several financial institutions which are parties thereto
                  and Bank of America N.A. (formerly Nationsbank, N.A.
                  (South)), as Agent Bank.

         23.      Reimbursement Agreement, dated as of May 1, 2000 among the
                  Company, the several financial institutions which are parties
                  thereto and Commerzbank, AG, New York Branch, as Agent and
                  Front Bank.

         24.      Credit Agreement, dated as of May 19, 2000 among the Company,
                  the several financial institutions which are parties thereto
                  and Bayerische Hypo-und Vereinsbank AG, New York Branch, as
                  Agent and Letter of Credit Bank.

         25.      5.0%-5.5% Massachusetts Port Authority Special Facilities
                  Revenue Bonds (Delta Air Lines, Inc. Project), Series 2001A
                  (Fixed Rate Securities).

         26.      Massachusetts Port Authority Special Facilities Revenue Bonds
                  (Delta Air Lines, Inc. Project), Series 2001B and 2001C
                  (Auction Rate Securities).

         27.      6.619% Equipment Notes (Series A-1, 2001-1) due in
                  installments between 2002 and 2011.

         28.      7.111% Equipment Notes (Series A-2, 2001-1) due September 18,
                  2011.

         29.      7.711% Equipment Notes (Series B, 2001-1) due September 18,
                  2011.

         30.      7.299% Equipment Notes (Series C, 2001-1) due September 18,
                  2006.

         31.      6.95% Equipment Notes (Series D, 2001-1) due September 18,
                  2006 (100% beneficial interest owned by Aero Assurance Ltd.,
                  a subsidiary of Delta).


                                       2


B.       SECURED OBLIGATIONS

         *1.      $96,500,000 The Port Authority of New York and New Jersey
                  Special Projects Bonds, Series 1R (Delta Air Lines, Inc.
                  Project).

         *2.      Nine Western Air Lines Capital Leases (4 B737-200; 3 B737-300
                  and 2 B727-200).

         *3.      SATO Guaranty (pledge of Company's government receivables to
                  provide collateral for SATO credit agreement).

         *4.      $122,600,000 Various Credit Agreements by 11 EMB-120
                  Brasilias, 7 CRJs and 4 ATRs at Atlantic Southeast Airlines,
                  Inc.

         *5.      $149,100,000 Various Credit Agreements by 15 CRJs at Comair
                  Airlines, Inc.

          6.      7.379% Equipment Notes (Series A-1, 2000-1) due in
                  installments between 2001 and 2010.

          7.      7.570% Equipment Notes (Series A-2, 2000-1) due November 18,
                  2010.

          8.      7.920% Equipment Notes (Series B, 2000-1) due November 18,
                  2010.

          9.      7.779% Equipment Notes (Series C, 2000-1) due November 18,
                  2005.

         10.      6.619% Equipment Notes (Series A-1, 2001-1) due in
                  installments between 2002 and 2011.

         11.      7.111% Equipment Notes (Series A-2, 2001-1) due September 18,
                  2011.

         12.      7.711% Equipment Notes (Series B, 2001-1) due September 18,
                  2011.

         13.      7.299% Equipment Notes (Series C, 2001-1) due September 18,
                  2006.

         14.      6.95% Equipment Notes (Series D, 2001-1) due September 18,
                  2006 (100% beneficial interest owned by Aero Assurance Ltd.,
                  a subsidiary of Delta).

        *15.      JFK Financing. (As of the date of this Second Amendment to
                  Credit Agreement, the Company is considering various means
                  for financing a proposed airport facilities project at John
                  F. Kennedy International Airport (JFK). Since the Company has
                  not yet determined the structure for such financing, the
                  intent of this provision is to include such financing in the
                  lists set forth on these schedules once such financing
                  occurs, if ever, and to the extent applicable to the
                  structure ultimately selected by the Company.


                                       3

EX-4.2

                                                                    EXHIBIT 4.2

===============================================================================


                            REIMBURSEMENT AGREEMENT

                                  dated as of

                                  May 1, 2000

                                     among

                             DELTA AIR LINES, INC.,

                        COMMERZBANK AG, New York Branch
                (in its capacity as Agent and the Fronting Bank)

                                      and

                          THE LENDERS DESCRIBED HEREIN

                    ---------------------------------------

                                Relating to the

                                  $415,000,000
                           Letter of Credit Facility

                                  Arranged by

                        COMMERZBANK AG, New York Branch

                    ---------------------------------------

===============================================================================





                               TABLE OF CONTENTS




                                                                                                                Page
                                                                                                                ----

                                                                                                             
Section 1.        Definitions and Accounting Terms................................................................1

         1.01     Definitions.....................................................................................1
         1.02     Interpretation.................................................................................11

Section 2.        Issuance of Letters of Credit; Payments, Etc...................................................11

         2.01     Issuance of Letters of Credit..................................................................11
         2.02     Reimbursements; Advances.......................................................................11
         2.03     Type of Advance; Conversion; Interest Periods; Payment of Interest; Prepayment; Breakage.......12
         2.04     Fees; Expenses.................................................................................14
         2.05     Increased Costs; Reduced Rate of Return........................................................15
         2.06     Increased Costs, Illegality, etc...............................................................17
         2.07     Manner of Payment; Late Payments...............................................................19
         2.08     Evidence of Debt...............................................................................19
         2.09     Obligations Unconditional......................................................................19
         2.10     Reduction of Commitments.......................................................................20
         2.11     Extension of Scheduled Expiration Date.........................................................20
         2.12     Change in Control..............................................................................20
         2.13     Application of Amounts Received from Applicable Bond Trustee or Applicable Tender Agent........21

Section 3.        Conditions Precedent...........................................................................21

         3.01     Agreement......................................................................................21
         3.02     Letters of Credit..............................................................................22

Section 4.        Representations and Warranties.................................................................23

         4.01     Organization; Powers...........................................................................23
         4.02     Authorization; No Violation....................................................................23
         4.03     Enforceability.................................................................................23
         4.04     Financial Statements...........................................................................24
         4.05     Litigation.....................................................................................24
         4.06     Business; Status as Air Carrier................................................................24
         4.07     Funded Debt....................................................................................24
         4.08     Title to Properties, Etc.......................................................................25
         4.09     Tax Returns and Payments.......................................................................25
         4.10     Use of Proceeds................................................................................25
         4.11     Subsidiaries...................................................................................25
         4.12     ERISA..........................................................................................25
         4.13     Environmental Matters..........................................................................25



                                      (i)



                                                                                                                Page
                                                                                                                ----

                                                                                                             
Section 5.        Covenants......................................................................................26

         5.01     No Merger or Sale of Assets....................................................................26
         5.02     Leases.........................................................................................26
         5.03     Debt...........................................................................................26
         5.04     Liens..........................................................................................27
         5.05     Insurance......................................................................................27
         5.06     Payment of Taxes...............................................................................28
         5.07     Financial Statements...........................................................................28
         5.08     Maintenance of Equipment.......................................................................29
         5.09     Inspection.....................................................................................29
         5.10     Security.......................................................................................29
         5.11     Notice of Any Default or Event of Default......................................................29
         5.12     ERISA Reporting Requirements...................................................................29
         5.13     Ratings........................................................................................29

Section 6.        Events of Default; Remedies....................................................................29

         6.01     Events of Default..............................................................................29
         6.02     Remedies.......................................................................................31

Section 7.        Intercreditor Arrangements.....................................................................32

         7.01     Fronting Bank Interests........................................................................32
         7.02     Payments.......................................................................................34
         7.03     Adjustment of Commitments......................................................................35
         7.04     Notices to the Lenders.........................................................................35

Section 8.        The Agent......................................................................................35

         8.01     Appointment....................................................................................36
         8.02     Nature of Duties...............................................................................36
         8.03     Lack of Reliance on Agent......................................................................36
         8.04     Certain Rights of the Agent....................................................................36
         8.05     Reliance.......................................................................................37
         8.06     Indemnification................................................................................37
         8.07     The Agent in its Individual Capacity...........................................................37
         8.08     Resignation by the Agent.......................................................................38
         8.09     Arranger.......................................................................................38

Section 9.        Miscellaneous..................................................................................38

         9.01     Indemnification................................................................................38
         9.02     Right of Setoff................................................................................39
         9.03     Notices........................................................................................39
         9.04     Successors and Assigns.........................................................................40
         9.05     No Waiver; Remedies Cumulative.................................................................42
         9.06     Payments Pro Rata..............................................................................43
         9.07     Governing Law; Submission to Jurisdiction; Venue...............................................43
         9.08     Amendment or Waiver............................................................................43
         9.09     Termination of Letters of Credit; Survival.....................................................44



                                     (ii)



                                                                                                                Page
                                                                                                                ----

                                                                                                             
         9.10     Entire Agreement...............................................................................44
         9.11     Counterparts...................................................................................44
         9.12     Severability...................................................................................44
         9.13     Nature of Duties...............................................................................44
         9.14     Fronting Bank Cooperation......................................................................45


Exhibits

Exhibit A       Form of Notice of Issuance
Exhibit B       Form of Assignment and Acceptance
Exhibit C       Form of Letter of Credit

Schedules

Schedule 4.07   Funded Debt; Secured Obligations
Schedule 4.11   Subsidiaries of Delta Air Lines, Inc.
Schedule 5.03   Guaranty Liabilities


                                     (iii)



                  REIMBURSEMENT AGREEMENT, dated as of May 1, 2000, by and
among DELTA AIR LINES, INC., a Delaware corporation (the "Borrower"),
COMMERZBANK AG ("Commerzbank"), acting through its New York Branch, as issuer
of the hereinafter defined Letters of Credit (the "Fronting Bank"), the
financial institutions listed on the signature pages hereof under the caption
"Lenders" (together with each financial institution which becomes a "Lender"
pursuant to Section 9.04 hereof, individually, a "Lender" and, collectively,
the "Lenders"), COMMERZBANK, acting in the manner and to the extent described
in Section 8 (in such capacity and together with any successor appointed
pursuant to Section 8.01, the "Agent"), and COMMERZBANK, acting as arranger (in
such capacity, the "Arranger").

                                  WITNESSETH:

                  WHEREAS, the Borrower has requested, and the Agent, the
Fronting Bank and the Lenders have agreed, to make available to the Borrower a
letter of credit facility in the aggregate stated amount of $415,000,000 upon
the terms and conditions set forth in this Agreement;

                  NOW, THEREFORE, in consideration of the premises and of the
commitments made hereunder and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

                  Section 1.        Definitions and Accounting Terms.

                  1.01     Definitions. The following terms as used in this
Agreement shall have the following meanings, unless the context otherwise
requires:

                  "Advance" or "Advances" shall have the meanings provided in
Section 2.02(a).

                  "Advance Repayment Date" shall have the meaning provided in
Section 2.02(a)

                  "Affiliate" shall mean, when used with respect to a specified
Person, another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with
the Person specified.

                  "Agent" shall have the meaning provided in the introductory
paragraph of this Agreement.

                  "Agreement" shall mean this Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.

                  "Airline Subsidiary" shall mean Comair, Inc., Atlantic
Southeast Airlines, Inc. and any other Subsidiary of the Borrower holding an
airline operating certificate issued by the U.S. Federal Aviation
Administration under FAR Part 121.

                  "Alternate Base Rate" shall mean for any day, a rate per
annum equal to the higher of (i) the Prime Lending Rate for such day or (ii)
the Federal Funds Rate for such day plus one-half percent (0.5%).





                   "Alternate Base Rate Advance" shall mean any Advance while
it accrues interest at the Alternate Base Rate.

                  "Applicable Bond Trustee" shall mean, with respect to a
series of Bonds, the trustee appointed from time to time by the issuer of such
Bonds to act as the trustee for the holders of such Bonds.

                  "Applicable Fee" shall mean for any day the amount set forth
in the table below under the rating category applicable to the Borrower's
senior unsecured long-term public debt as rated by S&P ("S&P Rating") and
Moody's ("Moody's Rating"; each of the S&P Rating and the Moody's Rating
referred to herein as a "Rating") on such day:




Senior Unsecured Debt           Level 1           Level 2           Level 3           Level 4          Level 5
Ratings (S&P's rating
followed by Moody's rating)     BBB+ or higher    BBB or Baa2       BBB- or Baa3      BB+ or Ba1       BB or lower or
                                or Baa1 or                                                             Ba2 or lower
                                higher

                                                                                        
Applicable Fee                      .625%              .75%             .875%            1.25%             1.50%



The Agent shall determine the Applicable Fee from time to time in accordance
with the above table and notify the Borrower, the Fronting Bank and the Lenders
of such determination from time to time. In the event the S&P Rating and the
Moody's Rating correspond to different levels on the respective table resulting
in different Applicable Fee determinations, the following provisions shall
apply. In the event the S&P Rating and the Moody's Rating differ by one level,
the Applicable Fee shall be that corresponding to the higher Rating. For
example, a "BBB+" S&P Rating and a "Baa2" Moody's Rating would result in an
Applicable Fee equal to 0.625%. In the event the S&P Rating and the Moody's
Rating differ by two levels, the Applicable Fee shall be that corresponding to
that level which is in between the two applicable levels. For example, a "BBB"
S&P Rating and a "Ba1" Moody's Rating would result in an Applicable Fee equal
to 0.875%. In the event the S&P Rating and the Moody's Rating differ by three
levels, the Applicable Fee shall be that corresponding to the level immediately
below the higher of such Ratings. For example, a "BBB+" S&P Rating and a "Ba1"
Moody's Rating would result in an Applicable Fee equal to 0.75%. In the event
the S&P Rating and the Moody's Rating differ by four levels (i.e. a ratings
split between level 1 and level 5), the Applicable Fee shall be that
corresponding to level 4. For example, a "BBB+" S&P Rating and a "Ba2" Moody's
Rating would result in an Applicable Fee equal to 1.25%. In the event only one
rating agency exists or continues rating the Borrower's long term senior
unsecured debt, such agency's rating shall be used for purposes of the
respective table. In the event: (i) neither agency exists or continues rating
the Borrower's long-term senior unsecured debt or (ii) the Borrower no longer
has any outstanding long term senior unsecured debt to be rated, the Applicable
Fee for the first 90 days after such occurrence shall be the Applicable Fee in
effect as determined using the above immediately prior to such occurrence.
During such 90-day period, the Agent and the Borrower shall negotiate in good
faith to agree upon a new pricing grid or other appropriate pricing terms. Any
such new grid or pricing terms shall be approved by the Fronting Bank and all
of the Lenders. In the event the Agent, the Borrower, the Fronting Bank and all
of the Lenders cannot agree upon such new pricing grid or pricing terms by the
end of such 90-day period, the


                                      -2-



Applicable Fee shall be that corresponding to level 3 of the above table for
the remainder of the term of this Agreement. Any necessary adjustment in the
Applicable Fee pursuant to the terms hereof shall become effective immediately
upon any change in a Rating.

                  "Applicable Indenture" shall mean, with respect to a series
of Bonds, the indenture, indenture of trust or trust agreement pursuant to
which such Bonds were issued.

                  "Applicable Law" shall mean, with respect to any Person, all
provisions of statutes, rules, regulations and orders of any Governmental
Authority applicable to such Person, and all orders and decrees of all courts
and arbitrators which are binding on such Person.

                  "Applicable Margin" shall mean, with respect to any Advance
and for any day during which such Advance is outstanding, the percentage amount
set forth in the table below opposite the applicable period during which such
day occurs and under the rating category applicable to the Borrower's S&P
Rating and Moody's Rating for such day:




Senior Unsecured Debt           Level 1           Level 2           Level 3           Level 4          Level 5
Ratings (S&P's rating
followed by Moody's rating)     BBB+ or higher    BBB or Baa2       BBB- or Baa3      BB+ or Ba1       BB or lower or
                                or Baa1 or                                                             Ba2 or lower
                                higher

                                                                                        
For Eurodollar Rate
  Advances

Up to and including 90 days          .75%             .875%             1.00%           1.375%            1.625%

91 to 180 days                      1.00%            1.125%             1.25%           1.625%            1.875%

More than 180 days                  1.25%            1.375%             1.50%           1.875%            2.125%

For Alternate Base
Rate Advances

Up to and including 90 days            0%                0%                0%            .375%             .625%

91 to 180 days                         0%             .125%              .25%            .625%             .875%

More than 180 days                   .25%             .375%              .50%            .875%            1.125%



The Agent shall determine the Applicable Margin from time to time in accordance
with the above table and notify the Borrower, the Fronting Bank and the Lenders
of such determination from time to time. In the event the S&P Rating and the
Moody's Rating correspond to different levels on the respective table resulting
in different Applicable Margin determinations, the following provisions shall
apply. In the event the S&P Rating and the Moody's Rating differ by one level,
the Applicable Margin shall be that corresponding to the higher Rating. For
example, a "BBB+" S&P Rating and a "Baa2" Moody's Rating would result in an
Applicable Margin for an Advance that has been outstanding for 95 days and
which is then bearing interest at a


                                      -3-



Eurodollar Rate equal to 1.00%. In the event the S&P Rating and the Moody's
Rating differ by two levels, the Applicable Margin shall be that corresponding
to that level which is in between the two applicable levels. For example, a
"BBB" S&P Rating and a "Ba1" Moody's Rating would result in an Applicable
Margin for an Advance that has been outstanding for 95 days and which is then
bearing interest at a Eurodollar Rate equal to 1.25%. In the event the S&P
Rating and the Moody's Rating differ by three levels, the Applicable Margin
shall be that corresponding to the level immediately below the higher of such
Ratings. For example, a "BBB+" S&P Rating and a "Ba1" Moody's Rating would
result in an Applicable Margin for an Advance that has been outstanding for 95
days and which is then bearing interest at a Eurodollar Rate equal to 1.125%.
In the event the S&P Rating and the Moody's Rating differ by four levels (i.e.
a ratings split between level 1 and level 5), the Applicable Margin shall be
that corresponding to level 4. For example, a "BBB+" S&P Rating and a "Ba2"
Moody's Rating would result in an Applicable Margin for an Advance that has
been outstanding for 95 days and which is then bearing interest at a Eurodollar
Rate equal to 1.625%. In the event only one rating agency exists or continues
rating the Borrower's long term senior unsecured debt, such agency's rating
shall be used for purposes of the respective table. In the event: (i) neither
agency exists or continues rating the Borrower's long-term senior unsecured
debt or (ii) the Borrower no longer has any outstanding long term senior
unsecured debt to be rated, the Applicable Margin for the first 90 days after
such occurrence shall be the Applicable Margin in effect as determined using
the above immediately prior to such occurrence. During such 90-day period, the
Agent and the Borrower shall negotiate in good faith to agree upon a new
pricing grid or other appropriate pricing terms. Any such new grid or pricing
terms shall be approved by the Fronting Bank and all of the Lenders. In the
event the Agent, the Borrower, the Fronting Bank and all of the Lenders cannot
agree upon such new pricing grid or pricing terms by the end of such 90-day
period, the Applicable Margin shall be that corresponding to level 3 of the
above table for the remainder of the term of this Agreement. Any necessary
adjustment in the Applicable Margin pursuant to the terms hereof shall become
effective immediately upon any change in a Rating.

                  "Applicable Tender Agent" shall mean, with respect to a
series of Bonds, the tender agent appointed from time to time in accordance
with the Applicable Indenture to act as the tender agent for such Bonds.

                  "Applicable Termination Date" shall mean, with respect to a
Letter of Credit, the Termination Date for such Letter of Credit.

                  "Arranger" shall have the meaning provided in the
introductory paragraph of this Agreement.

                  "Assignment and Acceptance" shall mean an agreement in the
form of Exhibit B hereto, executed by the assigning Lender, the assignee and
other parties as contemplated thereby, if any.

                  "Bonds" shall mean one or more of a series of variable rate
tax-exempt bonds to be issued by any governmental or conduit entity on behalf
of, and for the benefit of, the Borrower.

                  "Bond Documents" shall mean, with respect to a series of
Bonds, any indenture, trust agreement, bond, loan agreement, lease agreement
(but only leases under which (i) rentals


                                      -4-



equal to principal, interest and premium, if applicable, on the Bonds are to be
paid or (ii) additional payments which correspond to payments under this
Agreement are to be paid), remarketing agreement, tender agent agreement,
authentication agent agreement, bond purchase agreement and other documentation
related to such Bonds, the proceeds of such Bonds, the sale of such Bonds and
the remarketing of such Bonds.

                  "Borrower" shall have the meaning provided in the
introductory paragraph of this Agreement.

                  "Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and any day which
shall be in New York a legal holiday or a day on which banking institutions are
authorized or required by law or other government action to close and (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Rate Advances, any day which is a
Business Day described in clause (i) above and which is also a day for trading
by and between banks in the London interbank Eurodollar market.

                  "Change in Control" shall be deemed to have occurred if (i)
any Person or two (2) or more Persons acting in concert shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities and Exchange Act of 1934, as amended),
directly or indirectly, of securities of the Borrower (or other securities
convertible into such securities) representing fifty percent (50%) or more of
the combined voting power of all securities of the Borrower entitled to vote in
the election of directors, other than securities having such power only by
reason of the happening of a contingency, or (ii) during any period up to
twelve (12) consecutive months, commencing before or after the date of this
Agreement, individuals who at the beginning of such twelve (12) month period
were directors of the Borrower shall cease for any reason (other than death,
mental or physical disability, or retirement) to constitute a majority of the
board of directors of the Borrower.

                  "Change in Control Collateral" shall have the meaning
provided in Section 2.12.

                  "Code" shall mean the Internal Revenue Code of 1986, and the
regulations promulgated and rulings issued thereunder.

                  "Collateral" shall have the meaning provided in Section
6.02(a).

                  "Commerzbank" shall have the meaning provided in the
introductory paragraph of this Agreement.

                  "Commitment" shall mean, when used with reference to any
Lender on any date of determination, the maximum amount of such Lender's
payment obligation (or, if no further payment obligation exists, the maximum
amount of such Lender's reimbursement right) under Section 7 as set forth
opposite the name of such Lender on the Register maintained by the Agent (and,
in the case of each initial Lender, as set forth opposite such Lender's
signature to this Agreement under the caption "Commitment"), as the same may
have been reduced or terminated through the date of determination pursuant to
Sections 2.10, 7.03 and 9.09 hereof or by assignment pursuant to Section 9.04
hereof.


                                      -5-



                  "Commitment Termination Date" shall have the meaning provided
in Section 2.04(b).

                   "Control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management of policies of
a person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.

                  "Convertible Subordinated Debt" shall mean any debt of the
Borrower convertible into shares of any or all classes of stock of the Borrower
and containing, or issued under agreements or indentures containing, provisions
effectively subordinating the same to the debt created by this Agreement.

                  "Current Debt" shall mean any obligation for borrowed money
(including notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money) payable on demand
or within a period of one year from the date of the creation thereof.

                  "Date of Issuance" shall have the meaning provided in the
defined term "Notice of Issuance."

                  "Default" shall mean an event, act or occurrence which, with
the giving of notice or the lapse of time (or both), would become an Event of
Default.

                  "Default Rate" shall mean, with respect to any day, a rate of
interest per annum equal to one quarter of one percent (.25%) in excess of the
Alternate Base Rate in effect for such day (computed on the basis of a 360-day
year and actual days elapsed).

                  "Dollars" and the sign "$" shall each mean freely
transferable lawful money of the United States.

                  "Drawing" shall mean, with respect to a Letter of Credit, a
drawing made thereunder by the beneficiary thereof in accordance with its
terms.

                  "Effective Date" shall have the meaning provided in Section
3.01.

                  "Equity" shall mean the sum of: (i) the par value (or value
stated on the books of the Borrower) of the capital stock of all classes of the
Borrower (other than the Borrower's Series B ESOP Convertible Preferred Stock),
(ii) the amount of additional paid-in capital and reinvested earnings of the
Borrower, (iii) the amount of taxes deferred and unamortized investment tax
credits under Sections 167 and 168 of the Internal Revenue Code or similar
provisions of any applicable tax law and carried on the balance sheet under
those captions, (iv) the amount of any gain on the sale and leaseback of assets
which is deferred pursuant to GAAP, (v) the principal amount of any Convertible
Subordinated Debt outstanding, (vi) the amount of any post-retirement benefits
(other than pensions) of the Borrower accrued in accordance with the Statement
of Financial Accounting Standards No. 106 (Financial Accounting Standards Board
1990) and GAAP and classified as long term liabilities on the balance sheet of
the Borrower, and (vii) the difference between (a) the stated and liquidation
value of the Borrower's


                                      -6-



Series B ESOP Convertible Preferred Stock and (b) the unearned compensation
under the Borrower's employee stock ownership plan; minus (viii) the unrealized
loss on noncurrent marketable equity securities, net of any deferred tax
benefits, and minus (ix) treasury stock at cost.

                  "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time and any successor statute.

                  "Eurocurrency Reserve Period" shall have the meaning provided
in Section 2.06(c).

                  "Eurodollar Rate" shall mean, with respect to an Advance
during a specified Interest Period, the offered rate in the London interbank
market for deposits in United States dollars of amounts equal or comparable to
the principal amount of such Advance offered for a term comparable to such
Interest Period, as currently shown on the Reuters Screen LIBO page as of 11:00
a.m., GMT, two Business Days prior to the first day of such Interest Period;
provided, however, that (A) if more than one offered rate as described above
appears on the Reuters Screen LIBO page, the rate used to determine the
Eurodollar Rate will be the arithmetic average (rounded upward, if necessary,
to the next higher 1/1000 of 1%) of such offered rates, or (B) if no such
offered rates appear, the rate used for such Interest Period will be the
arithmetic average (rounded upward, if necessary, to the next higher 1 /1000 of
1%) of rates quoted by the Fronting Bank at approximately 10:00 a.m., New York
time, two Business Days prior to the first day of such Interest Period for
deposits in United States dollars offered to leading European banks for a
period comparable to such Interest Period in an amount comparable to the
principal amount of such Advance. If the Agent ceases to use the Reuters Screen
LIBO page for determining interest rates based on eurodollar deposit rates, a
comparable internationally recognized interest rate reporting service shall be
used to determine such offered rates.

                  "Eurodollar Rate Advance" shall mean any Advance while it
accrues interest at the Eurodollar Rate.

                  "Event of Default" shall have the meaning provided in Section
6.01 hereof.

                  "Federal Funds Rate" shall mean, for any day, the rate per
annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if such day is not a Business Day,
the Federal Funds Rate for such day shall be the rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (ii) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate quoted to
the Agent by three independent funds brokers on such day for similar
transactions as determined by the Agent.

                  "Fee Letter" shall mean that certain letter agreement, dated
February 22, 2000, between the Borrower and Commerzbank, regarding certain
fees.

                  "Financing Documents" shall mean this Agreement, the Letters
of Credit, the Fee Letter and each Notice of Issuance.


                                      -7-



                  "Fronting Bank" shall have the meaning provided in the
introductory paragraph of this Agreement.

                  "Fronting Bank Interests" shall have the meaning provided in
Section 7.01(a) hereof.

                  "Fronting Bank Share" shall have the meaning provided in
Section 7.02(a).

                  "Funded Debt" shall mean any obligation for borrowed money or
the deferred purchase price of property, or any obligation arising under a
capital lease, other than Convertible Subordinated Debt, payable more than one
year from the date of the creation thereof which, under GAAP in effect from
time to time, is shown on the balance sheet of the obligor as a liability;
provided that any obligation shall be treated as Funded Debt, regardless of its
term, if such obligation is renewable pursuant to the terms thereof or of a
revolving credit or similar agreement effective for more than one (1) year
after the date of the creation of such obligation or may be payable out of the
proceeds of a similar obligation pursuant to the terms of such obligation or of
any such agreement.

                  "GAAP" shall mean generally accepted accounting principles in
the U.S. applied on a consistent basis, as in effect from time to time.

                  "Governmental Authority" shall mean any Federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality or any court, in each case whether of the United States or
any foreign country.

                  "Indemnitee" shall have the meaning provided in Section
9.01(b).

                  "Indemnitor" shall have the meaning provided in Section
9.01(b).

                  "Interest Period" shall have the meaning provided in Section
2.03(b).

                  "Interest Determination Date" shall mean, with respect to any
Eurodollar Rate Advance, the second Business Day prior to the commencement of
any Interest Period relating to such Eurodollar Rate Advance.

                  "Lender" shall have the meaning provided in the introductory
paragraph of this Agreement and shall not include Participants; and references
to "its Lenders" and any other similar expression shall mean, with respect to
the Fronting Bank, the Lender or Lenders, if any, to whom the Fronting Bank has
assigned an interest in its Fronting Bank Interests in accordance with the
terms hereof.

                  "Letter of Credit" or "Letters of Credit" shall have the
meanings provided in Section 2.01.

                  "Liquidity Drawing" shall mean, with respect to a Letter of
Credit, a drawing on such Letter of Credit made to pay the purchase price of
Bonds tendered at the request of the holders thereof pursuant to the Applicable
Indenture.


                                      -8-



                  "Losses" shall mean liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, suits, costs, expenses and
disbursements (including, without limitation, reasonable attorneys' fees and
expenses).

                  "Majority Lenders" shall mean, as of any date of
determination, Lenders whose aggregate Percentages on such date represent at
least 51% of the Total Commitment on such date.

                  "Moody's" shall mean Moody's Investors Service, Inc.

                  "Moody's Rating" shall have the meaning set forth in the
definition of Applicable Fee.

                  "Notice of Conversion" shall have the meaning provided in
Section 2.03(a).

                  "Notice of Issuance" shall mean a completed application in
the form attached hereto as Exhibit A which requests the issuance of a Letter
of Credit and, in connection therewith specifies, (i) the name and address of
the Applicable Bond Trustee; (ii) the Stated Amount thereof, which when added
to the Stated Amount of all issued and outstanding Letters of Credit does not
exceed $415,000,000; (iii) the scheduled expiration date thereof, which shall
be a Business Day not later than the third anniversary of the Date of Issuance
thereof; (iv) the date of issuance thereof, which shall be a Business Day not
less than five (5) Business Days following the Agent's receipt of such Notice
of Issuance (the "Date of Issuance"), provided that such time period shall not
commence until the Agent and its counsel are satisfied with the wording of the
Letter of Credit and the Bond Documents for the Bonds that are to be secured by
such Letter of Credit and, provided further that the Notice of Issuance in
connection with the issuance of the first three Letters of Credit issued
hereunder shall be delivered at any time on or prior to the Effective Date; and
(v) the delivery instructions for such Letter of Credit.

                  "Officer's Certificate" shall mean a certificate signed by
the Chairman of the Board, the President, the Chief Financial Officer, the
Treasurer or any Vice President of Finance of the Borrower.

                  "Official Statement" shall mean, with respect to any Bonds,
any preliminary, final or supplemental official statement, prospectus or other
similar offering document that is used in connection with the offer, sale
and/or remarketing of such Bonds.

                  "Participant" shall mean a Person that acquires a
participation in the Fronting Bank's or any Lender's rights under this
Agreement pursuant to Section 9.04(f) of this Agreement.

                  "Payment Account" shall mean account number 150/1014901/05USD
maintained at Commerzbank AG, New York, New York, ABA number 026-008-044, or
such other account as the Agent may hereafter designate in writing as such to
the other parties hereto.

                  "Percentage" shall mean for each Lender that percentage
(expressed as a decimal) obtained by dividing the amount of such Lender's
Commitment by the Total Commitment.

                  "Person" shall mean an individual, a corporation, a
partnership, a limited liability company, an association, a business trust or
any other entity or organization, including a Governmental Authority.


                                      -9-



                  "Prime Lending Rate" shall mean, for any day, the rate
established by the Agent at its New York branch from time to time as its
"prime" or "reference" lending rate for unsecured commercial loans within the
United States, said rate to change on and as of the date of any change in such
established rate. The Prime Lending Rate is a reference rate only, and the
Agent may make loans from time to time at interest rates above, equal to, or
below the Prime Lending Rate.

                  "Rating" shall have the meaning set forth in the definition
of Applicable Fee.

                  "Register" shall have the meaning provided in Section
9.04(d).

                  "Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.

                  "Reimbursement Amounts" shall have the meaning provided in
Section 7.01(a).

                  "Reimbursement Obligation" shall mean, with respect to each
drawing made under any Letter of Credit, the Borrower's obligation to repay the
same as provided in Section 2.02.

                  "S&P" shall mean Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies, Inc.

                  "S&P Rating" shall have the meaning set forth in the
definition of Applicable Fee.

                   "Stated Amount" shall mean, with respect to a Letter of
Credit, the stated amount or face amount (including interest coverage as it may
increase and decrease from time to time) of such Letter of Credit, which
initially shall be the amount set forth in such Letter of Credit, as from time
to time increased or decreased in accordance with its terms.

                  "Subsidiary" shall mean any Person a majority (by number of
votes) of the outstanding stock or other ownership interests of which is, at
the time at which any determination is being made, owned by the Borrower either
directly or through Subsidiaries.

                  "Termination Date" shall mean, with respect to a Letter of
Credit, the date on which such Letter of Credit terminates in accordance with
its terms, which date (or method by which such date is to be determined) shall
be set forth in such Letter of Credit and shall not in any case exceed three
years from the Date of Issuance.

                  "Total Commitment" shall mean, as of any date of
determination, the sum of the Commitment of all Lenders as of such date.

                  "Total Stated Amount" shall mean, as of any date of
determination, the sum of the Stated Amount of all outstanding Letters of
Credit as of such date.

                  "United States" and "U.S." shall each mean the United States
of America.


                                     -10-



                  "Unutilized Commitment" shall mean, as of any date of
determination, the amount obtained by subtracting the Total Stated Amount as of
such date from the Total Commitment as of such date.

                  1.02     Interpretation. The following rules shall apply to
the construction of this Agreement unless the context requires otherwise: (a)
the singular includes the plural, and the plural the singular; (b) words
importing any gender include the other genders; (c) references to statutes are
to be construed as including all statutory provisions consolidating, and all
regulations promulgated pursuant to, such statutes; (d) references to "writing"
include printing, photocopy, typing, lithography and other means of reproducing
words in a tangible visible form; (e) the words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation"; (f)
references to the introductory paragraph, recitals, sections (or clauses or
subdivisions of sections) or exhibits are to those of this Agreement unless
otherwise indicated; (g) references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments, modifications
and supplements to such instruments, but only to the extent that such
amendments, modifications or supplements are permitted or not prohibited by the
terms of this Agreement; (h) section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose; and (i) references to Persons include
their respective permitted successors and assigns.

                  Section 2.        Issuance of Letters of Credit; Payments,
Etc.

                  2.01     Issuance of Letters of Credit. Prior to the
Commitment Termination Date, the Fronting Bank hereby agrees, on the terms and
subject to the conditions hereinafter set forth and on account of the Borrower,
to issue from time to time in favor of each Applicable Bond Trustee a letter of
credit, which shall be in substantially the form of Exhibit C (as issued, each,
a "Letter of Credit", and, collectively, the "Letters of Credit"), provided
that in no event shall (a) the aggregate Stated Amount of the Letters of Credit
at any time exceed $415,000,000 and (b) more than eight Letters of Credit be
issued hereunder. No Letter of Credit shall have a scheduled expiration date
that is later than three years from its Date of Issuance.

                  2.02     Reimbursements; Advances.

                  (a)      If the Fronting Bank shall make any payment pursuant
to a Drawing under any Letter of Credit, the Borrower shall, or shall cause the
Applicable Bond Trustee to, reimburse the aggregate amount of such Drawing to
the Fronting Bank by the Fronting Bank's close of business on the day such
payment is made unless, in the case of any Liquidity Drawing, the conditions of
subsection (b) have been satisfied. If the conditions of subsection (b) are
satisfied on the date on which the Fronting Bank honors payment of any Liquidity
Drawing, the Borrower shall, unless it has delivered written notice to the
contrary to the Agent, be deemed to have requested, and the Fronting Bank shall
be deemed to have made, an advance to the Borrower (each such advance, "Advance"
and collectively the "Advances") on the date and in the amount of such Liquidity
Drawing. Advances shall be repaid by Borrower upon the earliest of (i) the
Termination Date of the applicable Letter of Credit, (ii) the remarketing of the
Bonds purchased with the proceeds of the related Liquidity Drawing (but only to
the extent of the proceeds of the Bonds so remarketed) and (iii) the occurrence
of a Default or Event of Default herein (such date of repayment, an "Advance
Repayment Date").


                                     -11-



                  (b)      Unless the Borrower has previously delivered written
notice to the Agent to the effect that it does not want such Liquidity Drawing
to be an Advance, a Liquidity Drawing shall constitute an Advance if on the
date of such payment the following statements shall be true: (i) the
representations and warranties contained in Sections 4.01, 4.02, 4.03, 4.05,
4.06, 4.09(a), 4.09(c), 4.10, 4.12 and 4.13 are correct on and as of the date
of such Liquidity Drawing as though made on and as of such date, except to the
extent such representations and warranties relate to an earlier date in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date and (ii) no event has occurred and is
continuing, or would result from such Advance, which constitutes an Event of
Default or a Default. Unless the Borrower shall have previously advised the
Fronting Bank in writing that one or more of the above statements is no longer
true, the Borrower shall be deemed to have represented and warranted, on the
date of each Liquidity Drawing, that the above statements are true and correct.

                  2.03     Type of Advance; Conversion; Interest Periods;
Payment of Interest; Prepayment; Breakage.

                  (a)      Each Advance shall initially be made as a Alternate
Base Rate Advance. The Borrower shall have the option to convert on any
Business Day (i) a Alternate Base Rate Advance to a Eurodollar Rate Advance and
(ii) a Eurodollar Rate Advance to a Alternate Base Rate Advance, provided that
(A) except as otherwise provided in Section 2.06, a Eurodollar Rate Advance may
be converted into a Alternate Base Rate Advance only on the last day of an
Interest Period applicable to the Eurodollar Rate Advance being converted, (B)
a Alternate Base Rate Advance may not be converted to a Eurodollar Rate Advance
unless the principal amount thereof is equal to or greater than $5,000,000, (C)
a Alternate Base Rate Advance may only be converted into a Eurodollar Rate
Advance if no Default or Event of Default is in existence on the date of the
notice of conversion or on the date of conversion and (D) no more than six (6)
Eurodollar Rate Advances shall be outstanding at any one time. Each such
conversion shall be effected by the Borrower by giving the Agent prior to 12:00
noon (New York time) at least three Business Days' prior notice (each a "Notice
of Conversion") specifying the Advances to be so converted. The Agent shall
give each Lender prompt notice of any such proposed conversion.

                  (b)      At the time it gives any Notice of Conversion in
respect of the conversion of a Alternate Base Rate Advance into a Eurodollar
Rate Advance or on the third Business Day prior to the expiration of an Interest
Period applicable to a Eurodollar Rate Advance (in the case of any subsequent
Interest Period), the Borrower shall have the right to elect, by giving the
Agent notice thereof, the interest period (each an "Interest Period") applicable
to such Eurodollar Rate Advance, which Interest Period shall, at the option of
the Borrower, be a one, two or three month period, provided that: (i) the
initial Interest Period shall commence on the date of conversion thereof and
each Interest Period occurring thereafter in respect of such Advance shall
commence on the day on which the next preceding Interest Period applicable
thereto expires; (ii) if any Interest Period relating to a Eurodollar Rate
Advance begins on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period, such Interest Period
shall end on the last Business Day of such calendar month; (iii) if any Interest
Period would otherwise expire on a day which is not a Business Day, such
Interest Period shall expire on the next succeeding Business Day, provided that
if any Interest Period for a Eurodollar Rate Advance would otherwise expire on a
day which is not a Business Day but is a day of


                                     -12-



the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day; and (iv) no
Interest Period shall extend beyond the Termination Date of the Letter of Credit
under which the Liquidity Drawing which gave rise to such Advance was made. If
upon the expiration of any Interest Period applicable to a Eurodollar Rate
Advance, the Borrower has failed to elect a new Interest Period to be applicable
to such Eurodollar Rate Advance as provided above, the Borrower shall be deemed
to have elected to convert such Eurodollar Rate Advance into a Alternate Base
Rate Advance effective as of the expiration date of such current Interest
Period.

                  (c)      The Borrower agrees to pay interest in respect of
the unpaid principal amount of each Alternate Base Rate Advance from the date
the proceeds thereof are made available to the Borrower until the date prepaid
or repaid in full at a rate per annum equal to the Alternate Base Rate in
effect from time to time plus the Applicable Margin in effect from time to
time; provided, however, that if a Default or Event of Default shall occur and
be continuing on any day on which an Alternate Base Rate Advance is outstanding
the per annum interest rate on such day shall be equal to the Alternate Base
Rate plus the Applicable Margin plus 2%.

                  (d)      The Borrower agrees to pay interest in respect of
the unpaid principal amount of each Eurodollar Rate Advance from the date the
proceeds thereof are made available to the Borrower until the date prepaid or
repaid in full at a rate per annum which shall, during each Interest Period
applicable thereto, be equal to the Eurodollar Rate for such Interest Period
plus the Applicable Margin in effect from time to time; provided, however, that
if a Default or Event of Default shall occur and be continuing on any day on
which a Eurodollar Rate Advance is outstanding the per annum interest rate on
such day shall be equal to the Eurodollar Rate for such Interest Period plus
the Applicable Margin plus 2%.

                  (e)      Accrued (and theretofore unpaid) interest shall be
payable (i) in respect of each Alternate Base Rate Advance, quarterly in
arrears on the last Business Day of each March, June, September and December,
(ii) in respect of each Eurodollar Rate Advance, on the last day of each
Interest Period applicable thereto and (iii) in respect of each Advance, (A) on
the Advance Repayment Date for such Advance, (B) on any prepayment (on the
amount prepaid), (C) upon the partial remarketing of the Bonds purchased with
the proceeds of the Liquidity Drawing which gave rise to such Advance (on the
principal amount of the Bonds so remarketed), and (D) after the Advance
Repayment Date for such Advance, on demand.

                  (f)      On each Interest Determination Date, the Agent shall
determine the interest rate for the Eurodollar Rate Advance for which such
determination is being made and shall promptly notify the Borrower and the
Lenders thereof. Each such determination shall, absent manifest error, be
conclusive and binding on all parties hereto.

                  (g)      All computations of interest shall be made on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
is payable.

                  (h)      Upon at least three (3) Business Days' written
notice to the Agent, the Borrower may prepay any Eurodollar Rate Advances,
without premium (but subject to payment of the amounts, if any, required to be
paid pursuant to Section 2.03(i)), in whole at any time or from time to


                                     -13-



time in part in amounts aggregating $5,000,000 or any multiple of $1,000,000 in
excess thereof by paying the principal amount being prepaid together with
accrued interest thereon to the date of prepayment. Upon at least one Business
Day's written notice to the Agent, the Borrower may prepay any Alternate Base
Rate Advances, without premium (but subject to payment of the amounts, if any,
required to be paid pursuant to Section 2.03(i)), in whole at any time or from
time to time in part by paying the principal amount being prepaid together with
accrued interest thereon to the date of prepayment.

                  (i)      The Borrower shall compensate each Lender, upon its
written request (as reasonably determined by such Lender), for all reasonable
losses, expenses and liabilities (including, without limitation, any loss,
expense or liability incurred by reason of the liquidation or reemployment of
deposits or other funds required by such Lender to fund its Eurodollar Rate
Advances) which such Lender may sustain: (i) if for any reason a conversion
from or into Eurodollar Rate Advances does not occur on a date specified
therefor in a Notice of Conversion (whether or not withdrawn by the Borrower or
deemed rescinded pursuant to Section 2.06(b)); (ii) if any prepayment or
repayment or conversion of any of its Eurodollar Rate Advances occurs on a date
which is not the last day of an Interest Period with respect thereto; (iii) if
any prepayment of any of its Eurodollar Rate Advances is not made on any date
specified in a notice of prepayment given by the Borrower; or (iv) as a
consequence of (x) any other default by the Borrower to repay its Eurodollar
Rate Advances when required by the terms of this Agreement or (y) any action
taken pursuant to Section 2.06(b).

                  2.04     Fees; Expenses.

                  (a)      The Borrower agrees to pay the Agent, for the
account of the Fronting Bank and the Lenders, within five (5) Business Days of
its receipt of a written invoice therefor (which invoice shall be sent to the
Borrower by the Agent as soon as practicable following the end of each calendar
quarter during which any Letter of Credit is outstanding and as soon as
practicable following the Applicable Termination Date for such Letter of
Credit), a non-refundable letter of credit fee in respect of each Letter of
Credit that was outstanding during such (or any portion of such) calendar
quarter or period ended on the Applicable Termination Date. The fee for each
Letter of Credit and for each such period shall equal the sum for each day such
Letter of Credit was outstanding of the product of (i) the Stated Amount of
such Letter of Credit for such day (determined at 5:00 p.m. (New York time) on
such day), (ii) the Applicable Fee for such day and (iii) a fraction, the
numerator of which is one and the denominator of which is three hundred sixty
(360).

                  (b)      The Borrower agrees to pay the Agent, for the
account of the Lenders, a non-refundable commitment fee. The commitment fee
shall accrue for the period from the Effective Date to but excluding the
earliest of (i) December 5, 2000, (ii) the date on which Letters of Credit have
been issued, the aggregate initial Stated Amounts of which equal the Total
Commitment and (iii) the second Business Day following the date on which the
Agent receives written notice from the Borrower terminating in whole or in part
the obligation of the Fronting Bank to issue Letters of Credit (such earliest
date, the "Commitment Termination Date"). The commitment fee shall be payable in
arrears on the Commitment Termination Date; provided, however, that if the
Commitment Termination Date has not occurred by September 1, 2000, the
commitment fee accrued from and including the Effective Date to but excluding
September 1, 2000 shall be payable on September 1, 2000. The commitment fee


                                     -14-



payable for each day during such period shall equal the product of (A) the
Unutilized Commitment for such day (determined at 5:00 p.m. (New York time) on
such day), (B) 0.00125 and (C) a fraction, the numerator of which is one and the
denominator of which is three hundred sixty (360).

                  (c)      The Borrower agrees to pay the Agent, for the
account of the Fronting Bank, the Agent and the Arranger, the fees set forth in
the Fee Letter at the times set forth in the Fee Letter.

                  (d)      The Borrower agrees to pay and hold the Agent, the
Arranger, the Fronting Bank and each Lender harmless from and against any and
all present and future stamp and other similar transfer or documentary taxes
which arise as a result of the execution, delivery and performance of the
Financing Documents and the Bond Documents and save the Agent, the Arranger,
the Fronting Bank and each Lender harmless from and against any and all
liabilities with respect to or resulting from any delay or omission (other than
to the extent attributable to the Agent, the Arranger, the Fronting Bank or
such Lender) to pay such taxes.

                  (e)      The Borrower agrees to pay within fifteen (15) days
following the Borrower's receipt of a written demand therefor and an accounting
thereof (i) the reasonable out-of-pocket costs and expenses incurred by the
Agent and the Arranger in connection with the preparation, execution and
delivery of this Agreement and the other Financing Documents and the documents
and instruments referred to herein and therein and the syndication of this
Agreement and the Letters of Credit, (ii) in accordance with the Fee Letter,
the fees and disbursements of White & Case LLP, counsel to the Agent, incurred
in connection with the preparation, execution and delivery of the Financing
Documents, the Bond Documents and the other documents and instruments referred
to therein, (iii) all out-of-pocket costs and expenses of the Agent, the
Fronting Bank and each Lender (including, without limitation, the reasonable
fees and disbursements of counsel to the Agent, the Fronting Bank and the
Lenders) in connection with (A) any amendment, waiver or consent of any
Financing Document or any Bond Document which requires the consent of the
Agent, the Fronting Bank or any Lender or (B) the failure of a Letter of Credit
to be issued on the date specified therefor in the Notice of Issuance pursuant
to which the issuance of such Letter of Credit was requested, (iv) all
out-of-pocket costs and expenses of the Agent, the Fronting Bank and each
Lender (including, without limitation, the reasonable fees and disbursements of
counsel to the Agent, the Fronting Bank and the Lenders) in connection with the
enforcement of the Financing Documents, the Bond Documents and the other
documents and instruments referred to herein and therein, and (v) all
reasonable out-of-pocket costs and expenses of any appraiser, auditor or other
consultant retained by the Agent upon the written instruction from the Fronting
Bank to reasonably assist the Fronting Bank and the Lenders in monitoring the
Borrower's compliance with its obligations under this Agreement following the
occurrence and during the continuance of any Event of Default.

                  2.05     Increased Costs; Reduced Rate of Return.

                  (a)      If any change in any Applicable Law or in the
interpretation thereof by any Governmental Authority, central bank or
comparable agency charged with the administration thereof shall have occurred
after the Effective Date, which shall either (i) impose, modify or make
applicable any reserve, capital, special deposit, or similar requirement
against letters of credit issued by, participations in letters of credit issued
by, assets held by, or deposits in or for the account of, the Fronting Bank or
any Lender; (ii) subject the Fronting Bank or any Lender to any tax, duty,
assessment


                                     -15-


or other charge or withholding with respect to its obligation to maintain this
Agreement and/or the Letters of Credit, to pay Reimbursement Amounts, to
maintain its Commitment herein or to acquire Fronting Bank Interests (except for
changes in the rate of tax or the imposition of any tax or other charges on the
overall net income of the Fronting Bank or any Lender imposed by the
jurisdiction in which the Fronting Bank or such Lender has its principal
office); or (iii) impose on the Fronting Bank or any Lender any other condition
regarding this Agreement, the Letters of Credit, the obligation of any Lender to
pay Reimbursement Amounts and maintain its Commitment hereunder or acquire
Fronting Bank Interests, and the result of any event referred to in clause (i),
(ii) or (iii) above shall be to increase the cost to the Fronting Bank or any
Lender of issuing, funding or maintaining this Agreement, the Letters of Credit,
of funding Reimbursement Amounts or maintaining its Commitment or acquiring
Fronting Bank Interests or to reduce the Fronting Bank's or any Lender's rate of
return hereon, then promptly following receipt by the Borrower of written notice
by the Fronting Bank or any Lender acting through the Agent, the Borrower agrees
to pay the Fronting Bank or any such Lender such additional amount or amounts as
shall be sufficient to compensate the Fronting Bank or any such Lender for such
increased costs.

                  (b)      If the Fronting Bank or any Lender shall have
determined that the adoption of or any change in any Applicable Law regarding
capital adequacy or in the interpretation or application thereof or compliance
by the Fronting Bank or such Lender or any corporation controlling the Fronting
Bank or such Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any Governmental Authority, in
each case made subsequent to the Effective Date, has the effect of reducing the
rate of return on the Fronting Bank's or such Lender's or such corporation's
capital as a consequence of its obligations hereunder and under the Letters of
Credit to a level below that which the Fronting Bank or such Lender or such
corporation could have achieved but for such adoption, change or compliance
(taking into consideration the Fronting Bank's or such Lender's or such
corporation's policies with respect to capital adequacy) by an amount deemed by
the Fronting Bank or such Lender to be material, then from time to time, after
submission by the Fronting Bank or such Lender acting through the Agent to the
Borrower of a written request therefor and reasonable substantiating
documentation, the Borrower shall promptly pay to the Fronting Bank or such
Lender such additional amount or amounts as will compensate the Fronting Bank
or such Lender for such reduction.

                  (c)      The Fronting Bank and each Lender agrees to promptly
notify the Agent, and upon receiving the same, the Agent agrees to promptly give
notice to the Borrower of any event of which it has knowledge, occurring after
the Effective Date, which will entitle the Fronting Bank or such Lender to
impose any increased costs hereunder. In determining any additional amounts
pursuant to Section 2.05(a) or (b), the Fronting Bank and each Lender will use
averaging and attribution methods which are reasonable, provided that the
Fronting Bank's or such Lender's, as the case may be, determination of
compensation owing under Section 2.05(a) or (b) shall be conclusive and binding
on all the parties hereto, provided such determinations are made reasonably and
in good faith. The Fronting Bank and each Lender, upon determining that any
additional amounts will be payable pursuant to this Section 2.05, will give
prompt written notice thereof to the Agent, which notice shall show the basis
for calculation of such additional amounts and reasonable substantiating
documentation, and the Agent shall promptly submit the same to the Borrower. Any
increased costs payable under this Section 2.05 shall

                                     -16-



be due and payable in Dollars at such reasonable times and in such reasonable
manner as set forth in the certificate or certificates of the Agent delivered to
the Borrower pursuant to this Section.

                  (d)      The Fronting Bank and each Lender shall immediately
notify the Borrower of any event of which the Fronting Bank or Lender has
knowledge that will entitle it to compensation pursuant to this Section 2.05
and will exercise reasonable diligence to designate a different Eurodollar
lending office and/or take other measures which will avoid the need for such
compensation for increased costs and will not result in material costs to such
Fronting Bank or Lender, or be otherwise disadvantageous (in its sole
discretion) to such Fronting Bank or Lender.

                  2.06     Increased Costs, Illegality, etc.

                  (a)      In the event that the Fronting Bank or any Lender
shall have reasonably determined (which determination with respect to clause
(i) below, may be made only by the Agent):

                           (i)      on any Interest Determination Date that, by
         reason of any changes arising after the date of this Agreement
         affecting the interbank Eurodollar market adequate and fair means do
         not exist for ascertaining the applicable interest rate on the basis
         provided for in the definition of Eurodollar Rate; or

                           (ii)     at any time, that the Fronting Bank or such
         Lender shall incur increased costs or reductions in the amounts
         received or receivable hereunder with respect to any Eurodollar Rate
         Advance because of (x) any change since the Effective Date in any
         Applicable Law (whether or not having the force of law) (or in the
         interpretation or administration thereof and including the
         introduction of any new law or governmental rule, regulation, order or
         request), such as, for example, but not limited to, (A) a change in
         the basis of taxation of payments to the Fronting Bank or any Lender
         of the principal of or interest on any Eurodollar Rate Advance, any
         Fronting Lender Interests, any Reimbursement Amounts or any other
         amounts payable hereunder (except for changes in the rate of tax on,
         or determined by reference to, the net income or profits of the
         Fronting Bank or such Lender imposed by the jurisdiction in which its
         principal office is located) or (B) a change in official reserve
         requirements, but, in all events, excluding reserves required under
         Regulation D to the extent covered by Section 2.06(c) and/or (y) other
         circumstances affecting the Fronting Bank or such Lender or the
         interbank Eurodollar market or the position of the Fronting Bank or
         such Lender in such market; or

                           (iii)    at any time, that the making or continuance
         of any Eurodollar Rate Advance has been made (x) unlawful by any law
         or governmental rule, regulation or order, (y) impossible by
         compliance by the Fronting Bank or such Lender with any governmental
         request (whether or not having force of law) or (z) impracticable as a
         result of a contingency occurring after the date of this Agreement
         which materially and adversely affects the interbank Eurodollar
         market;

then, and in any such event, the Fronting Bank or such Lender acting through
the Agent (or the Agent, in the case of clause (i) above) shall promptly give
notice to the Borrower and, except in the case of clause (i) above, to the
Agent of such determination (which notice the Agent shall promptly transmit to
the Fronting Bank and each of the other Lenders). Thereafter (x) in the case of
clause (i) above, Eurodollar Rate Advances shall no longer be available until
such time as the Agent notifies the Borrower, the

                                     -17-


Fronting Bank and the Lenders that the circumstances giving rise to such notice
by the Agent no longer exist, and any Notice of Conversion given by the Borrower
with respect to Eurodollar Rate Advances which have not yet been incurred by way
of conversion shall be deemed rescinded by the Borrower, (y) in the case of
clause (ii) above, the Borrower shall pay to the Fronting Bank or such Lender,
upon written demand therefor (which written demand shall show the basis for all
calculations), such additional amounts as shall be required to compensate the
Fronting Bank or such Lender for such increased costs or reductions in amounts
received or receivable hereunder (a written notice as to the additional amounts
owed to the Fronting Bank or such Lender, showing the basis for the calculation
thereof, submitted to the Borrower by the Fronting Bank or such Lender shall be
conclusive and binding on all the parties hereto, provided such determinations
are made reasonably and in good faith) and (z) in the case of clause (iii)
above, take one of the actions specified in Section 2.06(b) as promptly as
possible and, in any event, within the time period required by law.

                  (b)      At any time that any Eurodollar Rate Advance is
affected by the circumstances described in Section 2.06(a)(ii) or (iii), the
Borrower may (and in the case of a Eurodollar Rate Advance affected by the
circumstances described in Section 2.06(a)(iii) shall) either (i) if the
affected Eurodollar Rate Advance is then being made pursuant to a conversion,
cancel said Borrowing by giving the Agent notice by telephone of the
cancellation on the same date that the Borrower was notified by the Fronting
Bank or the Lender or the Agent pursuant to Section 2.06(a)(ii) or (iii), or
(ii) if the affected Eurodollar Rate Advance is then outstanding, upon at least
three Business Days' written notice to the Agent, convert such Eurodollar Rate
Advance into a Alternate Base Rate Advance.

                  (c)      In the event that the Fronting Bank or any Lender
shall determine (which determination shall be conclusive and binding on all the
parties hereto, provided such determination is made reasonably and in good
faith) at any time that by reason of Regulation D the Fronting Bank or any
Lender is required to maintain reserves in respect of Eurocurrency liabilities
(as defined in Regulation D) during any period that it has a Eurodollar Rate
Advance outstanding (each such period, for the Fronting Bank or any Lender, a
"Eurocurrency Reserve Period"), then the Fronting Bank or such Lender acting
through the Agent shall promptly give notice to the Borrower of such
determination (which notice the Agent shall promptly transmit to each of the
other Lenders), and the Borrower shall directly pay to the Fronting Bank or such
Lender additional interest on the unpaid principal portion of each Eurodollar
Rate Advance of the Fronting Bank or such Lender during such Eurocurrency
Reserve Period at a rate per annum which shall, during each Interest Period
applicable to such Eurodollar Rate Advance, be the amount by which (i) the
Eurodollar Rate for such Interest Period divided (and rounded upward to the next
whole multiple of 1/16 of 1%) by a percentage equal to 100% minus the then
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable to
any member bank of the Federal Reserve System in respect of Eurocurrency
liabilities (as defined in Regulation D) exceeds (ii) the Eurodollar Rate for
such Interest Period. Additional interest payable pursuant to the immediately
preceding sentence shall be paid by the Borrower at the time that it is
otherwise required to pay interest in respect of such Eurodollar Rate Advance
or, if later demanded by the Fronting Bank or any Lender, promptly on demand.
The Fronting Bank and each Lender agrees that if it gives notice to the Borrower
of the existence of a Eurocurrency Reserve Period, it shall promptly notify the
Borrower of any termination thereof, at which time the Borrower shall cease to
be obligated to pay additional interest to the Fronting Bank or such

                                     -18-



Lender pursuant to the first sentence of this Section 2.06(c) until such time,
if any, as a subsequent Eurocurrency Reserve Period shall occur.

                  (d)      The Fronting Bank and each Lender shall immediately
notify the Borrower of any event of which the Fronting Bank or Lender has
knowledge that will entitle it to compensation pursuant to this Section 2.06
and will exercise reasonable diligence to designate a different Eurodollar
lending office and/or take other measures which will avoid the need for such
compensation for increased costs and will not result in material costs to such
Fronting Bank or Lender, or be otherwise disadvantageous (in its sole
discretion) to such Fronting Bank or Lender.

                  2.07     Manner of Payment; Late Payments.

                  (a)      All payments under this Agreement shall be made to
the Agent not later than 2:00 p.m. New York time on the date when due and shall
be made in Dollars in immediately available funds at the Payment Account.
Except as otherwise specifically provided herein, any payment received after
2:00 p.m. New York time (or such other time as may be specifically provided
herein) on a day shall be deemed made on the next succeeding day. Whenever any
payment to be made hereunder shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest shall be
payable at the applicable rate during such extension.

                  (b)      All payments made by the Borrower hereunder shall be
made without setoff, counterclaim or other defense other than prior payment.
Nothing herein shall restrict any claim the Borrower may have against any party
hereto or any third party.

                  (c)      Except as otherwise provided in Section 2.03(c) or
(d), the Borrower agrees to pay interest at the Default Rate on all overdue
amounts to the Agent, the Fronting Bank, any Lender or any Transferee
(including unpaid Drawings) from and including the due date thereof to and
excluding the date when paid in full. Such interest shall be payable upon
demand.

                  2.08     Evidence of Debt. The Agent shall maintain in
accordance with customary industry practice a detailed account or accounts
evidencing the indebtedness of the Borrower resulting from each Drawing.

                  2.09     Obligations Unconditional. The payment obligations
of the Borrower under this Agreement are primary, absolute, independent,
irrevocable and unconditional, and shall be paid strictly in accordance with
the terms of this Agreement under all circumstances, including, without
limitation, the following circumstances: (a) any lack of validity or
enforceability of any Letter of Credit, any of the other Financing Documents or
any of the Bond Documents; (b) any amendment or waiver of or any consent or
departure from the terms and conditions of all or any of the Financing
Documents or any of the Bond Documents; (c) the existence of any claim,
set-off, defense or other right which the Borrower may have at any time,
whether in connection with this Agreement, the transactions contemplated herein
or in the other Financing Documents, in the Bond Documents or any unrelated
transaction against the Agent, the Fronting Bank, any Lender or any beneficiary
or transferee of any Letter of Credit or any other Person; (d) any statement or
any document presented under any Letter of Credit proving to be forged,
fraudulent, invalid, inaccurate or false in any respect; (e) payment by the
Fronting Bank under any Letter

                                     -19-


of Credit against presentation of a draft or certificate which does not strictly
comply with the terms of such Letter of Credit; (f) any non-application or
misapplication by any Applicable Bond Trustee or any tender agent for any Bonds
or otherwise of the proceeds of any Drawing; or (g) the failure by Fronting Bank
to honor any Drawing or to make any payment demanded under any Letter of Credit
on the ground that the demand for such payment does not conform to the terms and
conditions of such Letter of Credit; provided that, the Borrower shall have a
claim against the Fronting Bank and the Fronting Bank shall be liable to the
Borrower, to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Borrower which were caused by (i) the
Fronting Bank's or any Lender's willful misconduct or gross negligence in
determining whether documents presented under any Letter of Credit complied with
the terms thereof or (ii) the Fronting Bank's willful failure or gross
negligence to pay under any Letter of Credit after the presentation to it by the
beneficiary thereof of a demand and certificate strictly complying with the
terms and conditions of such Letter of Credit.

                  2.10     Reduction of Commitments. Prior to the Commitment
Termination Date, the Borrower may, at any time and from time to time, upon at
least two (2) Business Days' prior notice to the Agent (which notice the Agent
shall promptly transmit to each of the Lenders), without premium or penalty,
terminate the Unutilized Commitment in whole or in part, provided that (a) any
such termination shall apply proportionately to reduce the Commitment of each
Lender and (b) after giving effect to such termination, the Total Commitment
shall equal or exceed the Total Stated Amount. At the close of business on the
Commitment Termination Date, the Unutilized Commitment shall be reduced to zero
and the Agent shall modify the Register to reflect such reductions in the
Commitment of each Lender.

                  2.11     Extension of Scheduled Expiration Date. At least 150
days prior to the scheduled expiration date of any Letter of Credit, the
Borrower may, by written notice to the Agent, request that the scheduled
expiration date for such Letter of Credit be extended for an additional one year
period commencing from the then scheduled expiration date. The Agent shall
promptly forward each such request to the Fronting Bank and the Lenders. The
Fronting Bank and the Lenders, in their sole and absolute discretion, shall
notify the Agent, which in turn shall notify the Borrower, of their decision
with respect to such request within 45 days of the date on which the Agent
received such request notice from the Borrower. The failure of the Agent to
notify the Borrower of any decision within such 45-day period shall be deemed to
be a rejection of such request and none of the Agent, the Fronting Bank or any
Lender shall incur any liability or responsibility whatsoever by reason of its
failure to notify the Borrower. If the Fronting Bank and all of the Lenders
agree to such a request, the Fronting Bank shall promptly (and, in any event no
later than the date that is 35 days prior to the then scheduled expiration date)
prepare and deliver to the Applicable Bond Trustee an amendment to (or a
restatement of) the applicable Letter of Credit, which amendment (or
restatement) shall reflect the new scheduled expiration date.

                  2.12     Change in Control. Upon the occurrence of a Change
in Control and at any time during the ninety (90) day period thereafter, the
Borrower shall, upon the written request of the Agent (at the direction of the
Majority Lenders), deposit with the Agent, in an interest bearing account, as
collateral, Dollars in an amount equal to the aggregate Stated Amount of all
Letters of Credit then outstanding and all other amounts owing under the
Financing Documents (the "Change in Control Collateral"). Upon the occurrence
of a Change in Control, and at any time during the ninety (90) day period
thereafter, the Fronting Bank may (and at the direction of the Majority Lenders
shall), but shall

                                     -20-



not be obligated to (unless directed to do so by the Majority Lenders), deliver
written notice of such Change in Control to each Applicable Bond Trustee and
request the Applicable Bond Trustee for a series of Bonds to cause such Bonds to
be purchased. The Change in Control Collateral shall be applied against amounts
due to the Agent, the Fronting Bank and the Lenders resulting from any such
purchase. All Change in Control Collateral shall be held in the account with the
Agent until the earlier of (i) the 120th day after the occurrence of a Change in
Control or (ii) the expiration of all Letters of Credit and payment of all
Reimbursement Obligations and Advances in connection therewith, at which time
the remaining Change in Control Collateral and any interest accrued thereon
shall be returned to the Borrower.

                  2.13     Application of Amounts Received from Applicable Bond
Trustee or Applicable Tender Agent. In the event the Fronting Bank receives any
amount from any Applicable Bond Trustee or any Applicable Tender Agent, such
amount, as soon as reasonably possible, shall be (i) first, applied to
reimburse the Fronting Bank in respect of any unpaid Drawing, (ii) second,
applied to prepay any outstanding Advances, with Alternate Base Rate Advances
to be prepaid before Eurodollar Rate Advances, (iii) third, if Eurodollar Rate
Advances are prepaid in accordance with clause (ii) of this Section 2.13 other
than on the last day of the Interest Period applicable thereto, applied to pay
amounts required to be paid pursuant to Section 2.03(i), and (iv) fourth, paid
to the Borrower.

                  Section 3.        Conditions Precedent.

                  3.01     Agreement. This Agreement shall become effective on
the date that all of the following conditions have been satisfied or waived by
the Fronting Bank and the Lenders (such date, the "Effective Date"):

                  (a)      Agreement. The Agent shall have received
counterparts of this Agreement duly executed and delivered by the Borrower, the
Arranger, the Fronting Bank and each Lender listed on the signature pages
hereto.

                  (b)      Opinion. The Agent shall have received from the
General Counsel, an Associate General Counsel or an Assistant General Counsel
of the Borrower, an opinion dated the Effective Date and addressed to the
Agent, the Fronting Bank and the Lenders in form and substance satisfactory to
the Agent and its counsel.

                  (c)      Corporate Proceedings. The Fronting Bank and the
Lenders shall be satisfied that all corporate proceedings of the Borrower taken
in connection with the transactions contemplated by this Agreement shall be in
form and substance reasonably satisfactory to the Fronting Bank and the
Lenders. The Fronting Bank and the Lenders acknowledge and agree that the
failure of the Borrower to provide evidence of corporate proceedings related to
the issuance of Bonds, other than Bonds to be issued on or about the Effective
Date, shall not, by itself, be considered a failure of this condition
precedent.

                  (d)      Financial Statements. The Agent shall have received
a copy of the Borrower's (i) annual report on Form 10-K for the year ended June
30, 1999, as filed with the U.S. Securities and Exchange Commission, and (ii)
quarterly report on Form 10-Q for the quarter ended March 31, 2000, as filed
with the U.S. Securities and Exchange Commission, together with a certificate
of an authorized

                                     -21-


financial officer of the Borrower to the effect that the unaudited financial
statements included in such quarterly report were prepared in accordance with
GAAP, subject only to normal year-end audit adjustments.

                  (e)      Payment of Fees. The Borrower shall have paid to the
Persons entitled thereto all fees that are due and payable pursuant to Section
2.04 on or before the Effective Date.

                  (f)      Consents. The Fronting Bank and the Lenders shall be
reasonably satisfied that all necessary governmental and third party approvals,
if any, required to be obtained by the Borrower in connection with the
transactions contemplated by this Agreement and the other Financing Documents
and otherwise referred to herein and therein shall have been obtained and
remain in full force and effect (other than approvals required in connection
with any such transactions that will close after the Effective Date).

                  (g)      No Adverse Change. Nothing shall have occurred since
March 31, 2000 (and the Fronting Bank and the Lenders shall have become aware
of no facts or conditions not previously known) which the Fronting Bank or the
Lenders shall determine, in their reasonable good faith judgment, could have a
material adverse effect on their rights or remedies hereunder, or on the
ability of the Borrower to perform its obligations hereunder or which could
have a material adverse effect on the business, financial condition or results
of operations of the Borrower and its Subsidiaries taken as a whole.

                  (h)      No Litigation. The Fronting Bank and the Lenders
shall be reasonably satisfied that, on the Effective Date, no judgment, order,
injunction or other restraint shall have been issued or filed which restrains,
and no hearing seeking injunctive relief or other restraint is pending or has
been noticed which seeks to restrain, the Fronting Bank from issuing any Letter
of Credit or the Borrower from consummating the transactions described in the
Financing Documents.

                  (i)      No Default; Representations and Warranties. The
Fronting Bank and the Lenders shall be reasonably satisfied that on the
Effective Date: (a) there shall exist no Default or Event of Default and (b)
all representations and warranties of the Borrower contained herein shall be
true and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the Effective Date,
except to the extent such representations and warranties relate to an earlier
date, in which case such representations and warranties shall be true and
correct in all material respects as of such earlier date.

                  All agreements, certificates, legal opinions and other
documents and papers referred to in this Section 3.01, unless otherwise
specified, shall (x) be delivered to the Agent for the account of the Fronting
Bank and each Lender and, in the case of this Agreement, in sufficient
counterparts for each Lender and (y) be reasonably satisfactory in form and
substance to the Fronting Bank and the Lenders.

                  3.02     Letters of Credit. The Fronting Bank will issue each
Letter of Credit on the Date of Issuance therefor if all of the following
conditions have been satisfied or waived by the Fronting Bank and the Lenders:

                  (a)      The Agent shall have received a Notice of Issuance
executed by the Borrower.

                                     -22-



                  (b)      The representations and warranties set forth in
Sections 4.01, 4.02, 4.03, 4.05, 4.06, 4.09(a), 4.09(c), 4.10, 4.12 and 4.13
hereof shall be true in all material respects on and as of the Date of Issuance
of such Letter of Credit with the same effect as though made on and as of such
date, except to the extent such representations and warranties relate to an
earlier date in which case such representations and warranties shall be true
and correct in all material respects as of such earlier date.

                  (c)      No Default or Event of Default shall have occurred
and be continuing on the Date of Issuance or shall result from the issuance of
such Letter of Credit.

                  (d)      The Agent shall have received a complete copy of all
Bond Documents and all Financing Documents relating to the Bonds to be secured
by such Letter of Credit, together with all opinions, consents, certificates
and receipts rendered and delivered in connection therewith, and the Agent and
its counsel shall be reasonably satisfied with the form and substance thereof.

The acceptance of the benefits of each Letter of Credit shall constitute a
representation and warranty by the Borrower to the Agent, the Fronting Bank and
each of the Lenders that all the conditions specified in Section 3.02 exist as
of the applicable Date of Issuance.

                  Section 4.        Representations and Warranties.

                  The Borrower represents and warrants to the Fronting Bank,
the Agent and each Lender that:

                  4.01     Organization; Powers. The Borrower is a corporation
duly organized and existing under the laws of the State of Delaware, has the
corporate power to own its property and carry on its business as being
conducted, and is duly qualified to do business as a foreign corporation and is
in good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary.

                  4.02     Authorization; No Violation. The execution, delivery
and performance by the Borrower of this Agreement (i) has been duly authorized
by all necessary corporate action and does not require any consent or approval,
authorization, permit or license from any federal, state or other regulatory
authority which has not been obtained, or violate any law, regulation, order,
judgment, decree or determination having applicability to the Borrower or its
organizational documents, or result in a breach of, or constitute a default
under any existing indenture or credit agreement or any other agreement or
instrument to which the Borrower is a party or by which its properties may be
bound or affected except where the failure to have such consent or approval or
such violation, breach or default could not reasonably be expected to result in
a material adverse effect on the business, financial condition or results of
operations of the Borrower and its Subsidiaries taken as a whole, and (ii) will
not conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, the Certificate of Incorporation or Bylaws
of the Borrower or of any agreement or instrument to which the Borrower is now
a party, which breach would have a material adverse effect on the business,
financial condition or results of operations of the Borrower and its
Subsidiaries taken as a whole.

                  4.03     Enforceability. This Agreement has been duly
executed and delivered by the Borrower and constitutes a legal, valid and
binding obligation of the Borrower enforceable against the

                                     -23-


Borrower in accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other laws affecting the enforcement of creditors' rights
generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law).

                  4.04     Financial Statements. The Borrower has furnished the
Fronting Bank and the Lenders with the following financial statements,
identified by the certificate of a principal financial officer of the Borrower:
balance sheets of the Borrower as at June 30, 1999 and March 31, 2000, and
income and reinvested earnings statements of the Borrower for the fiscal year
or fiscal quarter, as the case may be, ended on such dates, respectively,
certified, in the case of financial statements for the fiscal year ended June
30, 1999, by Arthur Andersen LLP. Such financial statements are true and
correct and have been prepared in accordance with GAAP, except, in the case of
the quarterly financial statements, the absence of complete footnotes and
subject to normal year-end audit adjustments. The balance sheets and their
accompanying notes present fairly the condition of the Borrower as of the dates
thereof, and the income and reinvested earnings statements present fairly the
results of the operations of the Borrower for the periods indicated. Except as
disclosed in the Official Statement as in effect on the Effective Date or
incorporated by reference therein, there has been no material adverse change in
the business, financial condition or results of operations of the Borrower and
its Subsidiaries taken as a whole since March 31, 2000.

                  4.05     Litigation. Except as disclosed in the Official
Statement as in effect on the Effective Date or incorporated by reference
therein, there is no action or proceeding pending or threatened against the
Borrower before any court or administrative agency which, in the reasonable
opinion of the Borrower, is likely to be determined in a manner which would
result in any material adverse change in the business, financial condition or
results of operations of the Borrower and its Subsidiaries taken as a whole,
and the Borrower is not in default with respect to any order, writ, injunction
or decree of any court or administrative agency, which would have a material
adverse effect on the Borrower and its Subsidiaries taken as a whole.

                  4.06     Business; Status as Air Carrier.

                  (a)      The Borrower is a duly certificated air carrier and
there are in force any certificates or other appropriate authority issued by
appropriate governmental authorities necessary to authorize the Borrower to
engage in intrastate, interstate, overseas and foreign air transportation of
persons, property and mail over the routes operated by the Borrower; and

                  (b)      no proceedings are pending or threatened, by or
before any public body, agency or authority, domestic or foreign, including but
not limited to proceedings to alter, amend, modify, suspend or revoke such
certificates in whole or in part, which might seriously affect adversely the
income from, title to, or possession of, any of the properties of the Borrower,
to an extent which would constitute a material adverse change in the business
or condition of the Borrower.

                  4.07     Funded Debt. The Borrower does not have outstanding
any Funded Debt except as set forth on Schedule 4.07 to this Agreement; and
there exists no default under the provisions of any instrument evidencing such
indebtedness or agreement relating thereto.


                                     -24-



                  4.08     Title to Properties, Etc. The Borrower and its
Subsidiaries have good and marketable title to their respective properties and
assets, including the properties and assets reflected in the balance sheets
described in Section 4.04 hereof, subject to no mortgage, pledge, encumbrance,
lien or charge of any kind except mortgages, pledges, encumbrances, liens or
charges permitted by Section 5.04 hereof.

                  4.09     Tax Returns and Payments.

                  (a)      The Borrower has filed all federal income tax
returns which are required to be filed, and has paid all taxes as shown on said
returns and on all assessments received by it to the extent that such taxes
(other than those which the Borrower is contesting in good faith by appropriate
proceedings being diligently conducted) have become due.

                  (b)      The federal income tax liability of the Borrower has
been finally determined by the Internal Revenue Service and satisfied for all
fiscal years prior to and including the fiscal year ended June 30, 1992.

                  (c)      All other tax returns and reports of the Borrower
which are required to be filed have been duly filed, and all taxes and
government charges (other than those for which payment may be withheld without
penalty or those which the Borrower is contesting in good faith by appropriate
proceedings being diligently conducted) upon the Borrower, its assets, income or
franchises which are due and payable have been paid.

                  4.10     Use of Proceeds. No part of the proceeds under any
of the Letters of Credit will be used other than to pay the principal of and
interest on Bonds. The Borrower is not engaged, principally or as one of the
Borrower's important activities, in the business of purchasing or carrying any
"margin stock" as such term is defined in Regulation U of the Board of
Governors of the Federal Reserve System. After giving effect to each use of the
proceeds from any of the Letters of Credit, not more than 25% of the value of
the assets of the Borrower and its Subsidiaries (determined on a consolidated
basis) shall be represented by "margin stock".

                  4.11     Subsidiaries. Schedule 4.11 is a complete and
correct list of all Subsidiaries as of the date hereof, all of which are
corporations duly incorporated, in good standing and with corporate power to
transact the business presently conducted by them. Except as disclosed in
Schedule 4.11, the Borrower owns, directly or indirectly through one or more
Subsidiaries, all the shares of each of such Subsidiaries (except directors'
qualifying shares, if any), and all such shares are validly issued, fully paid
and non-assessable and are free and clear of all liens and rights of others
whatsoever.

                  4.12     ERISA. The Borrower and each Subsidiary have met
their minimum funding requirements under the ERISA with respect to all their
employee benefit plans covered by the minimum funding requirements of ERISA,
and have not incurred any material liability to the Pension Benefit Guaranty
Corporation (or any entity succeeding to any or all of said Corporation's
functions under ERISA) under ERISA in connection with any such plan.

                  4.13     Environmental Matters. The Borrower and its
Subsidiaries are in substantial compliance with all applicable federal, state
and local environmental laws, regulations and ordinances

                                     -25-



governing their respective business, properties or assets with respect to
discharges into the ground and surface water, emissions into the ambient air and
generation, storage, transportation and disposal of waste materials or process
by-products, except such noncompliances as are not likely to have a material
adverse effect on the property, assets, business, operations or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole.
All licenses, permits or registrations required for the business of the Borrower
and its Subsidiaries under any federal, state or local environmental laws,
regulations or ordinances have been secured, and the Borrower and each
Subsidiary are in substantial compliance therewith, except such licenses,
permits or registrations the failure to secure or to comply therewith are not
likely to have a material adverse effect on the property, assets, business,
operations or condition (financial or otherwise) of the Borrower and its
Subsidiaries taken as a whole.

                  Section 5.        Covenants.

                  The Borrower covenants and agrees with the Agent, the
Fronting Bank and each Lender that so long as this Agreement shall remain in
effect and until all the Letters of Credit have been terminated and all fees
and all other expenses or amounts payable under this Agreement by the Borrower
shall have been paid in full:

                  5.01     No Merger or Sale of Assets. The Borrower will not,
and will not permit any of its Subsidiaries to, merge or consolidate with any
corporation or sell, lease or transfer or otherwise dispose of all or
substantially all of its assets in any transaction or series of related
transactions, except that (i) any Subsidiary may merge or consolidate with the
Borrower or any one or more other Subsidiaries; (ii) any Subsidiary may sell,
lease, transfer or otherwise dispose of any of its assets to the Borrower or
another Subsidiary; (iii) any Subsidiary may sell or otherwise dispose of all
or substantially all of its assets, provided that (a) such sale or other
disposition is for a consideration which represents fair value (as determined
in good faith by the Borrower) at the time of such sale or disposition, and (b)
the assets so disposed of do not constitute all or substantially all of the
aggregate assets of the Borrower and the Subsidiaries; (iv) the Borrower may
dispose of aircraft in the ordinary course of its business, provided that such
sale or other disposition is for a consideration which represents fair value
(as determined in good faith by the Borrower) at the time of such sale or
disposition; and (v) the Borrower may merge or consolidate with another
corporation, provided that (a) the Borrower shall be the continuing or
surviving corporation, (b) a majority of the board of directors of the Borrower
for a period of six (6) months after the effective date of such merger consists
of individuals who were directors of the Borrower twelve (12) months prior to
such effective date, and (c) immediately after such merger or consolidation
there shall exist no Event of Default as defined herein.

                  5.02     Leases. The Borrower will not, and will not permit
any of its Subsidiaries to, enter into or permit to remain in effect any flight
equipment lease agreements which, as of the close of any fiscal year, cause the
Borrower's consolidated aircraft rentals for such fiscal year, as determined in
accordance with GAAP, to exceed eight percent (8%) of the Borrower's
consolidated operating revenues for such fiscal year, provided that any such
lease agreements as may be necessary in connection with interchange agreements
between the Borrower and other airline related businesses shall not be included
in such calculation.

                  5.03     Debt. The Borrower will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist, for the
Borrower and the Subsidiaries taken together, (a)

                                     -26-



Current Debt in an aggregate principal amount at any one time outstanding in
excess of 100% of all accounts receivable of the Borrower and its Subsidiaries
outstanding as of the last day of the second calendar month next preceding the
month in which such calculation of Current Debt is made, all computed in
accordance with GAAP; or (b) Convertible Subordinated Debt in excess of 33.3% of
Equity; or (c) Funded Debt, Current Debt (other than Convertible Subordinated
Debt) and all Guaranty Liabilities (as defined below) in an amount at any one
time which exceeds 150% of Equity at such time. For purposes of this Section
5.03, "Guaranty Liabilities" shall mean all liabilities of the Borrower and any
Subsidiary of the Borrower as guarantor, surety, accommodation endorser or other
accommodation party on behalf of any Person where the underlying obligation of
such Person covered by, or the subject of, such guaranty or contingent
undertaking would constitute Current Debt or Funded Debt, as defined herein, if
such Person were the Borrower; provided, however, that (x) guarantees or other
contingent undertakings by the Borrower on behalf of any Subsidiary, by any
Subsidiary on behalf of any other Subsidiary, or by any Subsidiary on behalf of
the Borrower and (y) the contingent undertakings as set forth on Schedule 5.03
hereto, shall not constitute Guaranty Liabilities.

                  5.04     Liens. The Borrower will not, and will not permit
any of its Subsidiaries to, create, assume or suffer to exist any mortgage,
pledge, encumbrance, lien or charge of any kind upon any of its property or
assets, whether now owned or hereafter acquired, except: (i) mortgages,
pledges, encumbrances, liens or charges where the aggregate indebtedness
secured by such mortgages, pledges, encumbrances, liens or charges at any time
does not exceed the sum of (a) the greater of $3,000,000,000 or fifteen percent
(15%) of Equity plus (b) the amount outstanding under the obligations described
on Schedule 4.07 hereof as "Secured"; (ii) liens for taxes not yet due or which
are being contested in good faith; (iii) other liens, charges and encumbrances
incidental to the conduct of its business or the ownership of its property and
assets which were not incurred to secure the repayment of borrowed money or
other advances or credit, and which do not in the aggregate materially detract
from the value of its property or assets or materially impair the use thereof
in the operation of its business; (iv) liens imposed by law, such as carriers',
warehousemen's, mechanics', materialmen's and vendors' liens, for sums not yet
due or already due but the validity of which is being contested in good faith;
(v) mortgages, pledges, encumbrances, liens or other charges on property or
assets of a Subsidiary to secure obligations of such Subsidiary to the Borrower
or another Subsidiary; (vi) any mortgage, pledge, encumbrance, lien or other
charge, required by Section 5.10 hereof; (vii) any mortgage, pledge,
encumbrance, lien or other charge existing at the date hereof on any property
owned or leased by the Borrower or any Subsidiary at that date securing
obligations outstanding on that date; (viii) any mortgage, pledge, encumbrance,
lien or other charge on any property, shares of stock or obligation existing at
the time of acquisition thereof (including acquisition through merger or
consolidation) or (ix) any mortgage, pledge, encumbrance, lien or other charge
on aircraft or aircraft engines (but no other assets) now owned or acquired by
Borrower or any Subsidiary after the date hereof to secure the payment of all
or any part of the purchase price thereof or to secure any obligation incurred
or for which a firm commitment is obtained prior to, at the time of, or after,
the acquisition of such property for the purpose of financing all or any part
of the purchase price thereof.

                  5.05     Insurance. The Borrower will, and will cause each of
its Airline Subsidiaries to, keep adequately insured, by financially sound and
reputable insurers, all property of the character usually insured by
corporations engaged in the same or similar businesses similarly situated,
against loss or damage of the kind customarily insured against by such
corporations, and carry adequate liability

                                     -27-


insurance and other insurance of a kind generally carried by corporations
engaged in the same or similar businesses similarly situated; provided, however,
that nothing herein contained shall be construed to mean that a deductibility
clause in any such insurance, which, in effect, results in self-insurance of a
level or portion of losses considered reasonable by the Borrower's management,
shall render such insurance inadequate; and provided, further, that in the case
of a lease to the United States Government or an agency thereof of any aircraft
or other property, indemnity therefrom by the United States Government will be
considered adequate insurance against the risks that are the subject of any such
indemnity.

                  5.06     Payment of Taxes. The Borrower will, and will cause
each of its Airline Subsidiaries to, duly file all federal income tax returns
and all other tax returns and reports which, to the knowledge of the officers
of the Borrower are required to be filed and pay when due all taxes and
governmental charges assessed against it, its assets, income or franchises,
except to the extent and so long as contested in good faith.

                  5.07     Financial Statements. The Borrower will deliver to
the Agent, the Fronting Bank and the Lenders:

                  (a)      As soon as practicable and in any event within two
(2) months after the end of each quarterly period (other than the last
quarterly period in each fiscal year) an income statement of the Borrower for
the period from the beginning of the current fiscal year to the end of such
quarterly period, and a balance sheet of the Borrower as at the end of such
quarterly period, setting forth in each case in comparative form figures for
the corresponding period in the preceding fiscal year, all in reasonable detail
and certified by a principal financial officer of the Borrower, subject to
changes resulting from year-end adjustments; and a statement as of the end of
such quarterly period of the calculations made by the Borrower establishing its
compliance with the provisions of Sections 5.02, 5.03 and 5.04 hereof, in
sufficient detail to permit the Agent, Fronting Bank and the Lenders to
determine how the conclusions on such statement were arrived at, certified by
an authorized financial officer of the Borrower as accurate in all material
respects;

                  (b)      As soon as practicable and in any event within three
(3) months after the end of each fiscal year, an income statement and a
statement of reinvested earnings of the Borrower for such year, and a balance
sheet of the Borrower as at the end of such year, setting forth in each case in
comparative form corresponding figures from the preceding annual audit, all in
reasonable detail and satisfactory in scope to the Banks and certified by
independent certified public accountants of national standing selected by the
Borrower; and a statement as of the end of such fiscal year of the calculations
made by the Borrower establishing compliance with the provisions of Sections
5.02, 5.03 and 5.04 in sufficient detail to permit the Agent, Fronting Bank and
the Lenders to determine how the conclusions on such statement were arrived at,
certified by an authorized financial officer of the Borrower as accurate in all
material respects;

                  (c)      Copies of all financial statements, reports and
returns which it shall send to its stockholders;

                  (d)      Promptly after the sending or filing thereof, copies
of all periodic reports, if any, which the Borrower shall have filed with the
Securities and Exchange Commission (or any governmental

                                     -28-


agency or agencies substituted therefor) under ss.13 or ss.15(d) of the
Securities Exchange Act of 1934, as amended, or with any national securities
exchange; and

                  (e)      With reasonable promptness such other financial data
as the Fronting Bank and any Lender may reasonably request through the Agent.

                  5.08     Maintenance of Equipment. The Borrower will, and
will cause each of its Airline Subsidiaries to, maintain substantially all of
its equipment (except surplus or obsolete equipment) in good operating order.

                  5.09     Inspection. The Borrower will permit any Person
designated by any the Fronting Bank or any Lender in writing, to visit and
inspect any of the properties, corporate books and financial records of the
Borrower and its Subsidiaries at the Fronting Bank's or such Lender's expense,
and to discuss the affairs, finances, and accounts of any such corporation with
the principal officers of the Borrower, all at such reasonable times and as
often as the Fronting Bank or such Lenders may reasonably request. This covenant
shall be subject to applicable governmental and industrial security regulations.

                  5.10     Security. In the event the Borrower secures by
mortgage, pledge, encumbrance, lien or other charge any debt other than as
permitted by Section 5.04 hereof, the Borrower shall secure equally and ratably
the indebtedness incurred hereunder.

                  5.11     Notice of Any Default or Event of Default. As soon
as practicable (but in any event not more than five (5) days after the Chairman
of the Board, the President, or a principal financial officer of the Borrower
obtains knowledge of a Default or an Event of Default as specified in Section 6
hereof), the Borrower will deliver to the Agent, the Fronting Bank and each
Lender an Officer's Certificate specifying the nature thereof, the period of
existence thereof and what action the Borrower has taken or proposes to take
with respect thereto.

                  5.12     ERISA Reporting Requirements. With respect to any
employee benefit plan subject to Title IV of ERISA, the Borrower shall, if
requested by the Agent, provide the Agent with copies of the most recent annual
reports or returns (IRS Form 5500), audited or unaudited financial statements
and actuarial valuations with respect to such plans. In addition, the Borrower
shall provide the Agent copies of any notice filed with the Pension Benefit
Guaranty Corporation with respect to any "Reportable Event" as defined in
Section 4043 of ERISA, and the Agent shall forward copies of any such notice to
the Fronting Bank and the Lenders.

                  5.13     Ratings. The Borrower will notify the Agent promptly
after the Borrower becomes aware of any public announcement of the occurrence
of any change in the S&P Rating or the Moody's Rating.

                  Section 6.        Events of Default; Remedies.

                  6.01     Events of Default. The occurrence of any one or more
of the following events shall be an "Event of Default":


                                     -29-



                  (a)      any representation or warranty made by the Borrower
herein or in any certificate furnished to the Fronting Bank or the Lenders
hereunder proves to have been false or breached in any material respect on the
date as of which made, or any statement or certificate furnished by the
Borrower pursuant hereto shall prove to have been false in any material respect
at any date as of which the facts therein set forth were stated or certified;

                  (b)      the Borrower shall fail to pay or cause to be paid,
(i) within five (5) days after the date on which the principal amount of any
Reimbursement Obligation or any Advance is due; (ii) within five (5) days after
the date on which the interest amount of any Reimbursement Obligation or any
Advance is due; (iii) within ten (10) days after the date on which the
commitment fee and a letter of credit fee in Section 2.04(a) and 2.04(b),
respectively, is due; or (iv) within ten (10) days after the Borrower's receipt
of written notice that any such amount is past due, any other amount not
included in clauses (i), (ii) and (iii) of this paragraph (b) payable to the
Agent, the Arranger, the Fronting Bank or any Lender under this Agreement;

                  (c)      default in the due observance or performance by the
Borrower or any Subsidiary (to the extent applicable to such Subsidiary) of any
covenant, condition or agreement contained in Sections 5.01, 5.02, 5.03, and
5.04;

                  (d)      default in the due observance or performance by the
Borrower or any Subsidiary (to the extent applicable to such Subsidiary) of any
covenant, condition or agreement contained in this Agreement (other than those
specified in (b) or (c) above) and such default remains unremedied for a period
of 30 days after written notice thereof from the Agent, the Fronting Bank or
any Lender to the Borrower;

                  (e)      the Borrower shall institute a voluntary case
seeking liquidation or reorganization under Chapter 7 or Chapter 11,
respectively, of the United States Bankruptcy Code, or shall consent to the
institution of an involuntary case thereunder against it, or the Borrower shall
otherwise institute any similar proceeding under any other applicable federal
or state law, or shall consent thereto, or the Borrower shall apply for, or by
consent or acquiescence there shall be an appointment of, a custodian,
receiver, liquidator, sequestrator, trustee or other officer with similar
powers, for the Borrower, or for all or a material part of its properties; or
the Borrower shall make an assignment for the benefit of creditors, or the
Borrower shall have ceased to pay its debts generally as they become due; or if
an involuntary case shall be commenced seeking the liquidation or
reorganization of the Borrower under Chapter 7 or Chapter 11, respectively, of
the United States Bankruptcy Code or any similar proceeding shall be commenced
against the Borrower under any other applicable federal or state law and (i)
the petition commencing the involuntary case is not timely controverted, (ii)
the petition commencing the involuntary case is not dismissed within forty-five
(45) days of its filing, (iii) an interim trustee is appointed to take
possession of all or a portion of the property and/or to operate all or any
part of the business of the Borrower, or (iv) an order for relief (other than
the petition itself) shall have been issued or entered therein; or a decree or
order of a court having jurisdiction in the premises for the appointment of a
custodian, receiver, liquidator, sequestrator, trustee or other officer having
similar powers for the company or for all or a part of its properties, shall
have been entered; or any other similar relief shall be granted against the
Borrower under any applicable federal or state law; or


                                     -30-



                  (f)      seizure under any legal process of a substantial
share of the assets of the Borrower if release is not obtained within thirty
(30) days of such seizure;

                  (g)      default in any payment of principal or interest on
any other obligation for borrowed money or the deferred purchase price of
property beyond any period of grace provided with respect thereto, or in the
payment of any capital leases, or in the performance or observance of any other
agreement, term or condition contained in any agreement under which any such
obligation is created, if the effect of such default is to cause, or permit the
holder or holders of such obligation (or a trustee acting on behalf of such
holder or holders) to cause, such obligation to become due prior to its stated
maturity, provided such obligations or agreements have aggregate outstanding
amounts of $75,000,000 or more; or

                  (h)      the Borrower shall have failed to meet its minimum
funding requirements under the ERISA with respect to any of its employee benefit
plans which are covered by Title IV of ERISA (or to which ss.412 of the Code
applies), which failure has resulted in a material liability for excise tax
under ss.4971 of said Code, or any of its plans aforesaid shall be the subject
of voluntary or involuntary termination proceedings which may result in an
uninsured payment or repayment liability of the respective corporation to the
Pension Benefit Guaranty Corporation (or any entity succeeding to any or all of
its functions under ERISA) in an amount which is material in relation to the net
worth of the Borrower.

                  6.02     Remedies.

                  (a)      Upon the occurrence of an Event of Default (other
than an Event of Default with respect to the Borrower described in Section
6.01(e)), the Agent may, and upon the written request of the Fronting Bank and
the Majority Lenders shall, by written notice to the Borrower, declare an
amount equal to the then current aggregate Stated Amount of all Letters of
Credit plus all other amounts owing to the Agent, the Fronting Bank and the
Lenders hereunder to be immediately due and payable, whereupon the same shall
become due and payable to the Agent without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower. Upon
receipt of any such written notice, the Borrower agrees to deposit with the
Agent, in an interest bearing account, as collateral, Dollars in an amount
equal to the aggregate Stated Amount of all Letters of Credit then outstanding
and all other amounts owing under the Financing Documents (the "Collateral").
The Collateral shall be applied against amounts due to the Agent, the Fronting
Bank and the Lenders and any remaining Collateral shall be held in the account
with the Agent until the earlier of (i) all Events of Default having been cured
or (ii) the expiration of all Letters of Credit and payment of all
Reimbursement Obligations and Advances in connection therewith, at which time
the remaining Collateral and any interest accrued thereon shall be returned to
the Borrower.

                  (b)      Notwithstanding the notice provisions contained in
Section 6.02(a), if an Event of Default described in Section 6.01(e) shall
occur, the results which would occur upon the giving of written notice by the
Agent to the Borrower as specified in Section 6.02(a) shall occur automatically
without the giving of any such notice.

                  (c)      Upon the occurrence of an Event of Default, the
Fronting Bank may (and, upon the direction of the Majority Lenders, shall), but
shall not be obligated to (unless so directed by the

                                     -31-



Majority Lenders), deliver written notice of such Event of Default to each
Applicable Bond Trustee and request the Applicable Bond Trustee for a series of
Bonds to cause such Bonds to be purchased.

                  (d)      The Agent, the Fronting Bank or any Lender may take
such other action and exercise such other rights as are provided under
Applicable Law.

                  Section 7.        Intercreditor Arrangements. The provisions
of this Section 7 are for the sole and exclusive benefit of the Agent, the
Fronting Bank and the Lenders and the Borrower shall have no rights or
obligations under this Section 7.

                  7.01     Fronting Bank Interests.

                  (a)      In the event that the Fronting Bank honors payment
of a drawing made under the Letters of Credit and is not reimbursed therefor as
provided in Section 2.02, the Fronting Bank shall be deemed to have acquired for
its own account an undivided 100% interest in the Reimbursement Obligations
created thereby (the Fronting Bank's interests therein, the "Fronting Bank
Interests"). In the event that the Fronting Bank acquires any Fronting Bank
Interests, it shall promptly advise each Lender, if any, thereof by telephone
(promptly confirmed in writing) or by written notice, and each Lender severally
agrees to unconditionally and irrevocably buy from the Fronting Bank, and the
Fronting Bank agrees to sell to each Lender, a portion of the Fronting Bank
Interests for an amount (each such amount, a "Reimbursement Amount") equal to
such Lender's Percentage of the aggregate amount of such Fronting Bank
Interests; provided, however, that no Lender shall be required to purchase any
portion of any Fronting Bank Interest if as a result thereof the amount such
Lender would be required to pay for such purchase, when added to the amounts
paid for prior purchases of portions of Fronting Bank Interests which have not
been reimbursed by the Agent under Section 7.02, would result in such Lender
paying any amount in excess of its Commitment. The purchase price of each
portion of a Fronting Bank Interest purchased pursuant to the preceding sentence
shall be paid (without set-off, counterclaim or deduction of any kind
whatsoever) to the Fronting Bank in the manner set forth below in subsection (b)
of this Section 7.01. The Fronting Bank shall determine the amount of each
Reimbursement Amount associated with any sale of its Fronting Bank Interests,
and each such determination shall be conclusive and binding on its Lenders
absent manifest error.

                  (b)      Each Lender shall pay its Reimbursement Amount
associated with any purchase of a portion of the Fronting Bank Interests by
transferring such amount to the order of the Fronting Bank in immediately
available funds, (i) at or before 2:30 p.m. New York time on the same Business
Day, if telephonic notice confirmed by written notice (by facsimile) from the
Fronting Bank is received no later than 12:30 p.m. New York time on any
Business Day or (ii) at or before 12:00 noon New York time on the Business Day
next following the date on which notice is received, if telephonic notice
confirmed by written notice (by facsimile) from the Fronting Bank is received
later than 12:30 p.m. New York time on any Business Day. Telephonic notice
shall be deemed given to a Lender when actually given to any individual who
identifies himself or herself as an officer at such Lender's office at the
address set forth in Section 9.03 hereof. Facsimile written notice required to
be given pursuant to this Section shall be sent to the facsimile number
provided to the Fronting Bank for such purpose by each Lender. If a Lender
fails to pay to the Fronting Bank any Reimbursement Amount when due, such
Lender agrees that the Fronting Bank shall be entitled to receive, and such
Lender shall pay to the order of the Fronting Bank, interest on such amount at
a rate equal to the Alternate Base Rate in effect on

                                     -32-



each date plus 1% per annum from the date when due until paid. No Lender shall
be entitled to purchase a portion of any Fronting Bank Interests until such time
as it shall have paid all of its outstanding Reimbursement Amounts and any
interest which may be due thereon to the Fronting Bank. Each Lender further
agrees that, until it shall have paid all amounts owing to the Fronting Bank
pursuant to this Section 7.01, it shall not be entitled to receive any payment
described in clauses (i) or (ii) of subsection (b) of Section 7.02 and shall not
be permitted to vote on any matter where its consent or approval is required.

                  (c)      Each Lender's payment obligations to the Fronting
Bank under this Agreement are primary, absolute, independent, irrevocable and
unconditional, and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, including, without limitation, the following
circumstances: (i) any lack of validity or enforceability of any Letter of
Credit, any of the other Financing Documents or any of the Bond Documents; (ii)
any amendment or waiver of or any consent or departure from the terms and
conditions of all or any of the Financing Documents or any of the Bond
Documents; (iii) the existence of any claim, set-off, defense or other right
which such Lender may have at any time, whether in connection with this
Agreement, the transactions contemplated herein or in the other Financing
Documents, in the Bond Documents or any unrelated transaction against the Agent,
the Fronting Bank, any other Lender or any beneficiary or transferee of any
Letter of Credit or any person; (iv) any statement or any document presented
under any Letter of Credit proving to be forged, fraudulent, invalid, inaccurate
or false in any respect; (v) payment by the Fronting Bank under any Letter of
Credit against presentation of a draft or certificate which does not strictly
comply with the terms of such Letter of Credit; (vi) any non-application or
misapplication by any Applicable Bond Trustee or any tender agent for any Bonds
or otherwise of the proceeds of any Drawing; (vii) the failure by Fronting Bank
to honor any Drawing or to make any payment demanded under any Letter of Credit
on the ground that the demand for such payment does not conform to the terms and
conditions of such Letter of Credit; (viii) any participation or assignment by
the Fronting Bank of any interests or obligations of the Fronting Bank's under
this Agreement to any other Lender or person; (ix) any extension, indulgence,
settlement or compromise granted or agreed to in relation to this Agreement or
any other Financing Document; (x) any default by or insolvency or bankruptcy of
the Borrower; (xi) any act or omission on the part of the Agent or the Fronting
Bank relating to this Agreement or any other Financing Document; or (xii) the
absence of notice of any of the foregoing, provided that a Lender shall have a
claim against the Fronting Bank and the Fronting Bank shall be liable to a
Lender, to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by such Lender as a direct result of (i) the
Fronting Bank's willful misconduct or gross negligence in determining whether
documents presented under any Letter of Credit complied with the terms thereof
or (ii) the Fronting Bank's willful failure or gross negligence to pay under any
Letter of Credit after the presentation to it by the beneficiary thereof of a
demand and certificate strictly complying with the terms and conditions of such
Letter of Credit. Each Lender hereby waives presentment, protest, notice of
nonpayment of any amounts owing under this Agreement, and any defenses in law or
equity which it may have to the full discharge of any of its obligations to the
Fronting Bank under this Section 7.

                  (d)      It is understood that no Lender shall be responsible
for any default by any other Lender of its obligation to purchase portions of
Fronting Bank Interests pursuant to this Section 7 and that each Lender shall
be obligated to purchase portions of Fronting Bank Interests pursuant to this


                                     -33-



Section 7 regardless of the failure of any other Lender to purchase portions of
the Fronting Bank Interests pursuant to this Section 7.

                  7.02     Payments.

                  (a)      The Fronting Bank shall be entitled to receive its
pro rata share of all payments in respect of Fronting Bank Interests which pro
rata share shall be determined by multiplying the amount of any such payment in
respect of such Fronting Bank Interests by a fraction the numerator of which is
the aggregate amount of such Fronting Bank Interests minus the aggregate amount
of the Lenders' Reimbursement Amounts and the denominator of which is the
aggregate amount of such Fronting Bank Interests (the "Fronting Bank Share") and
each Lender shall be entitled to receive its pro rata share of all payments in
respect of such Fronting Bank Interests, which pro rata share shall be
determined by multiplying the amount of any such payment in respect of such
Fronting Bank Interests by a fraction the numerator of which is the amount of
such Lender's Reimbursement Amount paid for such Fronting Bank Interest and the
denominator of which is the aggregate amount of such Fronting Bank Interests. To
the extent that any Lender fails to purchase any portion of any Fronting Bank
Interests, the Fronting Bank shall be deemed the owner of such portion.

                  (b)      The Agent shall act as paying agent on behalf of the
Fronting Bank and the Lenders with respect to any moneys received pursuant to
subsection (a) of this Section 7.02 and any other provision of this Agreement,
and the Agent shall transfer to the Fronting Bank or Lenders, as the case may
be, in accordance with the payment instructions delivered in writing by the
Fronting Bank and each Lender to the Agent the following amounts when (and if)
the Agent receives them and in the same type of funds in which the Agent
receives them: (i) the Fronting Bank's and, so long as such Lender is not in
default in any part of its obligations to the Fronting Bank pursuant to this
Section 7, such Lender's proportionate share (determined as set forth in
subsection (a) of this Section 7.02) of all payments in respect of
Reimbursement Obligations; (ii) so long as such Lender is not in default in any
part of its obligations to the Fronting Bank pursuant to this Section 7, such
Lender's pro rata share (based on its Percentage) of each commission fee and
unutilized commitment fee, if any, paid by the Borrower to the Agent pursuant
to Section 2.04 of this Agreement (if any Lender is in default of its
obligations to the Fronting Bank, the Fronting Bank shall retain the defaulting
Lender's pro rata share of such fees for its own account for each day during
which such default continues); (iii) to the Fronting Bank, each commission fee
and unutilized commitment fee, if any, paid by the Borrower to the Agent
pursuant to Section 2.04 of this Agreement net of amounts paid or to be paid to
the Lenders in respect of commitment fees pursuant to clause (ii) immediately
above; (iv) the Fronting Bank's drawing fee, if any, paid by the Borrower to
the Agent pursuant to Section 2.04 of this Agreement; (v) payments, if any,
received by the Agent on behalf of the Fronting Bank or any Lender in respect
of stamp taxes, transfer taxes, documentary taxes, expense reimbursements,
increased costs and default interest duly payable to the Fronting Bank or any
Lender pursuant to Sections 2.03(i), 2.04, 2.05 and 2.06, respectively, of this
Agreement; and (vi) payments, if any, received by the Agent on behalf of the
Fronting Bank or any Lender pursuant to Section 9.01. Funds received by the
Agent on behalf of the Fronting Bank

                                     -34-



or any Lender under this Section shall, if received by the Agent prior to 10:00
a.m. New York time on any Business Day, be paid to the Fronting Bank or such
Lender no later than the Agent's close of business in New York on the same
Business Day. Funds received by the Agent on behalf of the Fronting Bank or any
Lender after 10:00 a.m. New York time on any Business Day shall be paid to the
Fronting Bank or such Lender no later than 2:00 p.m. New York time on the next
Business Day.

                  (c)      If (i) the Agent shall pay any amount to the
Fronting Bank or any Lender pursuant hereto in the belief or expectation that a
related payment has been or will be received or collected in connection with the
Fronting Bank's or any Lender's, as the case may be, interests in Fronting Bank
Interests and (ii) such related payment is not received or collected by the
Agent, then the Fronting Bank or such Lender, as the case may be, will promptly
on demand by the Agent return such amount to the Agent, together with interest
thereon at such rate as the Agent shall determine to be customary between banks
for correction of errors. If the Agent determines at any time that any amount
received or collected by the Agent in respect of any Reimbursement Obligations,
or any other amounts paid pursuant to this Agreement must be returned to the
Borrower, or paid to any other Person pursuant to any insolvency law, any
sharing clause, or otherwise, then, notwithstanding any other provision of this
Agreement, the Agent shall not be required to distribute any portion thereof to
the Fronting Bank or any Lender, and the Fronting Bank each Lender, as the case
may be, agrees to promptly on demand by the Agent repay any portion thereof that
the Agent shall have distributed to the Fronting Bank or such Lender, together
with interest thereon at such rate, if any, as the Agent shall pay to the
Borrower, or such other Person with respect thereto.

                  (d)      Except as otherwise provided in this Agreement, no
Lender shall have any right to receive any other amounts received by the Agent
or the Fronting Bank or the Arranger under this Agreement (including any
drawing fee or any payments made by the Borrower in respect of any indemnities
or expense reimbursements incurred by the Agent or the Fronting Bank pursuant
to Section 9.01) or under any other Financing Document. Any amounts other than
amounts referred to in this Section 7 received by the Agent, the Arranger or
the Fronting Bank from the Borrower pursuant to this Agreement or any other
Financing Document shall be the Agent's, the Arranger's or the Fronting Bank's,
as the case may be, sole property and shall be retained by the Agent, the
Arranger or the Fronting Bank, as the case may be, for its own account and no
Lender shall have any rights with respect to such amounts; provided, however,
that if each Lender has paid its pro rata share (based on its Percentage) of
any amounts described in Section 8.06 of this Agreement, and the Agent is
thereafter reimbursed therefor by the Borrower or otherwise, then each Lender
which makes any payment to the Agent pursuant to Section 8.06 will be entitled
to receive its pro rata share (based on its proportionate share of the advances
made to the Agent under Section 8.06) of such reimbursement.

                  7.03     Adjustment of Commitments. Each Lender's Commitment
shall be reduced concurrently with any reduction of the Stated Amount of any
Letter of Credit by its Percentage of such reduction.

                  7.04     Notices to the Lenders. Upon receipt by the Agent of
any notice under this Agreement, the Agent shall promptly forward copies of any
such notice to the Fronting Bank and each Lender.

                  Section 8.        The Agent. Except for the rights of the
Borrower set forth in Section 8.08, the provisions of this Section 8 are for
the sole and exclusive benefit of the Agent, the Fronting Bank and the Lenders
and the Borrower shall have no rights or obligations under this Section 8.


                                     -35-



                  8.01     Appointment. The Fronting Bank and the Lenders
hereby designate Commerzbank as Agent to act as specified herein and in the
other Financing Documents. Each Lender hereby irrevocably authorizes the Agent
to take such action on its behalf under the provisions of this Agreement, the
other Financing Documents and any other instruments and agreements referred to
herein or therein and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Agent by the terms hereof and thereof and such other powers as are reasonably
incidental thereto. The Agent may perform any of its duties hereunder by or
through its officers, directors, agents or employees.

                  8.02     Nature of Duties. The Agent shall have no duties or
responsibilities to the Arranger, the Fronting Bank or the Lenders except those
expressly set forth in this Agreement and the Financing Documents. Except as
provided in Section 9.01, neither the Agent nor any of its respective officers,
directors, agents or employees shall be liable to the Arranger, the Fronting
Bank or any Lender for any action taken or omitted by it or them hereunder or
under any other Financing Document or in connection herewith or therewith,
unless caused by its or their gross negligence or willful misconduct. The duties
of the Agent shall be mechanical and administrative in nature; the Agent shall
not have by reason of this Agreement or any other Financing Document a fiduciary
relationship in respect of the Arranger, the Fronting Bank or any Lender; and
nothing in this Agreement or any other Financing Document, expressed or implied,
is intended to or shall be so construed as to impose upon the Agent any
obligations in respect of this Agreement or any other Financing Document except
as expressly set forth herein.

                  8.03     Lack of Reliance on Agent. Independently and without
reliance upon the Agent or the Arranger, the Fronting Bank and each Lender, to
the extent it deems appropriate, has made and shall continue to make (a) its
own independent investigation of the financial condition and affairs of the
Borrower in connection with its execution and delivery of this Agreement and
the taking or not taking of any action in connection herewith and (b) its own
appraisal of the creditworthiness of the Borrower and, except as expressly
provided in this Agreement, the Agent shall not have any duty or
responsibility, either initially or on a continuing basis, to provide the
Arranger, the Fronting Bank or any Lender with any credit or other information
with respect thereto, whether coming into its possession before the payment of
Reimbursement Amounts or at any time or times thereafter. The Agent shall not
be responsible to the Arranger, the Fronting Bank or any Lender for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
perfection, collectibility, priority or sufficiency of this Agreement or any
other Financing Document or the financial condition of the Borrower or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement or any other
Financing Document, or the financial condition of the Borrower or the existence
or possible existence of any Default or Event of Default.

                  8.04     Certain Rights of the Agent. If the Agent shall
request instructions from the Fronting Bank or the Lenders with respect to any
act or action (including failure to act) in connection with this Agreement or
any other Financing Document, the Agent shall be entitled to refrain from such
act or taking such action unless and until the Agent shall have received
instructions from the Fronting Bank or the Lenders, as the case may be; and the
Agent shall not incur liability to any Person by reason

                                     -36-



of so refraining. Without limiting the foregoing, neither the Fronting Bank nor
any Lender shall have any right of action whatsoever against the Agent as a
result of the Agent acting or refraining from acting hereunder or under any
other Financing Document in accordance with the instructions of the Fronting
Bank and the Majority Lenders.

                  8.05     Reliance. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, certificate, telex, teletype or telecopier message,
cablegram, radiogram, order or other document or telephone message signed, sent
or made by any Person that the Agent believed to be the proper Person, and,
with respect to all legal matters pertaining to this Agreement and any other
Financing Document and its duties hereunder and thereunder, upon advice of
counsel selected by it.

                  8.06     Indemnification. To the extent the Agent is not
reimbursed and indemnified by the Borrower, the Fronting Bank and each Lender
will reimburse and indemnify the Agent for and against any and all Losses of
whatsoever kind or nature which may be imposed on, asserted against or incurred
by the Agent in performing its duties hereunder or under any other Financing
Document, or in any way relating to or arising out of this Agreement or any
other Financing Document, (a) in the case of the Fronting Bank, in an amount
equal to the Losses less the portion, if any, of such Losses payable by the
Lenders pursuant to clause (b) below, and (b) in the case of any Lender, in an
amount equal to its Percentage of such Losses, provided that the neither the
Fronting Bank nor any Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct; and provided further that upon such
reimbursement and indemnification by the Fronting Bank and the Lenders, the
Fronting Bank and the Lenders shall be subrogated to all rights which the Agent
has with respect thereto.

                  8.07     The Agent in its Individual Capacity. With respect
to its obligation, if any, to pay Reimbursement Amounts under this Agreement,
the Agent shall have the rights and powers specified herein for a "Lender" and
may exercise the same rights and powers as though it were not performing the
duties specified herein. The term "Lender" or any similar term shall, unless
the context clearly otherwise indicates, include the Agent its individual
capacity as a Lender. The Agent may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with the
Borrower or any Affiliate of the Borrower as if it were not performing the
duties specified herein, and may accept fees and other consideration from the
Borrower for services in connection with this Agreement and otherwise without
having to account for the same to the Arranger, the Fronting Bank or the
Lenders.


                                     -37-


                  8.08     Resignation by the Agent.

                  (a)      The Agent may resign from the performance of all its
functions and duties hereunder and/or under the other Financing Documents at
any time by giving 30 days' prior written notice to the Borrower, the Fronting
Bank and each Lender; provided, however, that if the Agent shall determine, in
its sole discretion, that its resignation shall be immediately required by law,
no prior notice shall be required. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.

                  (b)      Upon any such notice of resignation, the Borrower
shall appoint a successor Agent hereunder which shall be a commercial bank or
trust company reasonably acceptable to the Fronting Bank and the Majority
Lenders.

                  (c)      If a successor Agent shall not have been so
appointed within such 30 day period, the Fronting Bank and the Majority Lenders
may then appoint a successor Agent reasonably acceptable to the Borrower who
shall serve as Agent hereunder or thereunder.

                  (d)      If no successor Agent has been appointed pursuant to
clause (b) or (c) above by the 35th day after the date such notice of
resignation was given by the Agent, the Agent's resignation shall become
effective and the Fronting Bank and the Lenders shall thereafter perform all the
duties of the Agent hereunder and/or under any other Financing Document until
such time, if any, as the Borrower appoints a successor Agent as provided above.

                  8.09     Arranger. The Arranger has no duties or
responsibilities to the Agent, the Fronting Bank or the Lenders under this
Agreement or the other Financing Documents. Neither the Arranger nor any of its
officers, directors, agents or employees shall be liable to the Agent, the
Fronting Bank or any Lender for any action taken or omitted by it or them
hereunder or under any Financing Document or in connection herewith or
therewith. The Arranger shall not have by reason of this Agreement or any other
Financing Document a fiduciary relationship in respect of the Agent, the
Fronting Bank or any Lender, and nothing in this Agreement or any other
Financing Document, expressed or implied, is intended to or shall be so
construed as to impose upon the Arranger any obligations in respect of this
Agreement or any other Financing Document.

                  Section 9.        Miscellaneous.

                  9.01     Indemnification.

                  (a)      The Borrower agrees to indemnify and hold the Agent,
the Arranger, the Fronting Bank and each Lender harmless from and against any
and all Losses which the Agent, the Arranger, the Fronting Bank or any Lender
may incur or which may be claimed against the Agent, the Arranger, the Fronting
Bank or any Lender by any person or entity by reason of or in connection with
(i) the execution, delivery and performance of this Agreement, the other
Financing Documents and the Bond Documents, or (ii) the payment or failure to
make lawful payment under this Agreement; provided, however, that the Borrower
shall not be required to indemnify the Agent, the Arranger, the Fronting Bank
or any Lender for any Losses to the extent caused by (A) the failure of such
Person to satisfy its obligations under this Agreement, or (B) such Person's
gross negligence or willful misconduct.

                                     -38-



For purposes of clause (B) of the preceding sentence, the gross negligence or
willful misconduct of a Person in one capacity shall be attributed to the same
Person in all other capacities. Nothing in this Section 9.01(a) is intended to
limit the Borrower's obligations contained in this Agreement. Without prejudice
to the survival of any other obligations of the Borrower herein contained, the
obligations of the Borrower set forth in this Section 9.01(a) shall survive the
payment in full of amounts payable hereunder and the termination of this
Agreement.

                  (b)      In case any claim is asserted or any action or
proceeding covered by the indemnification provisions hereof is brought against
any person entitled to indemnification hereunder (any such person, the
"Indemnitee"), the Indemnitee shall promptly notify the party hereunder required
to indemnify such person (the "Indemnitor") in writing of such claim, action or
proceeding, and the Indemnitor shall resist, settle or defend such claim, action
or proceeding. If, within 10 Business Days after the Indemnitor's receipt of
such notice, the Indemnitor does not commence and continue to prosecute the
defense of such claim, action or proceeding, or if there exists a conflict which
would or does preclude the Indemnitor from representing the Indemnitee's
interest, the Indemnitee may, upon 5 Business Days' notice, retain counsel to
represent it in such defense and the reasonable fees and expenses of the
Indemnitee's counsel shall be deemed to be an expense payable by the Indemnitor
for the purpose of this Section 9.01. Subject to the foregoing, the Indemnitee
shall cooperate and join with the Indemnitor, at the expense of the Indemnitor,
as may be required in connection with any action taken or defended by the
Indemnitor.

                  9.02     Right of Setoff. If an Event of Default shall have
occurred and be continuing, the Agent, on behalf of itself, the Fronting Bank
and each Lender, is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Agent to or for the credit or the
account of the Borrower against any and all of the obligations of the Borrower
then existing under this Agreement held by the Agent. The right of the Agent
under this Section 9.02 is in addition to other rights and remedies which the
Agent, the Fronting Bank or such Lender may have. Promptly following any
exercise of the right of setoff, the Agent shall give the Borrower written
notice thereof.

                  9.03     Notices. Except as otherwise expressly provided
herein, all notices, demands and other communications provided for hereunder
shall be in writing (including facsimile communication) and mailed, telecopied
or delivered:

If to the Borrower:                 Delta Air Lines, Inc.
                                    William B. Hartsfield Atlanta
                                    International Airport
                                    Atlanta, Georgia 30320
                                    Attention:  Treasurer
                                    Telephone:
                                    Facsimile:

If to the Arranger, the Agent       Commerzbank AG,
or the Fronting Bank, at:           New York Branch
                                    2 World Financial Center


                                     -39-



                                    New York, New York 10281-1050
                                    Attention: Joachim Pausch
                                    Telephone No.: (212) 266-7255
                                    Facsimile No.: (212) 266- 7427

if to any initial Lender, at:       the address specified opposite
                                    its signature on this Agreement;
                                    and

if to any other Lender, at:         the address specified in the
                                    Register for such Lender;

or at such other address, telephone number or facsimile number as shall be
designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective when received.

                  9.04     Successors and Assigns.

                  (a)      The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that (i) the Borrower may not assign or
otherwise transfer any of its rights or obligations under this Agreement except
in connection with a merger, consolidation or transfer of assets permitted
under Section 5.01 hereof, (ii) the Fronting Bank may not assign or otherwise
transfer any of its obligations under the Letters of Credit, (iii) neither the
Fronting Bank nor any Lender shall assign its rights and obligations hereunder
unless the Fronting Bank or such Lender, as the case may be, complies with the
requirements of subsections 9.04(b) through 9.04(e) hereof and (iv) neither the
Fronting Bank nor any Lender shall grant participations in this Agreement
unless the Fronting Bank or such Lender, as the case may be, complies with the
requirements of subsection 9.04(f) hereof.

                  (b)      The Fronting Bank and each Lender may, with the
prior written consent of the Agent, not to be unreasonably withheld or delayed
(it being understood that the failure of the Agent to consent to a transfer
based upon the lack of creditworthiness or perceived lack of creditworthiness
of the proposed transferee shall, in all cases, be deemed "reasonable"), and,
so long as no Default or Event of Default has occurred and is continuing, the
Borrower, not to be unreasonably withheld or delayed, assign to one or more
assignees all or a portion of its Fronting Bank Interests and, in the case of a
Lender, its Commitment hereunder; provided, however, that (i) the consent of
the Borrower shall not be required in the case of an assignment to an assignee
that is already a Lender; (ii) each such assignment shall be of a constant, and
not a varying, percentage of Fronting Bank Interests and Commitment; (iii) no
partial assignment shall, as of the effective date of such assignment, result
in the sum of the assigning Lender's Commitment and Fronting Bank Interests
being less than $5,000,000, this Section 9.04(b)(iii) being inapplicable to an
assignment among and between the Fronting Bank, the Lenders and their
respective Affiliates; (iv) no partial assignment shall, as of the effective
date of such assignment, result in the assignee holding a Commitment and
Fronting Bank Interests in an aggregate amount less than $5,000,000, this
Section 9.04(b)(iv) being inapplicable to an assignment among and between the
Fronting Bank, the Lenders and their respective Affiliates; (v) no assignment
shall, as of the effective date of such assignment, increase the Borrower's
obligations, if any, to the assignee under any

                                     -40-


Financing Document, including, without limitation, Sections 2.03(i), 2.04, 2.05,
2.06 or 9.01 of this Agreement as of such date beyond those obligations, if any,
owing as of such date to the Fronting Bank or the assigning Lender, as the case
may be; and (vi) the parties to each such assignment shall execute and deliver
to the Agent an Assignment and Acceptance and the assigning Lender shall deliver
to the Agent a processing and recordation fee of $3,500 which shall not be
payable by the Borrower. The Agent shall deliver a copy of any such Assignment
and Acceptance to the Borrower and the Fronting Bank promptly after receipt
thereof. Upon acceptance and recording pursuant to paragraph (e) of this Section
9.04, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five Business Days after the
execution thereof, (A) the assignee thereunder shall become a party hereto and,
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement as well as the rights in the
Fronting Bank Interests so assigned and (B) the Fronting Bank or the assigning
Lender, as the case may be, thereunder shall, to the extent provided in such
assignment, cease to have any rights in the Fronting Bank Interests and, in the
case of an assigning Lender, the Commitment or part thereof so assigned.

                  (c)      By executing and delivering an Assignment and
Acceptance, the Fronting Bank or the assigning Lender thereunder and the
assignee thereunder shall be deemed to confirm to and agree with each other and
the other parties hereto as follows: (i) other than the representation and
warranty that it is the legal and beneficial owner of the Fronting Bank
Interests being assigned thereby free and clear of any adverse claim, the
Fronting Bank or the assigning Lender, as the case may be, makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with its
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, any other Financing Document or any
other instrument or document furnished pursuant hereto or thereto; (ii) the
Fronting Bank or the assigning Lender, as the case may be, makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under this Agreement, any other Financing
Document or any other instrument or document furnished pursuant hereto or
thereto; (iii) such assignee confirms that it has received a copy of this
Agreement, together with copies of such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance and this Agreement; (iv) such assignee will
independently and without reliance upon the Agent, the Fronting Bank or any
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement and any other Financing Document as are delegated to the
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all the obligations which by the terms
of this Agreement and any other Financing Document are required to be performed
by it as a Lender.

                  (d)      The Agent shall maintain at its address set forth in
Section 9.03, a copy of each Assignment and Acceptance delivered to it and a
register (the "Register") for the recordation of (i) the name and address of
the Fronting Bank and the amount of its Fronting Bank Interests and (ii) the
names and addresses of the Lenders and their respective Commitments,
Percentages and participation interests in the Fronting Bank Interests. The
entries in the Register shall be conclusive, absent manifest error, and

                                     -41-



the Borrower, the Agent, the Fronting Bank and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as the owner
of any Fronting Bank Interests as the owner thereof for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower, the
Fronting Bank and any Lender at any reasonable time and from time to time upon
reasonable prior notice.

                  (e)      Upon its receipt of a duly completed Assignment and
Acceptance executed by the Fronting Bank or an assigning Lender and an assignee
together with the processing and recordation fee referred to in paragraph (b)
above, the Agent shall (subject, so long as no Default or Event of Default has
occurred and is continuing, to the consent of the Borrower to such assignment
which consent shall not be unreasonably withheld or delayed), (i) accept such
Assignment and Acceptance, (ii) modify the Register to reflect the Commitment,
Percentage and amount of Fronting Bank Interests of the assignee Lender and the
reduced Fronting Bank Interests of the Fronting Bank or the assigning Lender, as
the case may be, and (iii) give prompt notice thereof to the Borrower and the
Fronting Bank.

                  (f)      The Fronting Bank and each Lender may without the
consent of the Borrower sell subparticipation interests to one or more banks or
other entities in all or a portion of its Fronting Bank Interests or
participation interests therein; provided, however, that (i) the Fronting
Bank's or such Lender's obligations, and the Borrower's obligations, under this
Agreement shall remain unchanged, (ii) the Fronting Bank or such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) a Participant shall be entitled to the benefit of the
cost protection provisions contained in Sections 2.03(i), 2.04, 2.05, 2.06, and
9.01 to the same extent that the Fronting Bank or the Lender from which such
Participant acquired its subparticipation would be entitled to the benefit of
such cost protection provisions if such subparticipation had not been sold,
granted or assigned, (iv) no subparticipation shall increase the Borrower's
obligations hereunder beyond those that exist in favor of the Fronting Bank or
the Lender granting such subparticipation; and (v) the Borrower, the Fronting
Bank, the Agent and the other Lenders shall continue to deal solely and
directly with the Fronting Bank or such Lender in connection with the Fronting
Bank's or such Lender's rights and obligations under this Agreement, and the
Fronting Bank or such Lender shall retain the sole right to enforce the
obligations of the Borrower hereunder and to approve any amendment,
modification or waiver of any provision of this Agreement or any other
Financing Document (other than amendments, modifications or waivers which (A)
waive or reduce fees payable hereunder, (B) waive or reduce the amount of
principal of or the rate at which default interest is payable on Reimbursement
Obligations, (C) change the dates fixed for payments of such amounts, (D)
increase the aggregate Stated Amount of the Letters of Credit or the granting
Lender's Commitment and (E) extend the Termination Date of any Letter of
Credit).

                  9.05     No Waiver; Remedies Cumulative. No failure or delay
on the part of the Agent, the Fronting Bank or any Lender in exercising any
right, power or privilege hereunder or under any other Financing Document and
no course of dealing between the Borrower, the Agent, the Fronting Bank or any
Lender shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other
Financing Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights, powers and remedies herein or in any other Financing Document expressly
provided are cumulative and not exclusive of any rights, powers or remedies
which the Agent, the Fronting Bank or

                                     -42-



any Lender would otherwise have. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
Agent, the Fronting Bank or any Lender to any other or further action in any
circumstances without notice or demand.

                  9.06     Payments Pro Rata. The Fronting Bank and each Lender
agrees that if it should receive any amount hereunder (whether by voluntary
payment, by realization upon security, by the exercise of the right of setoff or
banker's lien, by counterclaim or cross action, by the enforcement of any right
under the Financing Documents, or otherwise) which is applicable to the payment
of the principal of, or interest on, Reimbursement Obligations or fees, which
with respect to the related amount or amounts received by the Fronting Bank
and/or other Lenders is in a greater proportion than the total amount of such
Reimbursement Obligations or fees then owed and due to the Fronting Bank or such
Lender bears to the total amount of such Reimbursement Obligations or fees then
owed and due to the Fronting Bank and/or all of the Lenders immediately prior to
such receipt, then the Fronting Bank or such Lender receiving such excess
payment shall purchase for cash without recourse or warranty from the Fronting
Bank and/or the other Lenders an interest in the Reimbursement Obligations or
fees then owed to the Fronting Bank and/or such Lenders in such amount as shall
result in a proportional participation by the Fronting Bank and/or all of the
Lenders in such amount; provided, however, that if all or any portion of such
excess amount is thereafter recovered from the Fronting Bank or such Lender,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, but without interest.

                  9.07     Governing Law; Submission to Jurisdiction; Venue.

                  (a)      THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

                  (b)      Any legal action or proceeding against the Borrower
with respect to this Agreement may be brought in any court of the State of New
York sitting in the Borough of Manhattan or in the United States District Court
for the Southern District of New York, and, by execution and delivery of this
Agreement, the Borrower hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts for such purposes.

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

                  9.08     Amendment or Waiver. Neither this Agreement nor any
terms hereof (other than the provisions of Sections 7 and 8) may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination has been consented to in writing signed by the Agent, the Fronting
Bank, the Majority Lenders and the Borrower; provided, however, that no such
change, waiver, discharge or termination shall, without the consent of each
Lender, (a) extend the final maturity

                                     -43-



of any Reimbursement Obligation, or reduce the rate or extend the time of
payment of interest thereon or reduce the principal amount thereof, or increase
the Commitment of any Lender over the amount thereof then in effect, (b) reduce
the amount of any fee payable to such Lender or change the time for payment of
any such fee, (c) amend, modify or waive any provision of this Section 9.08 or
Sections 2.03(i), 2.04(a), 2.04(b), 2.04(d), 2.05, 2.06, 8.06, 9.01, 9.04 or
9.06, (d) consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement or any other Financing Document, (e)
extend the scheduled expiration date of any Letter of Credit pursuant to Section
2.11, (f) amend or modify the defined terms "Majority Lenders" or "Advance
Repayment Date" or "Applicable Fee" or "Applicable Margin", or (g) release the
Collateral other than pursuant to Section 6.02(a). The provisions of Sections 7
and 8 (except for Section 8.08) may only be amended or waived by a written
instrument signed by the Agent, the Fronting Bank and the Majority Lenders.
Section 8.08 may only be amended or waived by a written instrument signed by the
Borrower, the Agent, the Fronting Bank and the Majority Lenders.

                  9.09     Termination of Letters of Credit; Survival. The
Borrower may, if the Applicable Indenture so provides, without penalty, replace
or terminate any Letter of Credit issued hereunder at any time. Except for the
Borrower's indemnification obligations under this Agreement, which
indemnification obligations shall expressly survive the termination of this
Agreement, this Agreement shall terminate as soon as all Letters of Credit
issued hereunder have terminated in accordance with their terms and all
reimbursement obligations of the Borrower set forth herein shall have been paid
in full.

                  9.10     Entire Agreement. This Agreement and the other
Financing Documents constitute the entire contract between the parties relative
to the subject matter hereof. Any previous agreement among the parties with
respect to the subject matter hereof is superseded by this Agreement and the
other Financing Documents. Nothing in this Agreement or in the other Financing
Documents, expressed or implied, is intended to confer upon any party other
than the parties hereto any rights, remedies, obligations or liabilities under
or by reason of this Agreement or the other Financing Documents.

                  9.11     Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall be
lodged with the Borrower and the Agent.

                  9.12     Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.

                  9.13     Nature of Duties.

                  (a)      None of the Agent, the Fronting Bank or the Lenders
shall be responsible: (i) for the form, validity, accuracy, genuineness, or
legal effect of any document submitted by any party to the Fronting Bank in
connection with the application for and issuance of or payment under any Letter
of Credit, even if it should in fact prove to be in any or all respects
invalid, inaccurate, fraudulent, or forged; (ii) for the validity of any
instrument transferring or assigning or purporting to transfer or assign

                                     -44-



any Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (iii) for errors, omissions, interruptions, or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex, or otherwise,
whether or not they be in cipher; and (iv) for any consequences arising from
causes beyond the control of the Agent, the Fronting Bank or the Lenders,
including, without limitation, any acts by Governmental Authorities; provided
that, the Borrower shall have a claim against the Fronting Bank and the Fronting
Bank shall be liable to the Borrower, to the extent, but only to the extent, of
any direct, as opposed to consequential, damages suffered by the Borrower which
were caused by (A) the Agent's, the Fronting Bank's or any Lender's willful
misconduct or gross negligence in determining whether documents presented under
any Letter of Credit complied with the terms thereof or (B) the Fronting Bank's
willful failure or gross negligence to pay under any Letter of Credit after the
presentation to it by the beneficiary thereof of a demand and certificate
strictly complying with the terms and conditions of such Letter of Credit.

                  (b)      The Borrower assumes all risks associated with the
acceptance by the Fronting Bank of any proper draw certificate received by
telecommunication, it being agreed that the use of telecommunication devices is
for the benefit of the Borrower and that the Fronting Bank and Lenders assume
no liabilities or risks with respect to the receipt of any proper draw
certificate by telecommunication device.

                  9.14     Fronting Bank Cooperation. The Fronting Bank agrees
to cooperate with the Borrower in connection with the sale and remarketing of
Bonds by providing the Borrower with (a) current disclosure regarding the
Fronting Bank for inclusion in any Official Statement, (b) customary closing
certificates and (c) customary legal opinions.


                                     * * *


                                     -45-



         IN WITNESS WHEREOF, the parties below have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.


                                    DELTA AIR LINES, INC.


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:



                  [Signature Page to Reimbursement Agreement]





                                    COMMERZBANK AG, New York Branch,
                                    in its capacity as the Agent, the Arranger
                                    and the Fronting Bank


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                  [Signature Page to Reimbursement Agreement]





                                    "Lenders"


Commitment

$35,000,000                         COMMERZBANK AG, New York Branch


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    Commerzbank AG, New York Branch
                                    2 World Financial Center
                                    New York, New York 10281-1050
                                    Attn.: Joachim Pausch


                  [Signature Page to Reimbursement Agreement]



Commitment

$27,000,000                         BANCA NAZIONALE DEL LAVORO S.p.A.,
                                    New York Branch


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    25 West 51st Street
                                    New York, NY  10019
                                    Attn: Giulio Giovine


                  [Signature Page to Reimbursement Agreement]



Commitment

$27,000,000                         BAYERISCHE LANDESBANK GIROZENTRALE,
                                    Cayman Island Branch


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    560 Lexington Avenue
                                    New York, NY  10022
                                    Attn: James Fox


                  [Signature Page to Reimbursement Agreement]



Commitment

$27,000,000                         CITIBANK, N.A.


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    Credit Contact: Kirk P. Lakeman
                                    400 Perimeter Center Terrace
                                    Suite 600
                                    Atlanta, GA  30346


                  [Signature Page to Reimbursement Agreement]



Commitment

$27,000,000                         CREDIT INDUSTRIEL ET COMMERCIAL


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    520 Madison Avenue
                                    New York, NY  10022
                                    Attn: Eric Longuet


                  [Signature Page to Reimbursement Agreement]



Commitment

$27,000,000                         THE DAI-ICHI KANGYO BANK, LTD.


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    One World Trade Center
                                    Suite 4911
                                    New York, NY  10048
                                    Attn: Robert Gallagher, Jr.


                  [Signature Page to Reimbursement Agreement]



Commitment

$27,000,000                         THE INDUSTRIAL BANK OF JAPAN, LIMITED


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    191 Peachtree Street, N.E.
                                    Suite 3825
                                    Atlanta, GA  30303
                                    Attn: James Masters


                  [Signature Page to Reimbursement Agreement]



Commitment

$27,000,000                         SUNTRUST BANK


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    303 Peachtree Street
                                    3rd Floor
                                    Atlanta, GA 30308
                                    Attn: Debbie Armstrong


                  [Signature Page to Reimbursement Agreement]



Commitment

$27,000,000                         THE SANWA BANK, LIMITED


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    Park Avenue Plaza
                                    55 East 52nd Street
                                    New York, NY  10055
                                    Attn: Michael Lawrence


                  [Signature Page to Reimbursement Agreement]



Commitment

$27,000,000                         WACHOVIA BANK, N.A.


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    191 Peachtree Street, N.E.
                                    29th Floor
                                    Mailcode: GA-3940
                                    Atlanta, GA  30303
                                    Attn: Tom Gleason


                  [Signature Page to Reimbursement Agreement]



Commitment

$27,000,000                         WESTDEUTSCHE LANDESBANK GIROZENTRALE,
                                    New York Branch


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    1211 Avenue of the Americas
                                    New York, NY  10036
                                    Attn: Walter T. Duffy III


                  [Signature Page to Reimbursement Agreement]



Commitment

$19,000,000                         BAYERISCHE HYPO- UND VEREINSBANK AG,
                                    New York Branch


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    150 East 42nd Street
                                    New York, NY  10017
                                    Attn: Marianne Weinzinger


                  [Signature Page to Reimbursement Agreement]



Commitment

$19,000,000                         DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG,
                                    Cayman Islands Branch


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    One Peachtree Ctr.
                                    303 Peachtree Street N.E.
                                    Suite 2900
                                    Atlanta, GA  30308
                                    Attn: John Somers


                  [Signature Page to Reimbursement Agreement]



Commitment

$19,000,000                         NATEXIS BANQUE


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    45 rue Saint Dominique
                                    75700 Paris, 07 SP France
                                    Attn: Michel Heraud


                  [Signature Page to Reimbursement Agreement]



Commitment

$19,000,000                         NORDDEUTSCHE LANDESBANK GIROZENTRALE,
                                    New York Branch and/or Cayman Islands
                                    Branch


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    1114 Avenue of the Americas
                                    37th Floor
                                    New York, NY 10036
                                    Attn: Stephanie Finnen


                  [Signature Page to Reimbursement Agreement]



Commitment

$19,000,000                         THE SAKURA BANK, LIMITED


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    101 Park Avenue
                                    17th Floor
                                    New York, NY 10178
                                    Attn: Yoshikazu Nagura


                  [Signature Page to Reimbursement Agreement]



Commitment

$15,000,000                         LANDESBANK SCHLESWIG-HOLSTEIN GIROZENTRALE


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    Address for Notice

                                    Martensdamm 6
                                    Kiel, Germany 24103
                                    Attn: Constanze Lorsch


                  [Signature Page to Reimbursement Agreement]

                                                                      EXHIBIT A


                           FORM OF NOTICE OF ISSUANCE


No. __________(1)                                        Dated ___________ (2)


COMMERZBANK AG, NEW YORK BRANCH as the Agent and the Fronting Bank
         under the Reimbursement Agreement (as amended, modified or
         supplemented from time to time, the "Reimbursement
         Agreement"), dated as of May 1, 2000 among Delta Air Lines,
         Inc. Commerzbank AG, New York Branch as the Fronting Bank,
         Agent and Arranger and the Lenders from time to time party
         thereto

2 World Financial Center
New York, New York  10281-1050
Attention:  Joachim Pausch
Telephone No.:  (212) 266-7255
Facsimile No.:  (212) 266-7427


Dear Sirs:

                  We hereby give you notice pursuant to Section 3.02 of the
Reimbursement Agreement, that the undersigned requests that the Fronting Bank,
issue a Letter of Credit for the account of the undersigned on ___________ (3)
(the "Date of Issuance") in the aggregate stated amount of ___________ (4). This
notice may only be revoked by the undersigned in the event the Bonds to be
secured by the Letter of Credit described herein are not issued on the Date of
Issuance.


- ---------
(1)      Notice of Issuance Request Number.

(2)      Date of Notice of Issuance Request.

(3)      Date of Issuance which shall be a Business Day not less than five (5)
         Business Days following the Agent's receipt of such Notice of
         Issuance, provided that such time period shall not commence until the
         Agent and its counsel are satisfied with the wording of the Letter of
         Credit and the Bond Documents for the Bonds that are to be secured by
         such Letter of Credit, and, provided further that the Notice of
         Issuance in connection with the issuance of the first three Letters of
         Credit issued under the Reimbursement Agreement shall be delivered at
         any time on or prior to the Effective Date.

(4)      The Stated Amount of Letter of Credit.




                                                                      Exhibit A
                                                                         Page 2


                  For purposes of this Notice of Issuance, unless otherwise
defined herein, all capitalized terms used herein which are defined in the
Reimbursement Agreement shall have the respective meaning provided therein.

                  The beneficiary of the requested Letter of Credit will
be _________ (5), and such Letter of Credit will be in support of __________ (6)
and will have a stated expiration date of _____________ (7).

                  The Letter of Credit is in substantially the form attached as
Exhibit C to the Reimbursement Agreement and should be delivered __________ (8).

                  The undersigned hereby certifies that the following
statements are true on the date hereof:

                  (a)      The Borrower's representations and warranties
         contained in Sections 4.01, 4.02, 4.03, 4.05, 4.06, 4.09(a), 4.09(c),
         4.10, 4.12 and 4.13 of the Reimbursement Agreement are true and
         correct in all material respects, before and after giving effect to
         the issuance of the Letter of Credit requested hereby, as though made
         on and as of such date, except to the extent such representations and
         warranties relate to an earlier date in which case such
         representations and warranties shall be true and correct in all
         material respects as of such earlier date;

                  (b)      No event has occurred and is continuing, or will
         result from the issuance of the Letter of Credit requested hereby,
         which constitutes or, after giving effect to such issuance of the
         Letter of Credit, would constitute a Default or an Event of Default;
         and

                  (c)      After giving effect to the issuance of the Letter of
         Credit requested hereby, the aggregate principal amount of the Stated
         Amounts of all issued and outstanding Letters of Credit shall not
         exceed $415,000,000.


- ---------
(5)      Insert name and address of beneficiary.

(6)      Insert description of Bonds being secured.

(7)      Insert last date upon which drafts may be presented which shall be a
         Business Day not later than the third anniversary of the Date of
         Issuance.

(8)      Insert delivery instructions.



                                                                      Exhibit A
                                                                         Page 3


                                    Very truly yours,

                                    DELTA AIR LINES, INC.


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:





                                                                      EXHIBIT B


                       FORM OF ASSIGNMENT AND ACCEPTANCE


                                                          __________, 200__ (1)


                  Reference is made to the Reimbursement Agreement, dated as of
May 1, 2000 (the "Agreement"), by and among Delta Air Lines, Inc. (the
"Borrower"), Commerzbank AG, New York Branch, as Agent, Fronting Bank and
Arranger and certain other Lenders named therein. Unless otherwise defined
herein, capitalized terms used herein shall have the meanings given thereto in
the Agreement.

                  ________________________ (2) (the "Assignor") and
______________________ (3) (the "Assignee") hereby agree as follows:

                  1.       The Assignor hereby sells and assigns, without
recourse, to the Assignee, and the Assignee hereby purchases as of the
Effective Date set forth below, a ___% interest in and to all the Assignor's
participation interests in and to all of the outstanding Fronting Bank
Interests and unpaid commitment fees and letter of credit commissions due under
section 2.04(a) and 2.04(b) of the Agreement to the Assignor [, and the
Assignor's Commitment under the Agreement] (4).

                  2.       The Assignor represents and warrants to the Assignee
that (a) it is the legal and beneficial owner of the interests being assigned
hereby free and clear of any adverse claim, and (b) it is not in default under
any of its obligations set forth in the Agreement. The Assignor does not
represent or warrant and assumes no responsibility (x) with respect to any
statements, warranties or representations made in or in connection with the
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Agreement, any Financing Document, any Bond
Document or any other instrument or document furnished thereunder or pursuant
thereto; and (y) with respect to the financial position of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Agreement, any Financing Document, any Bond Document or any other instrument or
document furnished thereunder or pursuant thereto.

                  3.       The Assignee (a) represents and warrants to the
Assignor that it is legally authorized to enter into this Assignment and
Acceptance; (b) confirms that it has received a copy of the Agreement, together
with copies of the most recent financial statements delivered


- ---------
(1)      Insert date on which this Assignment and Acceptance is executed and
         delivered

(2)      Insert legal name of Assignor.

(3)      Insert legal name of financial institution to which the Assignor is
         assigning its Fronting Bank Interests.

(4)      Insert if the Assignor is a Lender.



                                                                      Exhibit B
                                                                         Page 2


pursuant to Section 5 of the Agreement and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into this Assignment and Acceptance; (c) will independently and without
reliance upon the Agent, the Fronting Bank or such assigning Lender, as the
case may be, or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Agreement; (d) appoints and
authorizes the Agent and the Fronting Bank to take such action as agent on its
behalf and to exercise such powers under the Agreement as are delegated to the
Agent and the Fronting Bank by the terms thereof, together with such powers as
are reasonably incidental thereto; and (e) agrees that it will perform in
accordance with their terms all the obligations which by the terms of the
Agreement are required to be performed by it as a Lender.

                  4.       From and after the Effective Date (a) the Assignee
shall be party to and be bound by the provisions of the Agreement and, to the
extent of the interests assigned by this Assignment and Acceptance, have the
rights and obligations of a Lender thereunder as well as the rights in the
interests and commitment fees so assigned and (b) the Assignor shall, to the
extent of the interests assigned by this Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Agreement.

                  5.       This Assignment and Acceptance will be delivered to
the Agent together with a process and recordation fee of $3,500.00 from the
Assignor.

                  6.       This Assignment and Acceptance shall be governed by
and construed in accordance with the laws of the State of New York.

                  7.       The effective date of this Assignment and Acceptance
shall be __________________ (5) (the "Effective Date").


- ---------
(5)      Insert a date at least five Business Days after the date on which this
         Assignment and Acceptance is executed.



                                                                      Exhibit B
                                                                         Page 3


             IN WITNESS WHEREOF, the parties hereto have caused this Assignment
and Acceptance to be executed and delivered by their respective duly authorized
officers as of the date first written above.


                                    [NAME OF ASSIGNOR]


                                    By:
                                       ----------------------------------------
                                       Name:
                                       Title:


                                    [NAME OF ASSIGNEE]


                                    By:
                                       ----------------------------------------
                                       Name:
                                       Title:



                                                                      Exhibit B
                                                                         Page 4


Agreed to and Accepted: (6)


DELTA AIR LINES, INC.


By:
   ----------------------------------
Name:
Title:


Agreed to and Accepted:


COMMERZBANK AG, New York Branch,
in its capacity as Agent


By:
   ----------------------------------
   Name:
   Title:


- ---------
(6)      Insert if the Borrower or the Agent have the right to consent.





                                                                      EXHIBIT C


                            FORM OF LETTER OF CREDIT


                               [_______], 200[_]

                           Letter of Credit No.______


[Applicable Bond Trustee]

- ------------------------------

- ------------------------------
Attention:
Telephone:
Facsimile:

Ladies and Gentlemen:

                  At the request and on the instructions of Delta Air Lines,
Inc., a Delaware corporation (the "Company"), we hereby establish in your
favor, as trustee under the Trust Indenture, dated as of [________] (the
"Indenture"), between [___________________](the "Issuer") and you, pursuant to
which $[__________] in aggregate principal amount of the Issuer's
[_____________________](the "Bonds") have been issued, this Irrevocable
Direct-Pay Letter of Credit No. [___________] in the amount of $[___________]
(hereinafter, as reduced and reinstated from time to time in accordance with
the provisions hereof, the "Stated Amount"), of which (a) an amount not
exceeding $[___________] (as reduced and reinstated from time to time in
accordance with the terms hereof, the "Principal Component") may be drawn upon
with respect to payment of the unpaid principal amount of Bonds at maturity,
upon acceleration or upon redemption or the portion of the purchase price
corresponding to principal of Bonds delivered for purchase under the Indenture
and either not remarketed or for which no remarketing proceeds have been
received prior to such drawing and (b) an amount not exceeding $[_________] (as
reduced and reinstated from time to time in accordance with the terms hereof,
the "Interest Component") may be drawn upon with respect to payment of accrued
interest on the Bonds or the portion of the purchase price of Bonds so
delivered for purchase corresponding to interest accrued on the Bonds on or
prior to the stated maturity thereof, effective immediately and expiring at the
close of business on [___________] unless terminated earlier in accordance with
the provisions hereof.

                  Funds under this Letter of Credit will be made available to
you, to your account with us or to your designee (named in a written demand as
specified below) against receipt by us of one or more written demands for
payment, each in the form of the certificate attached as Exhibit A hereto, and
specifying the type of Drawing or Drawings being made as follows:

                  (A)      a drawing with respect to payment of the portion of
the purchase price corresponding to principal of Bonds to be purchased from the
holder thereof pursuant to



                                                                      Exhibit C
                                                                         Page 2


Sections [___] and [___] of the Indenture which Bonds have either not been
remarketed or for which no remarketing proceeds have been received prior to
such drawing (an ""A" Drawing");

                  (B)      a drawing with respect to the payment of principal
of the Bonds, whether at maturity or upon acceleration or redemption pursuant
to Sections [___] and [___] of the Indenture (a ""B" Drawing");

                  (C)      a drawing with respect to the payment of the portion
of the purchase price of Bonds to be purchased from the holder thereof pursuant
to Sections [___] and [___] of the Indenture corresponding to accrued interest
(a ""C" Drawing"); and

                  (D)      a drawing with respect to the payment of accrued
interest or with respect to the payment of interest in accordance with Section
[___] of the Indenture (a ""D" Drawing").

                  An "A" Drawing and a "C" Drawing made to purchase Bonds
tendered at the request of the holders thereof pursuant to Section [___] of the
Indenture is hereinafter collectively referred to as a "Liquidity Drawing."

                  Such certificate or certificates shall be appropriately
completed and executed by a purported Authorized Officer (as hereinafter
defined) and shall be presented only on a Business Day (as hereinafter defined)
to us by facsimile (to facsimile number (212) 266-7427 or such other facsimile
number as may be designated by us in writing to you from time to time). Prior
to, or contemporaneously with, the presentation of a certificate or
certificates hereunder, you shall use best efforts to give telephonic notice
(by call to telephone number (212) 266-7255 or such other number designated by
us in writing to you from time to time) of your intention to present such
certificate or certificates and stating the amount or amounts to be demanded;
provided, however, that such telephonic notice and subsequent overnight
delivery shall not be conditions precedent to our obligation to honor a drawing
otherwise made in compliance with the terms hereof.

                  Demands for payment may be made by you under this Letter of
Credit at any time during our business hours at our aforesaid address on a
Business Day (as hereinafter defined). If demand for payment (other than a
Liquidity Drawing) is made by you hereunder at or prior to 10:00 a.m. on a
Business Day and such demand for payment and the documents presented in
connection therewith conform to the terms and conditions hereof, payment shall
be made to you or to your designee by wire transfer of the amount demanded, in
same day funds, not later than 2:00 p.m. on the same Business Day or such later
Business Day as you may specify in your demand. If demand for payment (other
than a Liquidity Drawing) is made by you hereunder after 10:00 a.m. on a
Business Day and such demand for payment and the documents presented in
connection therewith conform to the terms and conditions hereof, payment shall
be made to you or to your designee by wire transfer of the amount demanded, in
same day funds, not later than 2:00 p.m. on the next succeeding Business Day or
such later Business Day as you may specify in your demand. If demand for
payment pursuant to a Liquidity Drawing is made by you hereunder at or prior to
1:00 p.m. on a Business Day and such demand for payment and the documents
presented in connection therewith conform to the terms and conditions hereof,
payment shall be made to you or to your designee by wire transfer of the amount
demanded, in



                                                                      Exhibit C
                                                                         Page 3


same day funds, not later than 3:00 p.m. on the same Business Day or such later
Business Day as you may specify in your demand. If demand for payment pursuant
to a Liquidity Drawing is made by you hereunder after 1:00 p.m. on a Business
Day and such demand for payment and the documents presented in connection
therewith conform to the terms and conditions hereof, payment shall be made to
you or to your designee by wire transfer of the amount demanded, in same day
funds, not later than 3:00 p.m. on the next succeeding Business Day or such
later Business Day as you may specify in your demand.

                  If requested by you, payment under this Letter of Credit will
be made by deposit of same day funds into a designated account that you
maintain with us. All payments hereunder will be made with our own funds.

                  Demands for payment hereunder honored by us shall not, in the
aggregate, exceed the Stated Amount, as the Stated Amount may have been
reinstated by us as provided in the second succeeding paragraph. Subject to the
preceding sentence, each "A" Drawing and each "B" Drawing honored hereunder
shall pro tanto reduce the Principal Component, and each "C" Drawing and "D"
Drawing honored hereunder shall pro tanto reduce the Interest Component. Any
such reduction in accordance with the preceding sentence shall result in a
corresponding reduction in the Stated Amount, it being understood that after
the effectiveness of any such reduction you shall no longer have any right to
make a drawing hereunder in respect of the amount of such principal of and/or
interest on the Bonds or the payment of the purchase price corresponding
thereto.

                  Upon receipt by us of a Notice of Reduction or Termination in
the form attached hereto as Exhibit B signed on your behalf by a purported
Authorized Officer (as hereinafter defined) and appropriately completed, this
Letter of Credit shall be terminated, or the Stated Amount, the Principal
Component and/or the Interest Component, as the case may be, shall thereupon be
reduced by the amount specified therein.

                  Following any "A" Drawing, and for the corresponding "C"
Drawing, if any, immediately upon our being fully reimbursed therefor the
Stated Amount and the Principal Component shall be reinstated (effective on
such reimbursement) by the amount of such "A" Drawing and, if applicable, the
Stated Amount and the Interest Component shall be reinstated (effective on such
reimbursement) by the amount of such "C" Drawing; provided, however, the Stated
Amount, the Principal Component and the Interest Component shall be permanently
reduced to zero and shall not be reinstated once the Bank has honored an "A"
Drawing and/or a "C" Drawing made to purchase Bonds at our direction following
a Change in Control or an Event of Default under, and as defined in, the
Reimbursement Agreement, dated as of May 1, 2000, among the Company, the
financial institutions described as Lenders therein, the Agent for the Lenders
and us (the "Reimbursement Agreement"). In addition, if you shall not have
received, within seven calendar days after any payment in respect of a "D"
Drawing, written notice from us to the effect that an Event of Default under
the Reimbursement Agreement has occurred and is continuing and that we are not
reinstating the Interest Component, the Stated Amount and the Interest
Component will automatically be reinstated, as of the close of business



                                                                      Exhibit C
                                                                         Page 4


on the seventh calendar day following such "D" Drawing, by an amount equal to
the amount thereof.

                  Only you or your successor as trustee under the Indenture may
make a drawing under this Letter of Credit. Upon payment to you, to your
designee or to your account of the amount demanded hereunder, we shall be fully
discharged of our obligation under this Letter of Credit with respect to such
demand for payment and we shall not thereafter be obligated to make any further
payments under this Letter of Credit in respect of such demand for payment to
you or any other person who may have made to you or makes a demand for payment
of principal of, purchase price of, or interest on, any Bond. By paying to you,
to your designee or to your account an amount demanded in accordance herewith,
we make no representation as to the correctness of the amount demanded.

                  This Letter of Credit applies only to the payment of
principal or the portion of the purchase price of Bonds corresponding to
principal and the payment of up to 45 days' interest or the portion of the
purchase price corresponding to up to 45 days' interest (computed at an assumed
rate of 12% per annum calculated on the basis of a 365 day year) accruing on
the Bonds on or prior to the expiration of this Letter of Credit and does not
apply to any interest that may accrue thereon or any principal which may be
payable with respect thereto after such date.

                  Upon the earliest of (i) the making by you of the final
drawing available to be made hereunder and payment thereof, (ii) the expiration
date stated above, or (iii) the surrender by you to us of this Letter of Credit
in connection with delivery of a certificate in the form of Exhibit B attached
hereto stating that this Letter of Credit is terminated, this Letter of Credit
shall automatically terminate and be delivered to us for cancellation.

                  Communications with respect to this Letter of Credit shall be
in writing and shall be addressed to us at the address specified above and
shall specifically refer to this Letter of Credit by number. All times of day
referred to in this Letter of Credit refer to prevailing Eastern Time in New
York.

                  This Letter of Credit may be transferred in its entirety (but
not in part) to a successor trustee properly appointed and qualified pursuant
to Section [___] of the Indenture (a "Transferee"), and such transferred Letter
of Credit may be successively transferred. If this Letter of Credit is
transferred to a Transferee, all references to the Trustee in this Letter of
Credit and the certificates attached hereto shall be deemed references to such
Transferee. Transfer of the balance available to be drawn under this Letter of
Credit to a Transferee shall be effected by a request which shall (i) be in the
form of Exhibit C attached hereto appropriately completed, (ii) be signed by a
purported Authorized Officer, (iii) state the name and address of the
Transferee and (iv) be accompanied by the payment of the transfer fee of
$1,000.00 from the Company. Upon such presentation and receipt, we shall
forthwith effect a transfer of this Letter of Credit to the designated
Transferee.

                  As used herein (a) "Authorized Officer" shall mean any of
your Vice Presidents, Assistant Vice Presidents, Trust Officers or Assistant
Trust Officers or any equivalent officer of a successor beneficiary hereof; and
(b) "Business Day" means a day on which banks located in



                                                                      Exhibit C
                                                                         Page 5


New York, banks located in the city in which the Principal Office of the
Trustee (as defined in the Indenture) is located and banks located in the city
in which the Principal Office of the Paying Agent (as defined in the Indenture)
is located are not required or authorized to remain closed and on which the New
York Stock Exchange is not closed.

                  This Letter of Credit sets forth in full our undertaking, and
such undertaking shall not in any way be modified, amended, amplified or
limited by reference to any document, instrument or agreement referred to
herein (including, without limitation, the Bonds), except only the certificates
referred to herein, which form an integral part hereof; and any such reference
shall not be deemed to incorporate herein by reference any document, instrument
or agreement except for such certificates.

                  This Letter of Credit is subject to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 (the "Uniform Customs"). This Letter of Credit
shall be deemed to be a contract made under the laws of the State of New York
and shall, as to matters not governed by the Uniform Customs, be governed by
and construed in accordance with the laws of said State.


                                    Very truly yours,


                                    COMMERZBANK AKTIENGESELLSCHAFT,
                                      NEW YORK BRANCH


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:



                                          Exhibit A To Letter of Credit No.____


                            CERTIFICATE FOR DRAWING

                                     [Date]

Commerzbank AG, New York Branch
Two World Financial Center
New York, New York 10281
Attention:  Letter of Credit Department

                  Re:      Irrevocable Direct-Pay Letter of Credit No. ____
                           (the "Letter of Credit")

Ladies and Gentlemen:

                  [Insert name of current Trustee], as Trustee (the "Trustee"),
through its undersigned duly authorized officer, hereby certifies to
Commerzbank AG, New York Branch (the "Fronting Bank"), that:

                  (1)      The Trustee is the Trustee under the Indenture,
dated as of [_____________] (as amended or supplemented), for the holders of
the Bonds.

                  (2)      The Trustee is making drawings under the
above-referenced Letter of Credit in the aggregate amount of $____________
consisting of the sums set forth below:

         "A" Drawing

                  The portion of the purchase price corresponding to principal
         of Bonds to be purchased from the holder thereof pursuant to the
         following Sections of the Indenture:

                  [   ]    $
                   ---

                  [   ]    $
                   ---

                  [   ]    $
                   ---

                  [   ]    $
                   ---

                  [   ]    $
                   ---

      "B" Drawing

                  The principal amount of Bonds maturing on __________________:

                  $
                   -------------



                                          Exhibit A To Letter of Credit No.____


                  The principal amount of Bonds accelerated pursuant to Section
[___] of the Indenture:

                  $
                   -------------

                  The principal amount of Bonds redeemed pursuant to Section
[___] of the Indenture:

                  $
                   -------------

      "C" Drawing

                  The portion of the purchase price of Bonds corresponding to
accrued interest thereon, which Bonds are to be purchased from the holders
thereof pursuant to following Sections of the Indenture:

                  [   ]    $
                   ---

                  [   ]    $
                   ---

                  [   ]    $
                   ---

                  [   ]    $
                   ---

                  [   ]    $
                   ---

      "D" Drawing

                  Accrued interest on the Bonds:

                  $
                   -------------

                  (3)      With respect to the foregoing amounts, moneys are
not otherwise available pursuant to the Indenture.

                  (4)      Payment of such amount is demanded on
[_____________________], the date on which such amount is due and payable under
the Indenture, to [___________________] [insert account or designee].

                  (5)      The amount demanded hereunder does not include any
amount in respect of any Bonds (a) registered in the name of the Company or any
affiliate or subsidiary thereof as to which the Trustee has received written
notice of such ownership from the Company or (b) registered in the name of the
Issuer.

                  (6)      The amount demanded hereby does not exceed the
amount available on the date hereof to be drawn under the Letter of Credit in
respect of the Principal


                                      -2-

                                          Exhibit A To Letter of Credit No.____


Component or the Interest Component, as the case may be, or the amount which
the Trustee is required to draw on the date hereof under the Indenture.

                  (7)      Upon receipt by the undersigned of the amount
demanded hereby, (a) the undersigned will apply the same, or cause the same to
be applied, directly to the payments, when due, in accordance with the
Indenture, (b) no portion of said amount shall be applied by the undersigned
for any other purpose and (c) no portion of said amount shall be commingled
with other funds held by the undersigned.

                  Capitalized terms used herein and not otherwise defined
herein but defined in the Letter of Credit shall have the same meanings herein
as in the Letter of Credit.


                                     * * *


                                      -3-

                                          Exhibit A To Letter of Credit No.____


                  IN WITNESS WHEREOF, the Trustee has executed and delivered
this certificate as of the ______ day of _____________ 200__.


                                    [INSERT NAME OF CURRENT TRUSTEE], as
                                    Trustee

                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                      -4-



                                        Exhibit B To Letter Of Credit No. _____


                       NOTICE OF REDUCTION OR TERMINATION


                                     [Date]

Commerzbank AG, New York Branch
Two World Financial Center
New York, New York 10281
Attention:  Letter of Credit Department

                  Re:      Irrevocable Direct-Pay Letter of Credit No. ____
                           (the "Letter of Credit")

Ladies and Gentlemen:

                  [Insert name of current Trustee], as Trustee (the "Trustee"),
through its undersigned duly authorized officer, hereby certifies to
Commerzbank AG, New York Branch (the "Fronting Bank"), with reference to
Irrevocable Letter of Credit No. __________ (the "Letter of Credit") (the terms
defined therein and not otherwise defined herein being used herein as therein
defined) issued by the Fronting Bank in favor of the Trustee, that:

                  (1)      The Trustee is the Trustee under the Indenture for
the holders of the Bonds.

                  (2)      The Trustee hereby informs you that (check one box):

                  [__]     (A)      the Letter of Credit is terminated.

                  [__]     (B)      the conditions precedent to the delivery of
                           a substitute letter of credit as provided in the
                           Indenture have been satisfied and the Trustee has
                           accepted delivery of such substitute letter of
                           credit.

                  [__]     (C)      no Bonds remain Outstanding.

                  [__]     (D)      (i)      The Stated Amount has been
                           reduced from $______ to $_______ such reduction to be
                           effective on ________________ (the "Effective Date");

                                    (ii)     The Principal Component has been
                           reduced from $_______ to $________, such reduction to
                           be effective on the Effective Date;

                                    (iii)    The Interest Component has been
                           reduced from $_________ to $_______ such reduction to
                           be effective on the Effective Date.

                  (3)      We submit hereby [for cancellation] [for
replacement] the original of the Letter of Credit.


                                      -1-

                                        Exhibit B To Letter Of Credit No. _____


         IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _______ day of ___________200___.


                                    [INSERT NAME OF CURRENT TRUSTEE],
                                      as Trustee


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                      -2-



                                        Exhibit C To Letter Of Credit No. _____


                      DEMAND TO TRANSFER LETTER OF CREDIT

                                     [Date]

Commerzbank AG, New York Branch
Two World Financial Center
New York, New York 10281
Attention:  Letter of Credit Department

                  Re:      Irrevocable Direct-Pay Letter of Credit No. ____
                           (the "Letter of Credit")

Ladies and Gentlemen:

                  The undersigned [insert name of current Trustee]
("Transferor"), through its duly authorized officer, certifies that immediately
prior to the transfer contemplated hereby, Transferor was the Trustee under the
Indenture for the holders of the Bonds.

                  For value received, Transferor hereby irrevocably transfers
to:

                  [Name of new Trustee] ("Transferee")
                  [Address]
                  [Telephone/Facsimile]
                  [Attention]

all rights of Transferor to draw under the Letter of Credit in its entirety.
Transferee has succeeded Transferor as Trustee under the Indenture described in
the above referenced Letter of Credit.

                  By this transfer, all rights of Transferor in the Letter of
Credit are transferred to Transferee and Transferee shall have sole rights as
beneficiary thereof. All amendments are to be advised direct to Transferee
without any necessity of consent or notice from Transferor.

                  By their signatures below, Transferor and Transferee
acknowledge that Transferee has duly succeeded Transferor as Trustee under the
Indenture, and that Transferee has agreed to be bound by the terms of the
Indenture as if it were originally named "Trustee" therein.

                  Terms used but not defined herein have the meanings assigned
to them in the Letter of Credit.

                  The Letter of Credit is returned herewith, and we ask you to
endorse and transfer the Letter of Credit, and forward the Letter of Credit to
Transferee.


                                     * * *

                                        Exhibit C To Letter Of Credit No. _____


         IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Certificate as of the _______ day of ___________ 200___.


                                    [INSERT NAME OF CURRENT TRUSTEE], as
                                    Trustee


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:


                                    SIGNATURE AUTHENTICATED


                                    By
                                      -----------------------------------------
                                      Name:
                                      Title:




Acknowledged and Agreed by:

[INSERT NAME OF NEW TRUSTEE]


By:
   -----------------------------
   Name:
   Title:


                                      -2-

                                                                  SCHEDULE 4.07


                      FUNDED DEBT; SECURED OBLIGATIONS (1)


1.       6.65-9.15% Notes with maturities ranging from 1999 to 2004

2.       8.50% Notes due March 15, 2002

3.       8.125% Notes due July 1, 2039

4.       7.7% Notes due December 15, 2005

5.       7.9% Notes due December 15, 2009

6.       8.3% Notes due December 15, 2029

7.       8.10% Guaranteed Serial ESOP Notes, payable in installments between
         2002 and 2009

8.       10.125% Debentures due May 15, 2010

9.       10.375% Debentures due February 1, 2011

10.      9.00% Debentures due May 15, 2016

11.      9.75% Debentures due May 15, 2021

12.      9.25% Debentures due March 15, 2022

13.      10.375% Debentures due December 15, 2022

14.      Development Authority of Fulton County Loan Agreement dated May 1,
         1998

15.      Development Authority of Fulton County Loan Agreement dated September
         1, 1992

16.      Development Authority of Clayton County Loan Agreement dated May 1,
         2000 (Series A, B and C)

17.      Capital Leases:

         (a)      Forty-One B737-200 Aircraft Leases

         (b)      nine Western Aircraft Leases (4 B737-200; 3 B737-300 and 2
                  B727-200)


- ---------
1        All of which is unsecured except Item 17(b).

                                                                  Schedule 4.07
                                                                         Page 2


18.      Credit Agreement, dated as of May 2, 1997, among the Borrower, the
         several financial institutions which are parties hereto and
         Nationsbank, N.A. (South), as Agent Bank.

19.      Credit Agreement, dated as of March 22, 1999, among the Borrower, the
         several financial institutions party thereto, The Chase Manhattan Bank
         and Citibank, N.A.

                              SECURED OBLIGATIONS

1.       $96,500,000 The Port Authority of New York and New Jersey Special
         Project Bonds, Series 1R, Delta Air Lines, Inc. Project

2.       Nine Western Air Lines Capital Leases (4 B737-200; 3 B737-300 and 2
         B727-200)

3.       SATO Guaranty (pledge of Borrower's government receivables to provide
         collateral for SATO credit agreement)

4.       $58,000,000 Various Credit Agreements by 27 EMB-120 Brasilias at
         Atlantic Southeast Airlines, Inc.

5.       $100,600,000 Various Credit Agreements by 10 CRJs and 8 Brasilias at
         Comair Airlines, Inc.

6.       JFK Financing*

7.       Boston Financing*


- ---------
         *        As of the Effective Date of this Agreement, the Borrower is
         considering various means for financing proposed airport facilities
         projects at Boston Logan International Airport (BOS) and John F.
         Kennedy International Airport (JFK). Since the Borrower has not yet
         determined the structure for such financings, the intent of these
         provisions is to include such financings in the lists set forth in
         these schedules once such financings occur, if ever, and to the extent
         applicable to the structures ultimately selected by the Borrower.



                                                                  SCHEDULE 4.11


                     SUBSIDIARIES OF DELTA AIR LINES, INC.


Aero Assurance Ltd.

ASA Holdings, Inc. (wholly-owned subsidiary of Delta Air Lines Holdings, Inc.)

ASA Investments, Inc. (wholly-owned subsidiary of ASA Holdings, Inc.)

Atlantic Southeast Airlines, Inc. (wholly-owned subsidiary of ASA Holdings,
         Inc.)

CMD, Inc. (wholly-owned subsidiary of Comair Services, Inc.)

Comair Acquisition Co., Inc. (wholly-owned subsidiary of Comair Holdings, Inc.)

Comair Holdings, Inc. (wholly-owned subsidiary of Delta Air Lines Holdings,
         Inc.)

Comair, Inc. (wholly-owned subsidiary of Comair Holdings, Inc.)

Comair Investment Co., Inc. (wholly-owned subsidiary of Comair Holdings, Inc.)

Comair Services, Inc. (wholly-owned subsidiary of Comair Holdings, Inc.)

Comair Aviation Academy, Inc. (wholly-owned subsidiary of Comair Services,
         Inc.)

Crown Rooms, Inc.

Crown Rooms of Texas, Inc. (wholly-owned subsidiary of Crown Rooms, Inc.)

CVG Aviation, Inc. (wholly-owned subsidiary of Comair Services, Inc.)

DAL Aircraft Trading, Inc.

DAL Foreign Sales, Inc.

DAL Moscow, Inc. (wholly-owned subsidiary of Delta Air Lines Holdings, Inc.)

DAL Receivables, LLC

DASH Management, Inc.

Delta Air Lines Holdings, Inc.

Delta Air Lines, Inc. and Pan American World Airways, Inc. -
         Unterstutzungskasse GMBH

Delta Air Lines Global Services, Inc.

Delta Air Lines Receivables Corporation



                                                                  Schedule 4.11
                                                                         Page 2


Delta Benefits Management, Inc. (formerly known as Delta Air Lines Funding
         Corporation) (Class B Shares, representing 10% of the equity in DBMI,
         are owned by Aon Group, Inc.)

Delta Capital Markets, Inc.

Delta Connection, Inc.

Delta Loyalty Management Services, Inc. (formerly known as Delta Tel, Inc.)

Delta Technology, Inc.

Delta Ventures III, Inc. (wholly-owned subsidiary of Delta Air Lines Holdings,
         Inc.)

Epsilon Trading, Inc.

Guardant, Inc.

TransQuest Holding, Inc. (wholly-owned subsidiary of Delta Technology, Inc.)

TransQuest UK Ltd. (wholly-owned subsidiary of TransQuest Holding, Inc.)



                                                                  SCHEDULE 5.03


                              GUARANTY LIABILITIES


$88,000,000 Regional Airports Improvement Corporation 6.35% Facilities Sublease
Refunding Revenue Bonds, Issue of 1996, Delta Air Lines, Inc. (Los Angeles
International Airport)

SATO Guaranty (Borrower's allocable share of $25 million SATO revolving credit
facility, used by SATO to advance payments to participating airlines on
government receivables)

JFK Financing*

Boston Financing*


- ---------
*        As of the Effective Date of this Agreement, the Borrower is
considering various means for financing proposed airport facilities projects at
Boston Logan International Airport (BOS) and John F. Kennedy International
Airport (JFK). Since the Borrower has not yet determined the structure for such
financings, the intent of these provisions is to include such financings in the
lists set forth in these schedules once such financings occur, if ever, and to
the extent applicable to the structures ultimately selected by the Borrower.





                   FIRST AMENDMENT TO REIMBURSEMENT AGREEMENT

         THIS FIRST AMENDMENT TO REIMBURSEMENT AGREEMENT, dated as of November
9, 2001 (this "First Amendment"), is made by and among DELTA AIR LINES, INC., a
Delaware corporation (the "Borrower"), the financial institutions parties
hereto (the "Lenders") and COMMERZBANK AG, acting through its New York branch
("Commerzbank"), as letter of credit fronting bank (the "Fronting Bank") and
agent (the "Agent").

                                  WITNESSETH:

         WHEREAS, the Borrower, the Lenders and Commerzbank, as letter of
credit fronting bank, agent and arranger, are parties to that certain
Reimbursement Agreement dated as of May 1, 2000 (the "Reimbursement
Agreement"), pursuant to which the Fronting Bank and the Lenders made certain
financial accommodations available to the Borrower;

         WHEREAS, the Borrower has requested that the Fronting Bank, the Agent
and the Lenders amend the Reimbursement Agreement in certain respects; and

         WHEREAS, the Fronting Bank, the Agent and the Lenders are willing to
so amend the Reimbursement Agreement on the terms and conditions set forth
herein.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, the parties hereto
agree as follows:

         Section 1.        Definitions. Unless otherwise defined herein or the
context otherwise requires, terms used in this First Amendment have the
meanings provided in the Reimbursement Agreement.

         Section 2.        Amendments to Reimbursement Agreement. Effective on
(and subject to the occurrence of) the Effective Date, the Reimbursement
Agreement is hereby amended in accordance with this Section 2. Except as so
amended, the Reimbursement Agreement shall continue in full force and effect.

         (a)      Section 1.01 of the Reimbursement Agreement is amended by
inserting in the proper alphabetical order the following new defined terms:

                  "FIRST AMENDMENT" shall mean the First Amendment to
         Reimbursement Agreement dated as of November 9, 2001 among the
         Borrower, the Lenders party thereto, the Fronting Bank and the Agent.





                  "FIRST AMENDMENT EFFECTIVE DATE" shall mean the "Effective
         Date" of the First Amendment (as defined in the First Amendment).

         (b)      Section 5.03 of the Reimbursement Agreement is amended by:

                  (i)      inserting the following at the end of clause (a)
         thereof: ", provided that any calculation of "Current Debt" under this
         clause (a) shall not include up to $625,000,000 of secured debt
         obligations of the Borrower or any Subsidiary incurred and outstanding
         after the date hereof that would otherwise constitute "Current Debt"";
         and

                  (ii)     deleting "150%" in clause (c) thereof and
         substituting in lieu thereof "175%".

         (c)      Section 5.04 of the Reimbursement Agreement is amended by:

                  (i)      deleting "$3,000,000,000" in subclause (i)(a)
         thereof and substituting in lieu thereof "$5,350,000,000 plus the
         aggregate amount (not to exceed $150,000,000) of any Class D enhanced
         equipment trust certificates issued by the Borrower after the First
         Amendment Effective Date that are secured by only those aircraft that
         also secure other classes of enhanced equipment trust certificates";
         and

                  (ii)     inserting at the end of subclause (i)(b) thereof
         "and marked thereon with an asterisk".

         (d)      Section 5.10 of the Reimbursement Agreement is amended to
read in its entirety as follows:

                  Section 5.10. Security. In the event the Borrower secures by
         mortgage, pledge, encumbrance, lien or other charge (a) any debt other
         than as permitted by Section 5.04 hereof or (b) the debt under the
         Credit Agreement dated as of May 2, 1997, as heretofore amended (the
         "BANK OF AMERICA FACILITY"), among the Borrower, the financial
         institutions party thereto and Bank of America, N.A., as agent bank
         (or any syndicated revolving credit facility that replaces the Bank of
         America Facility), then the Borrower shall equally and ratably secure
         (together with any other indebtedness required to be so secured) the
         indebtedness incurred hereunder.

         Section 3.        Representations and Warranties. The Borrower hereby
represents and warrants that each of the representations and warranties of the
Borrower contained in the Reimbursement Agreement are true and accurate in all


                                       2



material respects as of the date hereof except for (i) any representations and
warranties that expressly relate solely to an earlier date, which
representations and warranties were true and accurate in all material respects
on and as of such earlier date, (ii) the representations and warranties
contained in Sections 4.07 of the Reimbursement Agreement, which
representations and warranties were true and accurate in all material respects
on and as of May 1, 2000, and (iii) (x) the changes in the business, financial
condition or results of operation of the Borrower and its Subsidiaries that
have resulted directly or indirectly from the terrorist attacks that occurred
on September 11, 2001 and related matters and (y) changes disclosed by the
Borrower in a report on Form 10-K, 10-Q or 8-K filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as
amended, prior to the date of this First Amendment, in each case insofar as
such changes affect the representation and warranty contained in the last
sentence of Section 4.04 of the Reimbursement Agreement. The Borrower further
represents and warrants to the Fronting Bank, the Agent and each of the Lenders
that (i) it has the requisite corporate power and authority to execute, deliver
and perform this First Amendment, (ii) this First Amendment constitutes a
legal, valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms and (iii) the execution, delivery and
performance by the Borrower of this First Amendment (A) have been duly
authorized by all necessary corporate action and do not require any consent or
approval, authorization, permit or license from any federal, state or other
regulatory authority which has not been obtained, or violate any law,
regulation, order, judgement, decree or determination having applicability to
the Borrower or its organizational documents, or result in a breach of, or
constitute a default under any existing indenture or credit agreement or any
other agreement or instrument to which the Borrower is a party or by which its
properties may be bound or affected, except where the failure to have such
consent or approval or such violation, breach of default could not reasonably
be expected to result in a material adverse effect on the business, financial
condition or results of operations of the Borrower and its Subsidiaries taken
as a whole, and (B) will not conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, the Certificate of
Incorporation or Bylaws of the Borrower or of any agreement or instrument to
which the Borrower is now a party, which breach would have a material adverse
effect on the business, financial condition or results of operations of the
Borrower and its Subsidiaries taken as a whole.

         Section 4.        Amendment of Schedule 4.07. Schedule 4.07 of the
Reimbursement Agreement, describing the "Funded Debt; Secured Obligations" of
the Borrower, is amended in its entirety to conform to Schedule 4.07 attached
to this First Amendment. The Borrower represents and warrants to the Fronting
Bank, the Agent and each of the Lenders that the Borrower does not have
outstanding any Funded Debt except as set forth on Schedule 4.07 to this First
Amendment, and there


                                       3



exists no default under the provisions of any instrument evidencing such
indebtedness or agreement relating thereto.

         Section 5.        Effective Date. This First Amendment shall be and
become effective on the date (the "Effective Date") on or prior to November 30,
2001 upon which (i) all of the conditions set forth in this Section 5 shall
have been satisfied and (ii) the Agent, the Fronting Bank, the Majority Lenders
and the Borrower shall have duly executed counterparts of this First Amendment
and provided original copies thereof to the Agent.

         (a)      Closing Certificate. The Agent shall have received an
Officer's Certificate, in form reasonably satisfactory to the Agent, certifying
that (i) before and after giving effect to this First Amendment, no Default or
Event of Default exists or will be in existence and (ii) the representations
and warranties of the Borrower contained in this First Amendment are true and
accurate in all material respects with the same effect as though such
representations and warranties had been made on and as of the Effective Date.

         (b)      Amendments to Other Facilities. (i) The Borrower shall have
entered into amendments effecting changes substantially similar to those
effected in Section 2 hereof with respect to the comparable provisions of (A)
the Credit Agreement dated as of May 2, 1997, as heretofore amended, among the
Borrower, the financial institutions party thereto and Bank of America, N.A.,
as agent bank (such amendment, the "BANK OF AMERICA AMENDMENT"), and (B) the
Credit Agreement dated as of May 19, 2000, as heretofore amended, among the
Borrower, the financial institutions parties thereto and Bayerische Hypo-und
Vereinsbank AG, New York Branch, as letter of credit bank and agent; (ii) the
Bank of America Amendment shall have become effective; and (iii) the Borrower
shall have terminated the commitments under (and repaid in full, together with
any accrued interest, all loans under) the Credit Agreement dated as of April
6, 2001 among the Borrower, the banks parties thereto and Citicorp North
America, Inc., as Administrative Agent.

         (c)      Legal Opinion. The Borrower shall have delivered to the Agent
a legal opinion of counsel to the Borrower, in form and content reasonably
satisfactory to the Agent, opining that this First Amendment has been duly
authorized, executed and delivered by the Borrower and is a valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms.

         (d)      Business Plan. The Borrower shall have provided to the
Fronting Bank, the Agent and the Lenders its updated business plan, including
pro forma financial statements and projections, for the fourth quarter of
fiscal year 2001 and fiscal year 2002, including without limitation projected
balance sheets, income statements and statements of cash flow for the fourth
quarter of fiscal year 2001 and fiscal year 2002


                                       4



on a quarterly basis, such materials being in substantially the same form and
content as the business plan and cash flow projections most recently presented
by the officers of the Borrower to the Board of Directors of the Borrower, or
any subcommittee thereof.

         (e)      Amendment Fee. The Agent shall have received from the
Borrower, for the account of each Lender (a "Consenting Lender") that has
evidenced its agreement hereto as provided in clause (ii) of Section 5 by 5:00
p.m. (Atlanta, Georgia time) on the later of (i) November 9, 2001 and (ii) the
date on which the Agent issues a notice to the Lenders stating that the
condition set forth in clause (ii) of Section 5 has been satisfied, an
amendment fee in the amount equal to 15 basis points (0.15%) on the aggregate
amount of such Consenting Lender's Commitment.

         (f)      Termination Date. Notwithstanding the terms of this Section
5, in the event that the Borrower shall fail to comply with each of the
conditions to effectiveness set forth in this Section 5 on or before November
30, 2001, this First Amendment shall not become effective and each of the
signatures submitted by the Agent, the Fronting Bank and the Majority Lenders
to the Agent shall be released.

         Section 6.        Miscellaneous.

         (a)      References to Reimbursement Agreement. Each reference to the
Reimbursement Agreement in the Reimbursement Agreement or any of the other
instruments, agreements, certificates or other documents executed in connection
therewith, shall be deemed to be a reference to the Reimbursement Agreement, as
amended hereby and as the same may be further amended, restated, supplemented
or otherwise modified from time to time in accordance with Section 9.08
thereof.

         (b)      Expenses of Agent. The Borrower agrees to pay, on demand, all
reasonable fees, costs and expenses incurred by the Agent in connection with
the preparation, negotiation and execution of this First Amendment and any
other Financing Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including, without limitation, the
reasonable costs and fees of the Agent's legal counsel and any taxes or
expenses associated with or incurred in connection with any instrument or
agreement referred to herein or contemplated hereby.

         (c)      Benefits. This First Amendment shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns.

         (d)      Governing Law. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS


                                       5



OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES.

         (e)      Effect. Except as expressly herein amended, the terms and
conditions of the Reimbursement Agreement shall remain in full force and effect
without amendment or modification, express or implied. The entering into this
First Amendment by the Lenders shall not be construed or interpreted as an
agreement by the Lenders to enter into any future amendment or modification of
the Reimbursement Agreement or any of the other Financing Documents.

         (f)      Counterparts; Telecopied Signatures. This First Amendment may
be executed in any number of counterparts and by different parties to this
First Amendment on separate counterparts, each of which when so executed shall
be deemed to be an original and shall be binding upon all parties, their
successors and assigns. Any signature delivered or transmitted by a party by
facsimile transmission shall be deemed to be an original signature hereto.

         (g)      Further Assurances. The Borrower agrees to take such further
actions as the Agent shall reasonably request from time to time in connection
herewith to evidence or give effect to the amendments set forth herein or any
of the transactions contemplated hereby.

         (h)      Section Titles. Section titles and references used in this
First Amendment shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreements among the parties hereto.

         (i)      Release of Claims. To induce the Agent, the Fronting Bank and
the Lenders to enter into this First Amendment, the Borrower hereby releases,
acquits and forever discharges the Agent, the Fronting Bank and the Lenders,
and all officers, directors, agents, employees, successors and assigns of the
Agent, the Fronting Bank and the Lenders, from any and all liabilities, claims,
demands, actions or causes of actions of any kind or nature (if there be any),
whether absolute or contingent, disputed or undisputed, at law or in equity, or
known or unknown, that the Borrower now has or ever had against such Persons
arising under or in connection with, directly or indirectly, any of the
Financing Documents.


                                       6



         IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to Reimbursement Agreement to be executed under duly authorized
officers as of the date above written.


                                    DELTA AIR LINES, INC.


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    COMMERZBANK, A.G., New York
                                    Branch, as Fronting Bank, as Agent and as
                                    a Lender


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    BANCA NAZIONALE DEL LAVORO
                                    S.p.A., New York Branch


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    BAYERISCHE LANDESBANK
                                    GIROZENTRALE, Cayman Island Branch


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                       7



                                    CITIBANK, N.A.


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    CREDIT INDUSTRIEL ET
                                    COMMERCIAL


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    THE DAI-ICHI KANGYO BANK, LTD.


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    THE INDUSTRIAL BANK OF JAPAN,
                                    LIMITED


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    SUNTRUST BANK


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    THE SANWA BANK, LIMITED


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                       8



                                    WACHOVIA BANK, N.A..


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    WESTDEUTSCHE LANDESBANK
                                    GIROZENTRALE, New York Branch


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    BAYERISCHE HYPO-UND
                                    VEREINSBANK A.G., New York Branch


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    DG BANK DEUTSCHE
                                    GENOSSENSCHAFTSBANK AG,
                                    Cayman Islands Branch


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                       9



                                    NATEXIS BANQUE POPULAIRES


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------



                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    NORDDEUTSCHE LANDESBANK
                                    GIROZENTRALE, New York Branch
                                    and/or Cayman Islands Branch


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    THE SUMITOMO MITSUI BANKING
                                    CORP.


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    LANDESBANK SCHLESWIG-
                                    HOLSTEIN GIROZENTRALE


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                    By:
                                       ----------------------------------------
                                    Name:
                                         --------------------------------------
                                    Title
                                         --------------------------------------


                                       10

EX-10.1

                                                                   EXHIBIT 10.1


                             DELTA AIR LINES, INC.
                             2002 RETENTION PROGRAM

1.       Purpose

         On January 23, 2002, the Personnel & Compensation Committee
("Committee") of the Board of Directors of Delta Air Lines, Inc. ("Delta")
adopted Delta's 2002 Retention Program ("Program"). The purpose of the Program
is to assist Delta in retaining key members of management who were employed by
Delta prior to September 11, 2001, and who are serving as officers when the
Program was adopted. The Committee believes it is important to retain these
individuals to enable Delta to continue to respond successfully to the
financial and operational challenges facing Delta and the airline industry as a
result of the terrorist attacks on the United States on September 11, 2001.

2.       Administration

         The Program shall be administered by the Committee. The Committee
shall have the authority, in its sole and absolute discretion and subject to
the terms of the Program: (a) to interpret the Program; (b) to adopt, amend and
rescind such rules and regulations as it deems necessary or advisable for the
proper operation and administration of the Program; (c) to select the
participants in the Program; (d) to determine the terms of the retention award
opportunities granted under the Program; and (e) to take any and all other
action it deems necessary or advisable for the proper operation or
administration of the Program. All determinations of the Committee with respect
to the Program shall be final, binding and conclusive on all persons. No member
of the Committee shall be liable to any person for any action, interpretation
or construction made with respect to the Program.

3.       Eligibility; Retention Awards

         a.       Eligibility. Officers of Delta designated by the Committee
shall be participants in the Program.

         b.       Retention Awards. Each participant in the Program shall be
granted a retention award opportunity (a "Retention Award") as determined by
the Committee. The Retention Award shall be subject to the terms of the
Program. Subject to such modifications as the Committee shall determine, a
participant's Retention Award shall be set forth in a Retention Award
Opportunity Certificate substantially in the form of Attachment A to the
Program.

4.       General Rules Regarding Vesting and Payment of Retention Awards

         Subject to the terms of the Program:

         a.       Vesting and Payment of First Installment. 33% of a
participant's Retention Award shall vest on December 31, 2003 and be paid in
cash within 30 days thereafter if the participant is continuously employed by
Delta from January 1, 2002 through and including December 31, 2003.





         b.       Vesting and Payment of Second Installment. The remaining 67%
of a participant's Retention Award ("Second Installment") shall vest on
December 31, 2004 and be paid in cash within 30 days thereafter if the
participant is continuously employed by Delta from January 1, 2002 through and
including December 31, 2004.

         c.       Accelerated Vesting and Payment of Second Installment. A
participant's Second Installment shall instead vest on December 31, 2003 and be
paid in cash within 90 days thereafter (i) if Delta's EBITDAR Margin for the
Measurement Period is at or above the median of the EBITDAR Margins for the
Measurement Period of the members of the Peer Group; and (ii) if the
participant is continuously employed by Delta from January 1, 2002 through and
including December 31, 2003. "EBITDAR Margin", "Peer Group" and "Measurement
Period" are defined in Section 10 of the Program.

5.       Special Rules Regarding Vesting and Payment of Retention Awards

         The General Rules Regarding the Vesting and Payment of Retention
Awards in Section 4 of the Program are subject to the following terms:

         a.       Termination of Employment On or Before December 31, 2003
Because of Disability or Death. If a participant's employment with Delta
terminates on or before December 31, 2003 due to Disability (as defined in the
Delta 2000 Performance Compensation Plan) or death, a pro rata portion of the
participant's Retention Award shall vest on the date of such termination of
employment and be paid in cash within 30 days thereafter. The pro rata portion
of the participant's Retention Award which shall vest under this Section 5(a)
will be determined by multiplying the Retention Award amount by a fraction, (i)
the numerator of which is the number of full and partial months (rounded to two
decimal places) the participant was continuously employed by Delta during the
period beginning on January 1, 2002 and ending on the date of such termination
of employment; and (ii) the denominator of which is 24.

         b.       Termination of Employment During Calendar Year 2004 Because
of Disability or Death. If a participant's employment with Delta terminates
during calendar year 2004 due to Disability or death, a pro rata portion of the
participant's unvested Retention Award shall vest on the date of such
termination of employment and be paid in cash within 30 days thereafter. The
pro rata portion of the participant's unvested Retention Award which shall vest
under this Section 5(b) will be determined by multiplying the unvested
Retention Award amount by a fraction, (i) the numerator of which is the number
of full and partial months (rounded to two decimal places) the participant was
continuously employed by Delta during the period beginning on January 1, 2004
and ending on the date of such termination of employment; and (ii) the
denominator of which is 12.

         c.       Termination of Employment for Reasons Other Than Disability
or Death. Except to the extent otherwise determined by the Committee, if a
participant's employment with Delta terminates on or before December 31, 2004
for any reason other than Disability or death, any unvested portion of the
participant's Retention Award shall immediately lapse and be forfeited at the
time of such termination of employment. Any vested portion of the participant's
Retention Award which has not been paid as of such termination of employment
shall be paid in accordance with the terms of the Program.


                                       2



         d.       Change in Control On or Before December 31, 2003. If, on or
before December 31, 2003, there is a Change in Control (as defined in the Delta
2000 Performance Compensation Plan) while a participant is employed by Delta, a
pro rata portion of the participant's Retention Award shall vest on the date of
the Change in Control and be paid in cash within 30 days thereafter. The pro
rata portion of the participant's Retention Award which shall vest under this
Section 5(d) will be determined by multiplying the Retention Award amount by a
fraction, (i) the numerator of which is the number of full and partial months
(rounded to two decimal places) the participant was continuously employed by
Delta during the period beginning on January 1, 2002 and ending on the date of
the Change in Control; and (ii) the denominator of which is 24.

         e.       Change in Control During Calendar Year 2004. If, during
calendar year 2004, there is a Change in Control while a participant is
employed by Delta, any unvested portion of the participant's Retention Award
shall vest on the date of the Change in Control and be paid in cash within 30
days thereafter.

         f.       Discharge of Liabilities. The payment to a participant of
amounts due under Section 5(d) or Section 5(e) of the Program shall discharge
all liabilities of Delta to the participant (i) under the Program; and (ii)
only with respect to the Program, under any executive retention protection
agreement or employment agreement between Delta and the participant.

6.       Intent to Remain Employed with Delta.

         By accepting the grant of a Retention Award, a participant shall be
deemed to demonstrate his or her intent to remain employed with Delta.

7.       Transferability of Awards

         No Retention Award granted under the Program shall be subject in any
manner to alienation, anticipation, sale, assignment, pledge, encumbrance or
transfer, and no other person shall otherwise acquire any rights therein.
Notwithstanding the foregoing, a Retention Award may be transferred by will, by
the laws of descent and distribution, or by beneficiary designation at death as
provided in Section 9(e).

8.       Amendment and Termination of the Program

         a.       Amendment. The Committee may amend the Program at any time
and from time to time; provided, however, that no amendment of the Program that
would adversely affect or impair the rights of a participant shall be effective
without the participant's written consent.

         b.       Termination. The Committee may terminate the Program at any
time. However, termination of the Program shall not alter or impair any of the
rights of any participant without his or her written consent under any
Retention Award granted prior to termination of the Program. In the absence of
such consent, any Retention Award granted prior to the termination of the
Program shall remain in effect after termination of the Program and shall
continue to be governed by the applicable terms of the Program.


                                       3



9.       General Provisions

         a.       Withholding Tax. Delta shall withhold, with respect to any
payment made to a participant under the Program, any taxes required by law to
be withheld because of such payment.

         b.       No Right To Continued Employment. The grant of a Retention
Award under the Program shall not be construed as conferring any legal or other
right upon any participant for the continuation of his or her employment for
any period. Delta expressly reserves the authority (which may be exercised at
any time and without regard to the timing of the vesting of a Retention Award)
to discharge any participant or to otherwise treat any participant without
regard to the effect which such treatment might have upon him or her as a
participant in the Program.

         c.       Payments Not Considered for Other Purposes. Payments to a
participant under the Program shall not be considered as earnings, compensation
or otherwise for purposes of determining the participant's benefits under any
other plan or program of Delta (including, without limitation, any disability,
life insurance, retirement and survivorship benefits under any qualified or
nonqualified plan).

         d.       Unsecured Interest. No participant or any other party
claiming an interest in amounts earned under the Program shall have any
interest whatsoever in any specific asset of Delta. To the extent that any
party acquires a right to receive payments under the Program, such right shall
be equivalent to that of an unsecured general creditor of Delta.

         e.       Beneficiary Designation. Each participant under the Program
may, from time to time, name any beneficiary or beneficiaries (who may be
designated as a primary, contingent or successor beneficiary) to whom any
benefit under the Program is to be paid in case of the participant's death
before he or she receives payment of the vested portion of such benefit. Each
designation shall revoke all prior designations by the same participant, shall
be in a form prescribed by the Committee, and shall be effective only when
filed by the participant in writing with the Committee during his or her
lifetime.

         f.       Successors and Assigns of Participant. The Program shall be
binding upon all successors and assigns of each participant, including, without
limitation, his or her estate, the personal representative, executor,
administrator or trustee of such estate, any beneficiary designated as provided
in Section 9(e) or any trustee in bankruptcy or representative of his or her
creditors.

         g.       Governing Law; Severability. The Program and all
determinations made and actions taken hereunder shall be governed by the
internal substantive laws, and not the choice of law rules, of the State of
Georgia, and construed accordingly, to the extent not superseded by applicable
federal law. If any provision of the Program shall be held unlawful or
otherwise invalid or unenforceable in whole or in part, the unlawfulness,
invalidity or unenforceability shall not affect any other provision of the
Program or part thereof, each of which shall remain in full force and effect.


                                       4



10.      Calculation of EBITDAR Margin

         a.       Methodology. The EBITDAR Margin for Delta and each member of
the Peer Group shall be calculated by dividing (i) Delta's or such Peer Group
member's aggregate operating income for the Measurement Period, determined
prior to charges, costs and expenses for depreciation, amortization and
aircraft rent; by (ii) its aggregate operating revenue for the Measurement
Period. Each company's EBITDAR Margin shall be determined based on its
regularly prepared and publicly available statements of operations prepared in
accordance with GAAP (and, if necessary to determine certain items, based on
data filed by such company with the U.S. Department of Transportation);
provided, however, that the calculation of the EBITDAR Margin for each company
shall be adjusted to exclude any item of gain, loss or expense determined by
the Committee to be extraordinary or unusual in nature or infrequent in
occurrence. Delta's EBITDAR Margin shall be deemed to be at or above the median
of the EBITDAR Margins of the members of the Peer Group if Delta's EBITDAR
Margin is equal to or higher than (i.e., superior to) the EBITDAR Margins of at
least three members of the Peer Group. Each company's EBITDAR Margin shall be
rounded to three decimal places.

         b.       GAAP. "GAAP" means generally accepted accounting principles
in the United States.

         c.       Measurement Period. "Measurement Period" means the period
beginning on January 1, 2002 and ending on and including December 31, 2003.

         d.       Peer Group. "Peer Group" means AMR Corporation, Continental
Airlines, Inc., Northwest Airlines Corporation, Southwest Airlines Co., UAL
Corporation and US Airways Group, Inc.

         e.       Other Factors. If a member of the Peer Group (i) ceases to
exist during the Measurement Period because it is merged into another company
or otherwise, (ii) fails to issue regularly prepared and publicly available
statements of operations in accordance with GAAP for the Measurement Period or
(iii) becomes the subject of voluntary or involuntary bankruptcy proceedings
during the Measurement Period, that company's EBITDAR Margin shall be deemed to
be lower than (i.e., inferior to) Delta's EBITDAR Margin.

         f.       Committee Authority to Make Adjustments. In determining under
Section 4(c) of the Program whether Delta's EBITDAR Margin for the Measurement
Period is at or above the median of the EBITDAR Margins for that period of the
members of the Peer Group, the Committee may make such adjustments to that
determination as it deems in its sole and absolute discretion to be necessary
or advisable to prevent the dilution or enlargement of the benefits or
potential benefits intended to be made available under the Program.


                                       5



                                                                   ATTACHMENT A


                    RETENTION AWARD OPPORTUNITY CERTIFICATE


         Participant:
                     ----------------------------------------------------------

         Annual Base Salary as of January 23, 2002:
                                                   ----------------------------

         Multiple of Annual Base Salary
                                       ----------------------------------------

         Retention Award Opportunity:
                                     ------------------------------------------


                         ACCEPTANCE AND ACKNOWLEDGMENT


         I hereby acknowledge receipt and accept the terms of the Delta Air
Lines, Inc. 2002 Retention Program. In accepting this Retention Award
Opportunity, I hereby acknowledge and reaffirm my obligations to Delta,
including obligations relating to protection and use of confidential
information, and my intention to continue to remain employed with Delta and to
devote my full business time and attention to the performance of my duties.


Date:
     ----------------------------      ----------------------------------------
                                                      (Signature)

EX-10.2

                                                                   EXHIBIT 10.2


                    DELTA 2000 PERFORMANCE COMPENSATION PLAN
                   NON-QUALIFIED STOCK OPTION AWARD AGREEMENT
                                JANUARY 24, 2002

PARTICIPANT NAME

The Delta 2000 Performance Compensation Plan ("Plan") is an incentive
compensation plan for officers and key employees of Delta Air Lines, Inc.
("Delta") and its Subsidiaries. The Plan is administered by the Personnel &
Compensation Committee of Delta's Board of Directors ("Committee"). Words
beginning with a capital letter which are used but not otherwise defined in
this Agreement have the meaning set forth in the Plan.

The Committee has selected you to receive an award of Non-Qualified Stock
Options, as follows:

NUMBER OF STOCK OPTIONS             XX,XXX Stock Options. Each Stock Option may
AWARDED:                            be exercised for one share of Delta common
                                    stock as provided below.

AWARD DATE:                         January 24, 2002

OPTION EXERCISE PRICE:              $32.02, which was the closing price of
                                    Delta Common Stock on the New York Stock
                                    Exchange on January 24, 2002.

EXERCISE PERIOD:                    General Rule. Subject to the terms and
                                    conditions of the Plan and the Rules For
                                    Non-Qualified Stock Options Granted On
                                    January 24, 2002 ("Rules"),

                                    (1)      50% of the number of Stock Options
                                             granted pursuant to this Agreement
                                             shall become exercisable on each
                                             of January 24, 2003 and January
                                             24, 2004; and

                                    (2)      your Stock Options shall remain
                                             exercisable through and including
                                             January 23, 2012.

                                    Special Rules. The Rules contain the
                                    Special Rules, which result in the
                                    following upon the occurrence of specified
                                    events:

                                    (1)      change in the period during which
                                             your Stock Options may be
                                             exercised; and/or

                                    (2)      forfeiture of your Stock Options.

                                    In no event may any of your Stock Options
                                    be exercised after January 23, 2012.

Also see the Prospectus and the Rules for other information about your award.
The Prospectus tells you how to access the Rules and the Plan on the Delta
intranet site and how to receive paper copies of these documents if you prefer.
The Rules tell you how and when your Stock Options may be exercised; the
process you will follow to exercise your Stock Options, including how to
contact the agent that administers certain exercises of Stock Options under the
Plan (currently the agent is Salomon Smith Barney); and the methods available
to pay the Option Exercise Price and/or to satisfy tax withholding due


                          ---------------------------
 This document constitutes part of a prospectus covering securities that have
               been registered under the Securities Act of 1933.





at the time you exercise Stock Options. Delta may from time to time change the
process for exercising Stock Options, including changing the method(s) that you
may use to pay the Option Exercise Price and satisfy the tax withholding
requirements. If you do not comply with the applicable requirements, Delta and
the agent may refuse to process exercises of your Stock Options.

By signing this Agreement:

         (a)      you acknowledge that you have had a full and adequate
                  opportunity to read this Agreement and the Prospectus for
                  Non-Qualified Stock Options dated January 24, 2002 which was
                  delivered to you with this Agreement;

         (b)      you acknowledge that you have received and had a full and
                  adequate opportunity to read the Plan and the Rules;

         (c)      you agree -- for yourself and for any designated beneficiary
                  and for your heirs, executors, administrators and personal
                  representatives -- to all of the terms and conditions
                  contained in this Agreement, the Rules, and the Plan; and

         (d)      you consent to receive all material regarding any awards
                  under the Plan, including any prospectuses, electronically
                  with an e-mail notification to your work e-mail address.

Subject to any written executive retention protection agreement signed by you
and Delta, this Agreement, together with the Plan and the Rules (the terms of
which are made a part of this Agreement and are incorporated into this
Agreement by reference), constitute the entire agreement between you and Delta
with respect to the award of your Stock Options. The Plan, the Rules, this
Agreement and all determinations made and actions taken pursuant to any of them
shall be governed by the internal substantive laws, and not the choice of law
rules, of the State of Georgia and construed accordingly, to the extent not
superseded by applicable federal law. If there is any conflict between the Plan
and either or both of the Rules and this Agreement, the Plan shall control; if
there is any conflict between this Agreement and the Rules, the Rules shall
control. Delta may amend this Agreement or the Rules at any time; provided that
no amendment of this Agreement or Part I of the Rules, which impacts any
outstanding Stock Options in a manner adverse to you, shall be made without
your written consent.

This Agreement has been executed in duplicate. Please note your acceptance by
signing below and returning one original to the Vice President - Global Rewards
& Recognition (Dept. 959-ATG) for Delta's records. You and Delta, each
intending to be bound legally, agree to the matters set forth above by signing
this Agreement, all as of January 24, 2002.

DELTA AIR LINES, INC.                    AWARD RECIPIENT

By: /s/ Leo F. Mullin                    By:
   -----------------------------------      -----------------------------------
   Leo F. Mullin
   Chairman of the Board and
   Chief Executive Officer


                                       2




                    DELTA 2000 PERFORMANCE COMPENSATION PLAN

                     RULES FOR NON-QUALIFIED STOCK OPTIONS
                          GRANTED ON JANUARY 24, 2002


These Rules apply to all Non-Qualified Stock Options granted on January 24,
2002 under the Delta 2000 Performance Compensation Plan ("Plan"). These Rules
contain important information about those awards, and should be read in
conjunction with the Plan, your Non-Qualified Stock Option Award Agreement
dated January 24, 2002 ("your Award Agreement") and the Non-Qualified Stock
Option Prospectus dated January 24, 2002. Words beginning with a capital letter
and not otherwise defined in these Rules shall have the meaning set forth in
the Plan.

Delta may amend Part I and Part II of these Rules at any time; provided that no
amendment of Part I of these Rules which impacts your outstanding Stock Options
in a manner adverse to you shall be made without your written consent.

                           PART I. SUBSTANTIVE RULES

A.       STOCK OPTION EXERCISE PERIOD - GENERAL RULE

         The General Rule regarding the period during which you may exercise
your Stock Options is set forth in your Award Agreement ("General Rule"). The
General Rule is subject to the terms and conditions of the Plan and the Special
Rules in Paragraph I.B. below ("Special Rules").

B.       STOCK OPTION EXERCISE PERIOD - SPECIAL RULES

         As discussed below, the Special Rules in this Paragraph I.B. change
the period during which you may exercise your Stock Options, and/or result in
the forfeiture of your Stock Options, whether or not your Stock Options are
then exercisable under the General Rule. The Special Rules apply only to the
extent your Stock Options have not previously been exercised, forfeited or
revoked. Specifically, the General Rule is subject to the following terms and
conditions:

         1.       Definitions - Employment with Delta. For purposes of this
         Paragraph I.B., (i) employment with Delta includes employment with any
         Subsidiary of Delta; and (ii) termination of employment with Delta
         means you are no longer an employee of Delta or any of its
         Subsidiaries.


                          ---------------------------
 This document constitutes part of a prospectus covering securities that have
               been registered under the Securities Act of 1933.





         2.       Termination of Employment Before January 24, 2003 Because of
         Retirement. If your employment with Delta terminates before January
         24, 2003 due to Retirement, your Stock Options shall be forfeited at
         the time of such termination of employment.

         3.       Termination of Employment On or After January 24, 2003
         Because of Retirement. If your employment with Delta terminates on or
         after January 24, 2003 due to Retirement, your Stock Options may be
         exercised, in whole or in part, only during the period (i) beginning
         on the date your employment with Delta terminates due to Retirement;
         and (ii) ending on and including the earlier of (A) January 23, 2012
         or (B) the third anniversary of the date your employment with Delta
         terminates due to Retirement.

         4.       Termination of Employment Because of Disability. If your
         employment with Delta terminates due to Disability, your Stock Options
         may be exercised, in whole or in part, only during the period (i)
         beginning on the later of (A) January 24, 2003 or (B) the date your
         employment with Delta terminates due to Disability; and (ii) ending on
         and including the earlier of (A) January 23, 2012 or (B) the third
         anniversary of the date your employment with Delta terminates due to
         Disability.

         5.       Termination of Employment Because of Death. If you die while
         employed by Delta, your Stock Options may be exercised, in whole or in
         part, only during the period (i) beginning on the date of your death;
         and (ii) ending on and including the earlier of (A) January 23, 2012
         or (B) the third anniversary of the date of your death.

         6.       Death After Termination of Employment Because of Disability.
         If you die after your employment with Delta terminates due to
         Disability, your Stock Options may be exercised, in whole or in part,
         only during the period (i) beginning on the date of your death; and
         (ii) ending on and including the earlier of (A) January 23, 2012 or
         (B) the third anniversary of the date your employment with Delta
         terminates due to Disability.

         7.       Termination of Employment for Reasons Other Than Retirement,
         Disability or Death. If your employment with Delta terminates for any
         reason other than Retirement, Disability or death, your Stock Options
         shall be forfeited at the time of such termination of employment.

         8.       Non-Competition Agreement - Termination of Employment On or
         After January 24, 2003 Because of Early Retirement. If (i) your
         employment with Delta terminates on or after January 24, 2003 due to
         Retirement prior to age 65, if you are not then on the pilot seniority
         list of Delta or any of its Subsidiaries, or age 60, if you are then
         on such a seniority list, and (ii) within two years after such
         Retirement and without the Committee's approval, you directly or
         indirectly provide management or executive services (whether as a
         consultant, advisor, officer or director) to any person or entity in
         direct and substantial competition with the air transportation
         business of Delta or its Subsidiaries, then your Stock Options shall
         be forfeited at the time you first provide such management or
         executive services. Because of the broad and extensive scope of
         Delta's air transportation business, you acknowledge that the
         restrictions in this Paragraph I.B.8.


                                       2



         are intended to extend to management or executive services which are
         directly related to the provision of air transportation services into,
         within or from the United States, as no smaller geographical
         restriction will adequately protect the legitimate business interests
         of Delta.

         9.       Demotion. If, prior to January 24, 2004, you voluntarily
         suggest and then accept a demotion, or are involuntarily demoted, to a
         position with Delta or any of its Subsidiaries involving lesser
         responsibilities than those of the job held by you on January 24,
         2002, the Committee may in its sole discretion, not later than six
         months from the date of the demotion, modify or revoke your Stock
         Options in any manner it deems appropriate under the circumstances.
         The Committee will determine in its sole discretion what constitutes a
         demotion to a job involving lesser responsibilities under this
         Paragraph I.B.9.

         10.      Change In Control. If a Change In Control (as defined in the
         Plan) occurs, your outstanding Stock Options shall become immediately
         exercisable, vested and nonforfeitable.

                         PART II. ADMINISTRATIVE RULES

A.       OVERVIEW

         The process for exercising Stock Options varies depending on the
manner in which you pay the Option Exercise Price and make certain other
required payments. As discussed below, there are currently three ways to
exercise your Stock Options: the Cash Purchase Method; the Cashless Exercise
Method; and the Share Tender Method. Delta has retained Salomon Smith Barney
Inc. ("SSB") to process Stock Option exercise requests under the Cash Purchase
Method and the Cashless Exercise Method; Delta processes Stock Option exercise
requests under the Share Tender Method.

B.       REQUIRED PAYMENTS

         To exercise your Stock Options, you are required to make the following
payments:

         -        Option Exercise Price. You must pay the Option Exercise Price
                  for each Stock Option you exercise.

         -        Withholding Taxes. You must pay required withholding taxes.
                  When you exercise Stock Options, you realize ordinary
                  compensation income equal to the excess of the fair market
                  value of the Delta common stock acquired on the date of
                  exercise over the Option Exercise Price. Delta is required to
                  comply with applicable income tax withholding requirements
                  with respect to that amount.

         -        Other Costs. If you use the Cashless Exercise Method, you
                  must pay SSB a brokerage commission for selling shares of
                  Delta common stock on your behalf


                                       3



                  and certain administrative charges. There are no such charges
                  under the Cash Purchase Method or the Share Tender Method.

C.       STOCK OPTION EXERCISE METHODS

         You may exercise your Stock Options using any of the following three
methods:

         1.       Cash Purchase Method. Under the Cash Purchase Method, you pay
         SSB the Option Exercise Price and required withholding taxes from your
         own funds before you exercise your Stock Options. The payment must be
         made by a check payable to Salomon Smith Barney Inc. or by electronic
         funds transfer. It must be received by SSB before your Stock Option
         exercise request will be processed. SSB will credit your SSB brokerage
         account with the shares of Delta common stock you received from your
         Stock Option exercise.

         2.       Cashless Exercise Method. The Cashless Exercise Method allows
         you to exercise your Stock Options without paying out any cash of your
         own. That is why it is called "cashless." In effect, you pay the
         Option Exercise Price, required withholding taxes and other costs by
         using your "gain" -- the excess of the fair market value of the Delta
         common stock acquired on the date of exercise over the Option Exercise
         Price.

                  There are two types of Cashless Exercises: Exercise and Sell;
         and Sell-to-Cover.

                  -        Under the Exercise and Sell Method, you instruct SSB
                           to sell all shares of Delta common stock acquired
                           from the exercise of your Stock Options. The
                           proceeds of this sale will be used to pay the Option
                           Exercise Price, required withholding taxes and other
                           applicable costs. SSB will send you a check for the
                           net proceeds.

                  -        Under the Sell-to-Cover Method, SSB will (1)
                           estimate the number of shares of Delta common stock
                           that needs to be sold to pay the Option Exercise
                           Price, required withholding taxes and other costs;
                           (2) sell on your behalf that estimated number of
                           shares from the Delta common stock you are acquiring
                           pursuant to the Stock Option exercise; and (3) use
                           the proceeds from that sale to make the required
                           payments. SSB will credit your brokerage account
                           with the remaining shares of Delta common stock, and
                           any remaining cash proceeds.

         3.       Share Tender Method. Under the Share Tender Method, you pay
         the Option Exercise Price by using unrestricted shares of Delta common
         stock (i) that you have owned for at least six months; and (ii) that
         have a Fair Market Value on the date of your Stock Option exercise
         equal to the Option Exercise Price. Under this method, you do not make
         a physical delivery of your previously owned shares of Delta common
         stock, but instead use a process called "attestation." Attestation
         does not involve any physical movement of stock certificates. Rather,
         you provide to Delta on the appropriate form the stock certificate
         number for the attested shares if you hold the shares in your own
         name,


                                       4



         or the name and number of your account if your broker or bank holds
         the attested shares on your behalf. This information allows
         verification (i) that you own the shares being attested; (ii) that the
         shares are unrestricted; and (iii) that you have owned the shares for
         at least six months. Providing incorrect information may result in
         disqualification of the Stock Option exercise and/or disciplinary
         action.

         Under the Share Tender Method, Delta will deduct from the shares you
         acquired from your Stock Option exercise the number of (i) attested
         shares used to pay the Option Exercise Price; and (ii) the shares
         necessary to satisfy tax withholding requirements. You will receive
         the net number of shares.

         Please note that you may not exercise your Stock Options by attesting
         shares that you have attested during the previous six months.

D.       STOCK OPTION EXERCISE PROCEDURES

         1.       Cash Purchase Method or Cashless Exercise Method. To exercise
         your Stock Options using the Cash Purchase or Cashless Exercise
         Method, you must first open a brokerage account with SSB and then
         submit a Stock Option exercise request to SSB in accordance with its
         procedures. You may contact SSB as follows:

                           Salomon Smith Barney Inc.
                         Attention Stock Plan Services
                                 P.O. Box 2151
                               New York, NY 10116

                        Telephone: 800 323-7788 (in the U.S.)
                                   212 503-1809 (outside the U.S.)

           Voice Response Information: 800 367-4777
                 Internet Information: http://www.benefitaccess.com

         2.       Share Tender Method. To exercise your Stock Options using the
         Share Tender Method, please contact Delta as follows:

                                 Craig Whipple
                         Specialist - Executive Rewards
                      1060 Delta Boulevard, Department 959
                          Atlanta, Georgia 30354-1989

                            Telephone: 404 715-6333
                                  Fax: 404 715-2795

                                email: craig.whipple@delta.com


                                       5



E.       TRANSFERABILITY OF STOCK OPTIONS

         Your Stock Options are not transferable otherwise than by will, by the
laws of descent and distribution, or by a written designation referred to in
Section 8.5 of the Plan, and are exercisable during your lifetime only by you.
In the event that your Stock Options are to be exercised by any person other
than you, such person shall provide appropriate proof of his or her right to
exercise your Stock Options.


                                       6

EX-10.3

                                                                   EXHIBIT 10.3

                                 [DELTA LOGO]

LEO F. MULLIN
Chairman and
Chief Executive Officer

                                 May 28, 2002


Mr. Robert L. Colman
Department 950
Atlanta


Dear Bob:


This letter will supplement the letter dated September 17, 1998 from myself to
you (the "Letter") concerning your employment with Delta Air Lines, Inc.
("Delta"). We have agreed that in consideration of your continuing employment
with Delta, the provision of the Letter that calls for the reduction of any
nonqualified benefits from Delta by any qualified or nonqualified defined
benefit retirement benefits from General Electric Company will be deleted. This
will be accomplished by amending the Letter to delete the following sentence
from page 4: "However, the benefit under the nonqualified plan will be reduced
by the amount of any retirement benefits which you receive under any qualified
or nonqualified defined benefit retirement plan of General Electric Company."

Bob, we look forward to your continuing employment with Delta. If the terms
outlined above reflect your understanding of our agreement, please so indicate
by signing the two original letters provided. Please keep one letter for your
records and return the other to Leon Piper.


Sincerely,



/s/ Leo F. Mullin


Accepted:



/s/ Robert L. Colman
- ---------------------------------
Robert L. Colman
Date: 5/30/02
- ---------------------------------


cc:      Robert S. Harkey
         Leon A. Piper



  DELTA AIR LINES, INC., POST OFFICE BOX 20706, ATLANTA, GA 30320-6001 U.S.A.

EX-12

                                                                      EXHIBIT 12


DELTA AIR LINES, INC.
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS (LOSS) TO FIXED CHARGES
(In millions, except ratios)




                                                     Three Months      Three Months       Six Months        Six Months
                                                        Ended             Ended             Ended             Ended
                                                       June 30,          June 30,          June 30,          June 30,
                                                         2002              2001              2002              2001
                                                     ------------      ------------       ----------        ----------
                                                                                                
Earnings (loss)
    Loss before income taxes                             $(287)            $ (99)            $(889)            $(321)

Add (deduct)
    Fixed charges from below                               330               287               645               568
    Interest capitalized                                    (4)              (10)              (10)              (19)
                                                         -----             -----             -----             -----

Earnings (loss) as adjusted                              $  39             $ 178             $(254)            $ 228

Fixed charges
    Interest expense                                     $ 168             $ 127             $ 325             $ 247
    Portion of rental expense representative
      of the interest factor                               162               160               320               321
                                                         -----             -----             -----             -----

Total fixed charges                                      $ 330             $ 287             $ 645             $ 568

Ratio of earnings (loss) to fixed charges (1)             0.12              0.62             (0.39)             0.40



(1)      Fixed charges exceeded our adjusted earnings (loss) by $291 million and
         $899 million for the three and six months ended June 30, 2002,
         respectively, and $109 million and $340 million for the three and six
         months ended June 30, 2001, respectively.

EX-15

                                                                      EXHIBIT 15



August 12, 2002

Delta Air Lines, Inc.
Atlanta, Georgia

We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Delta Air Lines, Inc. and subsidiaries for the three-month and
six-month periods ended June 30, 2002, as indicated in our report dated July 18,
2002; because we did not perform an audit, we expressed no opinion on that
information.

We are aware that our report referred to above, which was included in your
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, is being
incorporated by reference in Registration Statement Nos. 2-94541 and 333-65218
on Form S-3 and Registration Statement Nos. 33-30454, 33-65391, 333-16471,
333-46904, 333-48718, 333-49553, 333-73856, and 333-92291 on Form S-8.

We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statements prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/ Deloitte & Touche LLP
Atlanta, Georgia

EX-99.1

                                                                   Exhibit 99.1

                                August 13, 2002

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Ladies and Gentlemen:

         The certifications set forth below are hereby submitted to the
Securities and Exchange Commission pursuant to, and solely for the purpose of
complying with, Section 1350 of Chapter 63 of Title 18 of the United States
Code in connection with the filing on the date hereof with the Securities and
Exchange Commission of the Quarterly Report on Form 10-Q of Delta Air Lines,
Inc. ("Delta") for the period ended June 30, 2002 (the "Report").

         Each of the undersigned, the Chief Executive Officer and the Chief
Financial Officer, respectively, of Delta, hereby certifies that, as of the end
of the period covered by the Report:

         1.       such Report fully complies with the requirements of Section
                  13(a) of the Securities Exchange Act of 1934; and

         2.       the information contained in the Report fairly presents, in
                  all material respects, the financial condition and results of
                  operations of Delta.



                                                    /s/ Leo F. Mullin
                                                    ------------------------
                                                    Name:  Leo F. Mullin
                                                    Chief Executive Officer




                                                    /s/ M. Michele Burns
                                                    ------------------------
                                                    Name:  M. Michelle Burns
                                                    Chief Financial Officer