-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OldgGjkq5b2vIBVUSjVPxK044fumkY7+uPFWkd9u4yolBf0JPLbNAWUOIFaqX4W6 YiqVJsGQ1sBHVRDLKyYXYA== 0000950136-02-003308.txt : 20021122 0000950136-02-003308.hdr.sgml : 20021122 20021122171503 ACCESSION NUMBER: 0000950136-02-003308 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 28 FILED AS OF DATE: 20021122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATA HOLDINGS CORP CENTRAL INDEX KEY: 0000898904 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, NONSCHEDULED [4522] IRS NUMBER: 351617970 STATE OF INCORPORATION: IN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-101423 FILM NUMBER: 02838373 BUSINESS ADDRESS: STREET 1: 7337 W WASHINGTON ST CITY: INDIANAPOLIS STATE: IN ZIP: 46231 BUSINESS PHONE: 3172474000 FORMER COMPANY: FORMER CONFORMED NAME: AMTRAN INC DATE OF NAME CHANGE: 19930318 S-4 1 file001.txt REGISTRATION STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 22, 2002 REGISTRATION NO. 333-[ ] ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ATA HOLDINGS CORP. AMERICAN TRANS AIR, INC. (Exact names of registrants as specified in their charters) INDIANA INDIANA (State or other jurisdiction of (State or other jurisdiction of incorporation or organization) incorporation or organization) 4522 4522 (Primary Standard Industrial (Primary Standard Industrial Classification Code Number) Classification Code Number) 35-1617970 35-1305077 (I.R.S. Employer (I.R.S. Employer Identification Number) Identification Number) 7337 West Washington Street 7337 West Washington Street Indianapolis, Indiana 46231 Indianapolis, Indiana 46231 (317) 247-4000 (317) 247-4000 (Address, including zip code, and (Address, including zip code, and telephone number,including area code, telephone number, including area code, of registrant's principal of registrant's principal executive offices) executive offices) MR. KENNETH K. WOLFF CHIEF FINANCIAL OFFICER AMERICAN TRANS AIR, INC. 7337 WEST WASHINGTON STREET INDIANAPOLIS, INDIANA 46231 (317) 247-4000 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copy to: RONALD CAMI, ESQ. CRAVATH, SWAINE & MOORE WORLDWIDE PLAZA 825 EIGHTH AVENUE NEW YORK, NY 10019 (212) 474-1000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
CALCULATION OF REGISTRATION FEE ==================================================================================================================================== TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM CLASS OF SECURITIES AMOUNT TO BE FFERING PRICE PER AGGREGATE OFFERING AMOUNT OF TO BE REGISTERED REGISTERED (1) CERTIFICATE (2) PRICE (2) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------------ Pass Through Certificates, Series 2002-1A... $203,612,000 100% $203,612,000 $18,733 - ------------------------------------------------------------------------------------------------------------------------------------ Pass Through Certificates, Series 2002-1B... $56,280,000 100% $56,280,000 $5,178 - ------------------------------------------------------------------------------------------------------------------------------------ Guarantee--of the Pass Through Certificates of American Trans Air, Inc. by ATA Holdings Corp........................................ (3) (3) (3) (3) ====================================================================================================================================
(1) Equals the aggregate principal amount of the securities being registered. (2) Pursuant to Rule 457(f)(2), the registration fee has been calculated using the book value of the securities being registered. (3) No separate consideration will be received for the Guarantee. Pursuant to Rule 457(n), no separate fee is payable in respect of the Guarantee. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ PROSPECTUS $259,892,000 AMERICAN TRANS AIR, INC. 2002-1 PASS THROUGH TRUSTS PASS THROUGH CERTIFICATES, SERIES 2002-1 APPLICABLE UNDERLYING PAYMENTS FULLY AND UNCONDITIONALLY GUARANTEED BY ATA HOLDINGS CORP. OFFER TO EXCHANGE $203,612,000 CLASS A PASS THROUGH CERTIFICATES AND $56,280,000 CLASS B PASS THROUGH CERTIFICATES FOR A LIKE AMOUNT OF REGISTERED CLASS A AND CLASS B PASS THROUGH CERTIFICATES THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON [ ], 2002, UNLESS EXTENDED. This is a registered offer to exchange each class of outstanding certificates issued by two separate pass through trusts ("Outstanding Certificates") for new certificates issued by the same pass through trusts (the "Exchange Certificates") having terms substantially identical in all material respects to the Outstanding Certificates they are replacing (except that the Exchange Certificates will not contain terms with respect to transfer restrictions or certain interest rate increases and the Exchange Certificates will be available only in book-entry form). PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 22 FOR A DESCRIPTION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
FINAL EXPECTED PASS THROUGH CERTIFICATES PRINCIPAL AMOUNT INTEREST RATE DISTRIBUTION DATE ---- ------- ------------ --------- ------ -------- ---- ------------ ---- 2002-1A................................. $203,612,000 8.328% February 20, 2013 2002-1B................................. $ 56,280,000 10.699% February 20, 2008
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is [ ] Address of Principal Executive Offices of American Trans Air, Inc.: 7337 West Washington Street Indianapolis, Indiana 46231 (317) 247-4000 TABLE OF CONTENTS
Page ---- Where You Can Find More Information......................................................................... 2 Forward-looking Statements.................................................................................. 3 Summary..................................................................................................... 5 Summary of Terms of the Exchange Offer...................................................................... 6 Summary Description of the Exchange Certificates............................................................ 8 Use of Proceeds............................................................................................. 19 Risk Factors................................................................................................ 22 The Exchange Offer.......................................................................................... 35 Ratio of Earnings to Fixed Charges.......................................................................... 44 Capitalization.............................................................................................. 45 Selected Consolidated Financial Data........................................................................ 46 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 49 Business.................................................................................................... 103 Description of Principal Indebtedness....................................................................... 114 Description of the Certificates............................................................................. 117 Description of the Delayed Funding Implementation........................................................... 135 Description of the Deposit Agreements....................................................................... 135 Description of the Escrow Agreements........................................................................ 137 Description of the Liquidity Facilities..................................................................... 139 Description of the Intercreditor Agreement.................................................................. 145 Description of the Aircraft and the Appraisals.............................................................. 150 Description of the Secured Promissory Notes................................................................. 152 Exchange Offer; Registration Rights......................................................................... 170 Book-Entry; Delivery and Form............................................................................... 172 U.S. Federal Income Tax Consequences........................................................................ 177 Delaware Taxes.............................................................................................. 183 ERISA Considerations........................................................................................ 184 Legal Matters............................................................................................... 187 Experts..................................................................................................... 188 Subsidiaries of ATA Holdings Corp........................................................................... 189 Directors and Executive Officers............................................................................ 190 Executive Compensation...................................................................................... 192 Certain Relationships and Related-Party Transactions........................................................ 193 Index to Consolidated Financial Statements.................................................................. F-1
APPENDIX AI -- Glossary APPENDIX AII -- Appraisals -------------------- WHERE YOU CAN FIND MORE INFORMATION American Trans Air, Inc. ("ATA") is a wholly owned subsidiary of ATA Holdings Corp. ("ATA Holdings" or the "Company"), formerly Amtran, Inc. ATA Holdings is subject to the informational requirements of the Securities Exchange Act of 1934 and, therefore, must file periodic reports, proxy statements and other information with the Commission. In addition, ATA Holdings has agreed to file with the Commission the annual reports and the information, documents and other reports otherwise required by Section 13 of the Exchange Act. All such information is available to the public over the Internet at the SEC's web site at http://www.sec.gov and may be inspected and copied at the public reference facilities: Public Reference Room Chicago Regional Office 450 Fifth Street, N.W. Citicorp Center Judiciary Plaza 500 West Madison Street Washington, D.C. 20549 Suite 1400 Chicago, IL 60661-2511 Copies of these documents can also be obtained at prescribed rates by writing to the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. This prospectus constitutes a part of a registration statement on Form S-4 filed by ATA with the Commission under the Securities Act. As permitted by the rules and regulations of the Commission, this prospectus does not contain all of the information contained in the registration statement and the exhibits and schedules thereto. Reference is hereby made to the registration statement and its exhibits and schedules for further information with respect to ATA and the securities offered through this exchange offer. Statements contained in this prospectus concerning the provisions of any documents filed as an exhibit to the registration statement or otherwise filed with the Commission are not necessarily complete, and in each instance reference is made to the copy of such document so filed. Each such statement is qualified in its entirety by such reference. 2 FORWARD-LOOKING STATEMENTS This prospectus incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. These forward-looking statements are identifiable by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will" and similar terms and phrases, including references to assumptions. These statements are contained in sections entitled "Summary," "Risk Factors" and other sections of this prospectus and in the documents incorporated by reference in this prospectus. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. Such factors include, but are not limited to, the following: o economic conditions; o labor costs; o aviation fuel costs; o competitive pressures on pricing; o weather conditions; o governmental legislation and regulation; o consumer perceptions of our services; o demand for air transportation in the markets in which we operate; o other operational matters discussed in this prospectus; o other risks and uncertainties listed from time to time in reports we periodically file with the Commission. In addition, there are factors that relate specifically to the September 11, 2001 terrorist attacks that may cause actual results to be materially different. These factors include, but are not limited to, the following: o the adverse impact of the terrorist attacks on the economy in general; o the likelihood of a further decline in air travel because of the attacks and as a result of a reduction in the airline industry's operations; o higher costs associated with new security directives and potentially new regulatory initiatives; o higher costs for insurance and the continued availability of such insurance; o the number of crew members who may be called for duty in the armed services; and o the impact on our ability to operate as planned. 3 Except to the extent required by the federal securities laws, we do not undertake to update our forward-looking statements to reflect future events or circumstances. 4 SUMMARY This summary highlights selected information from this prospectus, but does not contain all the information that may be important to you. We encourage you to read this entire prospectus, including the "Risk Factors" section, before making an investment decision. "ATA Holdings" refers to ATA Holdings Corp.; "ATA" refers to American Trans Air, Inc. and "we" or "the Company" refers to ATA Holdings and its subsidiaries, including ATA. THE COMPANY ATA Holdings owns ATA, the tenth largest passenger airline in the United States (based on 2001 capacity and traffic) and a leading provider of airline services in selected market segments. We are also the largest commercial passenger charter airline in the United States and one of the largest charter providers of passenger airline services to the U.S. military, in each case based on revenues. For the year ended December 31, 2001, our revenues consisted of 64.3% scheduled service, 15.1% commercial charter service and 13.1% military charter service, with the balance derived from related travel services. We actively consider and enter into discussions regarding possible business combinations with air carriers and others, and plan to continue to do so. See "Risk Factors." Scheduled Service We provide scheduled service primarily from our gateways at Chicago-Midway and Indianapolis to popular vacation destinations such as Hawaii, Phoenix, Las Vegas, Florida, California, Mexico and the Caribbean, as well as more traditionally business destinations such as New York's LaGuardia Airport, Philadelphia, Denver, Dallas-Ft. Worth, Washington, D.C., Boston, Seattle, Minneapolis-St. Paul, Newark and Charlotte. Our Chicago-Midway operations also include service to a number of Midwestern cities, provided by our commuter airline subsidiary, Chicago Express Airlines, Inc. ("Chicago Express"). We focus on routes where we believe we can be a leading provider of nonstop service, and we target leisure and value-oriented business travelers. Commercial Charter Service We are the largest commercial passenger charter airline in the United States and provide services throughout the world, primarily through U.S. tour operators. We seek to maximize the profitability of these operations by leveraging our leading market position, diverse aircraft fleet and worldwide operating capability. We believe our commercial charter services are a predictable source of revenues and operating profits in part because our commercial charter contracts require tour operators to assume capacity, yield and fuel price risk, and also because of our ability to re-deploy assets into favorable markets. Military/Government Charter Service We have provided passenger airline services to the U.S. military since 1983 and are currently one of the largest commercial airline providers of these services. We believe that because these operations are generally less seasonal than leisure travel, they have tended to have a stabilizing impact on our operating margins. The U.S. government awards one-year contracts for its military 5 charter business and pre-negotiates contract prices for each type of aircraft that a carrier makes available. We believe that our fleet of aircraft is well suited to the needs of the military. Recent Developments Beginning in 2000, we entered into a series of agreements to acquire what is now 40 new Boeing 737-800 aircraft and 12 new Boeing 757-300 aircraft to replace our older fleets of Lockheed L-1011-50/100, and Boeing 727-200 aircraft. As of September 30, 2002, we had accepted delivery of 25 new Boeing 737-800 aircraft and 10 Boeing 757-300 aircraft under these agreements. We expect to take delivery of the remaining 17 aircraft by the end of 2004. On November 20, 2002, we obtained a $168.0 million secured term loan, of which $148.5 million is guaranteed by the U.S. Government. The proceeds of the loan will repay any borrowings on our existing revolving bank credit facility, which matures January 2, 2003, and will support approximately $50.0 million in letters of credit required by certain of our creditors. The remaining proceeds will be used for general corporate purposes. SUMMARY OF TERMS OF THE EXCHANGE OFFER In the exchange offer we will accept for exchange up to $203,612,000 class A Outstanding Certificates and up to $56,280,000 class B Outstanding Certificates for an equal aggregate principal amount of Exchange Certificates. The total amount of Outstanding Certificates reflects the amount issued in an initial private offering and also the amount purchased later in the year in accordance with a delayed funding component of the initial offering. See "Description of the Delayed Funding Implementation." The form and terms of the Exchange Certificates are substantially the same as the form of the Outstanding Certificates except that the Exchange Certificates have been registered under the Securities Act. Background................................. On October 15, 2002, we completed an offering of two classes of pass through certificates issued by two separate pass through trusts. In connection with that offering, we entered into a registration rights agreement in which we agreed, among other things, to deliver this prospectus to you and to complete an exchange offer. Securities Offered......................... Up to $203,612,000 class A certificates and up to $56,280,000 class B certificates, which have been registered under the Securities Act. The terms of the Exchange Certificates are substantially the same as the terms of the Outstanding Certificates except for certain transfer restrictions and registration rights relating to the Outstanding Certificates. See "Description of the Certificates--Exchange Offer; Registration Rights." The Exchange Offer......................... We are offering to accept for exchange your unregistered Outstanding Certificates for our new Exchange Certificates that have been registered under the Securities Act of 1933. As of the date hereof, $259,892,000 in aggregate principal amount of
6 Outstanding Certificates are outstanding. On or promptly after the expiration date we will issue the Exchange Certificates to those of you who hold Outstanding Certificates and wish to tender them. The issuance of the Exchange Certificates is intended to satisfy our obligation contained in the registration rights agreement. For procedures on tendering, see "The Exchange Offer" and "Description of the Certificates-- Exchange Offer; Registration Rights." Expiration of the Exchange Offer........... 5:00 p.m., New York City time, on [ ], 2002, unless we extend it. See "The Exchange Offer--Terms of the Exchange Offer, Period for Tendering Outstanding Certificates." Tenders; Withdrawal........................ You may withdraw your tender of Outstanding Certificates at any time before the offer expires. If for any reason any Outstanding Certificates are not accepted for exchange, they will be returned as soon as practicable after the expiration or termination of the exchange offer. Conditions to the Exchange Offer........... The exchange offer is subject to the condition that it does not violate applicable law or any applicable interpretation of the staff of the Commission. There is no guarantee that any such condition will not occur. You will have certain rights against us under the registration rights agreement if we fail to consummate the exchange offer. Federal Income Tax Considerations.......... Pursuant to the exchange offer, the exchange of an Outstanding Certificate for an Exchange Certificate will not constitute a taxable exchange. See "U.S. Federal Income Tax Consequences." Exchange Agent............................. [ ] is serving as the Exchange Agent in connection with the exchange offer. Consequences If You Do Not Exchange Your Outstanding Certificates................ Outstanding Certificates that are not tendered in the exchange offer or are not accepted for exchange will continue to accrue interest, but will not retain any rights under the registration rights agreement and will bear legends restricting their transfer. You will not be able to offer or sell the Outstanding Certificates unless: o pursuant to an exemption from the requirements of the Securities Act of 1933;
7 o the Outstanding Certificates are registered under the Securities Act of 1933; or o the transaction requires neither such an exemption nor registration. We do not currently anticipate that we will register Outstanding Certificates under the Securities Act. See "Risk Factors--Consequences of Failure to Exchange and Requirements for Transfer of Exchange Certificates." SUMMARY DESCRIPTION OF THE EXCHANGE CERTIFICATES Certificates Offered....................... o Up to $203,612,000 Class A Exchange Certificates which have been registered under the Securities Act. o Up to $56,280,000 Class B Exchange Certificates which have been registered under the Securities Act. Use of Proceeds............................ There will be no proceeds from the Exchange Certificates. The proceeds from the sale of the Outstanding Certificates were used to purchase secured promissory notes issued to finance nine Boeing 737-800 aircraft to be owned by or leased to ATA. Subordination Agent, Pass Through Trustee, Paying Agent and Loan Trustee........... Wilmington Trust Company Escrow Agent............................... Wells Fargo Bank Northwest, National Association Depositary................................. IntesaBci S.p.A., New York Branch Initial Liquidity Provider................. AIG Matched Funding Corp. Trust Property............................. The property of each pass through trust will include: o secured promissory notes; o rights of the pass through trust to acquire secured promissory notes under a note purchase agreement; o rights of the pass through trust under the related escrow and paying agent agreement; o rights of the pass through trust under the intercreditor agreement described below under
8 "--Intercreditor Agreement"; o all rights under the liquidity facility for that pass through trust; and o funds from time to time deposited with the pass through trustee in accounts relating to that pass through trust. ATA Holdings Guarantee..................... The payments by ATA under each lease and owned aircraft indenture will be unconditionally guaranteed by ATA Holdings. See "Description of the Secured Promissory Notes--The ATA Holdings Guarantee." Certificates; Denominations................ The Exchange Certificates of each trust will be issued in a minimum denomination of $100,000 and in integral multiples of $1,000 in excess thereof, except that one Exchange Certificate of each trust may be issued in a denomination of less than $100,000. Regular Distribution Dates................. February 20, May 20, August 20 and November 20, commencing May 20, 2002. Record Dates............................... The fifteenth day preceding the related distribution date. Distributions by Pass Through Trustees..... Each pass through trustee will distribute all payments of principal, premium, if any, and interest received on the secured promissory notes held in that pass through trust to the holders of certificates issued by that pass through trust. Each pass through trustee will distribute all scheduled payments of principal and interest made on the secured promissory notes on regular distribution dates. Each pass through trustee will distribute all payments of principal, premium, if any, and interest made on the secured promissory notes resulting from any early redemption or purchase of those secured promissory notes on a special distribution date. Each pass through trustee will also distribute any premium that we pay in connection with the return of any unused deposit. Such distribution of premium will be on a special distribution date. Each pass through trustee will provide certificateholders with at least 15 days' notice prior to any special distribution.
9 Distributions by a pass through trustee to certificateholders generally are subject to the intercreditor and subordination provisions described below. Distribution by the Paying Agent........... The paying agent will distribute all payments of interest on the deposits, and any unused deposits relating to each pass through trust, to the holders of certificates issued by that pass through trust. Possible Issuance of Class C Certificates.. Subject to certain conditions, ATA may elect to issue Series C secured promissory notes in connection with the financing of owned aircraft, but Series C secured promissory notes will not be purchased by the Class A or Class B pass through trust. ATA may elect to fund the sale of the Series C secured promissory notes through the sale of pass through certificates issued by a Class C American Trans Air, Inc. 2002-1C Pass Through Trust. Intercreditor Agreement.................... The pass through trustees, the subordination agent and the liquidity provider have entered into an intercreditor agreement that states how payments made on the secured promissory notes and payments made under the liquidity facilities will be shared and distributed among the pass through trustees and the liquidity provider. The intercreditor agreement also sets forth agreements among the pass through trustees and the liquidity provider relating to who will control the exercise of remedies under the secured promissory notes and the indentures. There are no cross-default provisions in the indentures or in the leases unless otherwise agreed to between an owner participant and ATA. This means that if the secured promissory notes relating to an aircraft are in default, and the secured promissory notes issued with respect to the remaining aircraft are not in default, no remedies will be exercisable with respect to the remaining aircraft. Subordination.............................. By virtue of the intercreditor agreement, the secured promissory notes are cross-subordinated. This means that payments received on a junior class of secured promissory notes relating to one aircraft may be applied according to the priority of payment provisions in the intercreditor agreement to make payments relating to a more senior class of certificates. Under the
10 intercreditor agreement, distributions on the certificates will be made in the following order: o first, to the holders of the Class A certificates; o second, to the holders of the Class B certificates; and o third, if Class C certificates have been issued, to the holders of the Class C certificates. Certain payments to the liquidity provider will be made prior to payments on all or some of the certificates, as discussed under "Description of the Intercreditor Agreement--Priority of Distributions." The subordination provisions may permit distributions to junior certificateholders after a default on the secured promissory notes even if more senior certificateholders have not been repaid in full. The subordination provisions do not apply to payments relating to the deposits or proceeds of advances under the liquidity facilities. Control of Loan Trustee.................... The holders of at least a majority of the outstanding principal amount of secured promissory notes issued under each indenture will be entitled to direct the Loan Trustee under such indenture in taking action as long as no Indenture Default is continuing thereunder. If an Indenture Default is continuing under such indenture, the controlling party with respect to the indenture will, subject to certain limited exceptions discussed below, be entitled to direct the loan trustee in taking remedial action under that indenture, which may include accelerating the secured promissory notes under that indenture or foreclosing the lien on the aircraft securing those secured promissory notes. In exercising remedies during the nine months after the earlier of (a) the acceleration of the secured promissory notes issued under any indenture and (b) our bankruptcy, the controlling party may not sell the secured promissory notes or the aircraft subject to the lien of that indenture for less than certain specified minimums or modify lease rental payments for that aircraft below a specified threshold. The controlling party will be:
11 o the Class A pass through trustee if final distributions on the Class A certificates have not been made; and o the Class B trustee, upon payment of final distributions of the aggregate outstanding balance of the Class A certificates, together with accrued interest to the holders of the Class A certificates. Under certain circumstances, the liquidity provider with the greater amount owed to it may elect to act as the controlling party. See "Description of the Intercreditor Agreement--Intercreditor Rights" and "Description of the Intercreditor Agreement--Voting of Secured Promissory Notes." Right to Buy Other Classes of Certificates............................ If ATA is in bankruptcy or another Triggering Event has occurred, the certificateholders may have the right to buy the more senior classes of certificates. See "Description of the Certificates-- Purchase Rights of Certificateholders." This right to buy is based on the following: o the Class B certificateholders will have the right to purchase all the Class A certificates; o if any Class C certificates are issued, the Class C certificateholders will have the right to purchase all the Class A and Class B certificates. The purchase price will be the outstanding balance of the applicable classes of certificates plus accrued and unpaid interest, plus any other amounts then due to the certificateholders of those classes. Liquidity Facilities....................... Under the liquidity facility for each of the Class A and Class B pass through trusts, the liquidity provider will, if necessary, make advances in an aggregate amount sufficient to pay interest on up to six successive quarterly regular distribution dates at the applicable interest rate for the certificates of that pass through trust. The liquidity facilities may not be used to pay any other amount relating to the certificates and will not cover interest on deposits held with the Depositary.
12 The holders of the certificates to be issued by each pass through trust will be entitled to receive and keep the proceeds of advances under the liquidity facility for that pass through trust. This is because the subordination provisions will not apply to the proceeds of advances under the liquidity facilities. Upon receipt of each advance under any liquidity facility, the subordination agent will, to the extent of available funds, reimburse the liquidity provider for the amount of that advance. That reimbursement obligation and all interest, fees and other amounts owing to the liquidity provider will rank senior to all classes of certificates in right of payment. Escrowed Funds............................. Funds paid to the escrow agent by a class of certificateholders will be deposited with a depositary and held as deposits under a separate deposit agreement for the pass through trust that issued that class of certificates. Funds may be withdrawn by the escrow agent at the direction of the pass through trustee for that class of certificates to purchase secured promissory notes prior to the delivery period termination date. On each regular distribution date, the depositary will pay to the paying agent interest accrued on the deposits relating to that pass through trust at a rate equal to the interest rate applicable to the certificates issued by that pass through trust. The paying agent, on behalf of the escrow agent, will pay that interest to that class of certificateholders. The deposits relating to a pass through trust and interest paid on the deposits will not be subject to the subordination provisions. Except as noted in the next paragraph, the deposits cannot be used to pay any other amount relating to the certificates. Unused Escrowed Funds...................... We may not use all the deposits held in escrow prior to the delivery period termination date. This may happen because of delays in the delivery of aircraft or for other reasons. If any funds remain as deposits with respect to any pass through trust after the delivery period termination date, they will be withdrawn by the escrow agent for that pass through trust and distributed, with accrued and unpaid interest, to the holders of escrow receipts relating to the respective pass through trust. The holders of escrow receipts will receive at least 15 days' prior written notice of this distribution. This distribution will also include a premium payable by ATA, provided that no premium will be paid on unused deposits attributable to the failure of an aircraft to be
13 delivered prior to the delivery period termination date for any reason that was not ATA's fault or was not caused by ATA's negligence or where unused deposits (other than unused deposits resulting from any such failure of delivery) are less than $5.0 million. Any premium paid on unused deposits will not be subject to the subordination provisions. See "Description of the Deposit Agreements--Unused Deposits." In addition, if any aircraft expected to be delivered under an aircraft purchase agreement between GECC and the manufacturer is not leased to or owned by ATA and a substitute aircraft is not substituted therefore, the deposits relating to such aircraft may be withdrawn and distributed. Obligation to Purchase Secured Promissory Notes ........................ Under a note purchase agreement, the Class A and Class B pass through trustees will be obligated to purchase the Series A and Series B secured promissory notes, respectively, issued for each aircraft. In the case of a leased aircraft, the terms of the financing agreements entered into may differ from the forms of those agreements described in this prospectus because ATA, ATA Holdings or the owner participant may request changes. However, under the note purchase agreement, the terms of those financing agreements must (a) contain mandatory document terms that are included in the note purchase agreement with only those modifications as are permitted by the note purchase agreement and (b) not vary mandatory economic terms that are included in the note purchase agreement. In addition, ATA must (a) certify to the pass through trustees that any modifications to the forms of the financing agreements do not materially and adversely affect the certificateholders and (b) obtain written confirmation from Moody's that the use of versions of agreements modified in any material respect will not result in a withdrawal, suspension or downgrading of the rating of any class of certificates. The pass through trustees will not be obligated to purchase secured promissory notes if, at the time of issuance, ATA is in bankruptcy or certain other specified events have occurred. The pass through trustees will also have no right or obligation to purchase the secured promissory notes after the delivery period termination date.
14 Secured Promissory Notes (a) Issuer.............................. Leased Aircraft. Promissory notes secured by aircraft leased by ATA will be issued by an owner trustee. These secured promissory notes will be non-recourse to the owner trustee in its individual capacity. ATA's obligations under the related lease and related documents will be sufficient to pay scheduled payments on those secured promissory notes. Owned Aircraft. ATA will be the issuer of promissory notes secured by aircraft that ATA owns. (b) Interest............................ The secured promissory notes held in each pass through trust will accrue interest at the annual rate for the certificates issued by that pass through trust as shown on the cover page of this prospectus. Interest on all secured promissory notes will be payable on February 20, May 20, August 20 and November 20 of each year, commencing on May 20, 2002. Interest is calculated on the basis of a 360-day year consisting of twelve 30-day months. (c) Principal........................... Principal payments on the Series A and Series B secured promissory notes held in each related trust are scheduled to begin on February 20, 2003. (d) Redemption and Purchase............. Aircraft Event of Loss. If an aircraft, with respect to which secured promissory notes have been issued, is lost, destroyed or damaged beyond repair or other events of loss occur with respect to an aircraft, all the secured promissory notes issued for that aircraft will be redeemed, unless ATA replaces the aircraft under the related lease or financing agreements. The redemption price in this case will be the unpaid principal amount of those secured promissory notes, together with accrued interest, but without any premium. Optional Redemption. The issuer of the secured promissory notes for an aircraft may elect to redeem the notes prior to maturity. The redemption price in this case will be the unpaid principal amount of those secured promissory notes, together with accrued interest plus a premium. See "Description of the Secured Promissory Notes--Redemption." Purchase by Owner. If an event of default under a lease between ATA and an owner trustee occurs and is continuing, the applicable owner trustee or owner participant of an aircraft may elect to purchase all the secured promissory notes with respect to that aircraft,
15 subject to the terms of the relevant leased aircraft indenture. The purchase price in this case will be the unpaid principal amount of those secured promissory notes, together with accrued interest, but without any premium except under certain circumstances specified in the relevant leased aircraft indenture. For an event of default with respect to an owned aircraft, ATA will have no comparable right to purchase the secured promissory notes. (e) Security............................ The secured promissory notes issued for each aircraft will be secured by a security interest in that aircraft and, in the case of each leased aircraft, in the related owner trustee's rights under the lease for that aircraft, subject to limited exceptions. The secured promissory notes are not cross-collateralized. This means that the secured promissory notes issued for an aircraft will not be secured by any other aircraft or lease. Any proceeds from the sale of an aircraft or from the exercise of other default remedies for an aircraft will not be available to cover shortfalls with respect to any other aircraft. The secured promissory notes are cross-subordinated under the intercreditor agreement. This means that payments received on a junior series of secured promissory notes issued for one aircraft may be applied to make payments relating to a more senior class of certificates. There are no cross-default provisions in the indentures or in the leases unless otherwise agreed to between an owner participant and ATA. This means that if the secured promissory notes issued for one aircraft are in default and the secured promissory notes issued for the remaining aircraft are not in default, no remedies will be exercisable with respect to the remaining aircraft. Although the secured promissory notes issued in respect of the leased aircraft are not obligations of, or guaranteed by, ATA or ATA Holdings, the amounts payable by ATA (and fully and unconditionally guaranteed by ATA Holdings) under the lease will be sufficient to pay when due all amounts payable on the secured promissory notes. The secured promissory notes issued in respect of the owned aircraft will be direct obligations of ATA, and will be fully and unconditionally guaranteed by ATA Holdings.
16 (f) Section 1110 Protection............. Our outside counsel will provide its opinion to the pass through trustees that the loan trustee will be entitled to the benefits of Section 1110 of the U.S. Bankruptcy Code with respect to the relevant aircraft. See "Description of the Secured Promissory Notes--Remedies." U.S. Income Tax Matters.................... The arrangement represented by the pass through trusts will be classified as one or more grantor trusts (or as a partnership) for U.S. federal income tax purposes. The pass through trusts will take the position that they will be treated as one or more grantor trusts. Under this approach, each U.S. person acquiring an interest in the certificates will be treated as the owner of a pro rata undivided interest in the assets of the pass through trust allocable to such certificates and will be required to report on its federal income tax return its pro rata share of the entire income from the relevant deposits and its pro rata share of the entire income from the secured promissory notes and other property held by the relevant pass through trust. See "U.S. Federal Income Tax Consequences." ERISA Considerations....................... In general, employee benefit plans subject to Title I of ERISA or Section 4975 of the U.S. tax code, entities that may be deemed to hold the assets of those plans, and other plans will be eligible to purchase the certificates, subject to the conditions and circumstances that apply to those plans. Each person who acquires a certificate will be deemed to have represented and warranted that either: (a) no plan assets have been used to purchase that certificate or (b) the purchase and holding of that certificate are exempt from the prohibited transaction restrictions of ERISA and Section 4975 of the U.S. tax code pursuant to one or more prohibited transaction exemptions and are permissible under all applicable laws. See "ERISA Considerations." Rating of the Certificates................. It was a condition to the issuance of the certificates that the certificates have at least the following ratings from Moody's Investors Service: CERTIFICATES MOODY'S ------------ ------- Class A.........................................Baa3 Class B..........................................Ba3
17 A rating is not a recommendation to purchase, hold or sell certificates. Ratings do not address market price or suitability for a particular investor. There can be no assurance that these ratings will not be lowered or withdrawn by Moody's. STANDARD & MOODY'S POOR ------- ---- Rating of the Depositary................... Short Term.............. P-1 A-1 SHORT TERM ---------- Threshold Rating for the Liquidity Provider..................... Class A................. P-1 A-1 Class B................. P-1 A-1 Rating of the Liquidity Provider........... The liquidity provider meets the threshold ratings requirement for each class of certificates. Exchange Offer; Registration Rights.................................. Pursuant to a registration rights agreement among ATA, the pass through trustee and the purchasers of the certificates, we have agreed to: o use our reasonable best efforts to file with the Commission this registration statement with respect to an offer to exchange the certificates for certificates of the pass through trusts having substantially identical terms as the certificates (except that the exchange certificates will not have transfer restrictions or interest rate step-up provisions) within 240 days after the date of the first issuance of the Outstanding Certificates; and o use our reasonable best efforts to cause this registration statement to become effective under the Securities Act within 300 days of the date of the first issuance of the Outstanding Certificates. Under certain circumstances, we have also agreed to file a shelf registration statement with respect to the resale of the certificates and use our reasonable best efforts to keep such shelf registration statement effective until two years after the date of issuance of the
18 certificates. The interest rate on the secured promissory notes is subject to increase under certain circumstances if we do not comply with our obligations under the registration rights agreement. See "Exchange Offer; Registration Rights."
USE OF PROCEEDS There will be no proceeds from the Exchange Certificates. The proceeds from the sale of the Outstanding Certificates were deposited with the depositary on behalf of the applicable escrow agent for the benefit of the certificateholders of the pass through trusts. Upon the request of the pass through trustees, the escrow agent has and will withdraw the deposits and deliver the proceeds to the pass through trustees to purchase one or more secured promissory notes. If an owner trustee issues the secured promissory notes, the owner trustee will use the proceeds of the sale of the secured promissory notes to finance or refinance a portion of the purchase price of an aircraft. Upon the purchase of an aircraft by an owner trustee, the aircraft will be leased by the owner trustee to ATA. ATA presently intends to operate the aircraft, however, it is permitted to sublease the aircraft to other carriers. If ATA issues the secured promissory notes, ATA will use the proceeds from the sale of the secured promissory notes to finance or refinance the purchase of aircraft that ATA will own. RISK FACTORS For a description of certain factors that should be considered by holders who tender their Outstanding Certificates in the exchange offer, see "Risk Factors" beginning on page 22. SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA In the table below, we provide you with summary historical financial data and other operating information of ATA Holdings. We have prepared the selected financial data included in this information using the consolidated financial statements of ATA Holdings for the five years ended December 31, 2001 and the nine-month periods ended September 30, 2002 and 2001. The financial statements for the five fiscal years ended December 31, 2001 have been audited by Ernst & Young LLP, independent auditors. The summary consolidated financial data for the nine months ended September 30, 2002 and 2001 has not been audited. The unaudited consolidated financial statements include all adjustments, consisting of normal recurring accruals, that we consider necessary for the fair presentation of our financial position and results of operations for these periods. When you read this summary historical financial data, it is important that you read along with it the historical financial statements and related notes in our annual and quarterly reports filed with the SEC, as well as the section of our annual and quarterly reports titled "Management's Discussion and Analysis of Financial Condition and Results of Operations." 19
NINE MONTHS YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30, 1997 1998 1999 2000 2001 2001 2002 ---- ---- ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Operating revenues................ $783,193 $ 919,369 $1,122,366 $1,291,553 $1,275,484 $1,027,849 $966,400 Depreciation and amortization..... 62,468 78,665 96,038 125,041 121,327 101,400 60,258 Operating income (loss)........... 13,484 75,373 90,027 2,570 (91,870) 18,777 (108,879) Interest expense.................. 9,454 12,808 20,966 31,452 30,082 21,345 25,979 Income (loss) before income taxes........................... 6,027 67,210 77,797 (19,931) (116,067) 3,442 (133,708) Income (loss) available to common shareholders(13)......... 1,572 40,081 47,342 (15,699) (81,885) (548) (117,374) Net income (loss) per share-basic..................... 0.14 3.41 3.86 (1.31) (7.14) (0.05) (10.04) Net income (loss) per share-diluted................... 0.13 3.07 3.51 (1.31) (7.14) (0.05) (10.04) BALANCE SHEET DATA (AT END OF PERIOD): Cash.............................. $104,196 $172,936 $120,164 $129,137 $184,439 $159,948 $113,058 Non-cash working capital (deficiency)(1)................... (100,731) (112,276) (128,191) (6,833) 22,331 83,462 (61,016) Property and equipment, net....... 267,681 329,332 511,832 522,119 314,943 732,999 293,931 Total assets...................... 450,857 594,549 815,281 1,032,430 1,002,962 1,262,520 814,478 Short-term debt (including current maturities)............. 8,975 1,476 2,079 96,740 124,059 148,484 80,768 Long-term debt.................... 182,829 245,195 345,792 361,209 373,533 507,989 334,727 Total debt........................ 191,804 246,671 347,871 457,949 497,592 656,473 415,495 Shareholders' equity (deficit)(2).................... 56,990 102,751 151,376 124,654 44,132 124,373 (69,949) OTHER FINANCIAL DATA: EBITDAR(3)........................ $132,390 $211,811 $253,454 $208,707 $134,330 $194,466 $88,260 EBITDA(3)......................... 77,949 158,683 194,801 136,562 35,342 126,187 (47,471) Net cash provided by (used in) operating activities............ 99,936 151,812 152,673 111,692 144,424 141,974 (4,884) Net cash provided by (used in) investing activities............ (76,055) (142,352) (305,718) (290,837) (129,791) (308,128) 15,678 Net cash provided by (used in) financing activities........... 6,933 59,280 100,273 188,118 40,669 196,965 (82,175) Ratio of earnings to fixed charges(4)...................... 1.19 3.03 2.65 -- -- -- -- Deficiency of earnings available to cover fixed charges(4)...................... -- -- -- 23,138 130,353 7,950 139,381
NINE MONTHS YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30, 1997 1998 1999 2000 2001 2001 2002 ---- ---- ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS) SELECTED OPERATING DATA FOR PASSENGER SERVICE:(5) Available seat miles (millions)(6)................. 12,647.7 13,851.7 15,082.6 16,390.1 16,187.7 12,583.4 13,050.6 Revenue passenger miles (millions)(7))................ 8,986.0 9,758.1 10,949.0 11,816.8 11,675.7 9,289.8 9,396.2 Passenger load factor(8)........ 71.0% 70.5% 72.6% 72.1% 72.1% 73.8% 72.0% Revenue per available seat mile. 6.19(cent) 6.64(cent) 7.44(cent) 7.88 7.88 8.17 7.41 Operating expense per ASM(9).... 6.09(cent) 6.09(cent) 6.84(cent) 7.86 8.45 8.02 8.24 Block hours flown(10)........... 139,426 160,403 175,460 191,532 197,043 151,743 173,267 Average daily aircraft utilization (block hours per day)(11): Lockheed L-1011-50/100........ 6.48 6.72 6.51 6.63 6.02 6.42 4.45 Lockheed L-1011-500........... - - 6.47 6.77 6.69 7.45 5.93 Boeing 727-200 ADV............ 7.94 9.02 8.95 8.78 7.48 8.29 5.04 Boeing 757-200................ 10.86 11.88 11.86 11.90 11.30 11.55 10.84 Boeing 737-800................ - - - - 9.14 9.85 9.94 Boeing 757-300................ - - - - 9.78 8.60 9.72 Total aircraft.................. 45 48 53 58 60 59 63
- -------------------- (1) Non-cash working capital consists of total current assets (excluding cash) less total current liabilities (excluding current maturities of long term debt and short term debt). (2) No common stock dividends were paid in any of the periods presented. (3) EBITDAR represents net income (loss) plus interest expense (net of capitalized interest), income tax expense, depreciation, amortization and aircraft rentals. EBITDA represents net income plus interest expense (net of capitalized interest), income tax expense, depreciation and amortization. EBITDAR and EBITDA are presented because each is a widely accepted financial 20 indicator of a company's ability to incur and service debt. However, EBITDAR and EBITDA should not be considered in isolation, as a substitute for net income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. (4) The "ratio of earnings to fixed charges" represents earnings divided by fixed charges, as defined in the following paragraph. The "deficiency" represents the amount of fixed charges in excess of earnings. For purposes of these computations, earnings consist of income (loss) before income taxes, plus fixed charges, adjusted to exclude the amount of any interest capitalized during the period. Fixed charges include the total of: (i) interest, whether expensed or capitalized; (ii) amortization of debt expense relating to any indebtedness, whether expensed or capitalized; and (iii) such portion of rental expense as can be demonstrated to be representative of the interest factor. (5) The operating data (other than revenue per ASM and operating expense per ASM) pertain to ATA and Chicago Express and do not include information for other operating subsidiaries of ATA Holdings. (6) "Available seat miles" or "ASMs" represent the number of seats available for sale to passengers multiplied by the number of miles those seats are flown. (7) "Revenue passenger miles" or "RPMs" represent the number of miles flown by revenue passengers. (8) "Passenger load factor" represents revenue passenger miles divided by available seat miles. (9) "Operating expense per ASM" for any period represents the amount determined by dividing total operating expense for such period by the total ASMs for such period. (10) "Block hours flown" for any aircraft represents the elapsed time computed from the moment the aircraft first moves under its own power from the boarding ramp at one airport to the time it comes to rest at the boarding ramp of the next point of landing. (11) "Average daily aircraft utilization" is determined with respect to each aircraft type for any period by dividing the block hours flown by all aircraft of such type during such period by the number of days during such period that aircraft of such type were owned or leased by ATA. (12) The following summarized financial data (unaudited) in this table has been derived from the financial statements of ATA for each of the respective periods presented. ATA is the principal subsidiary of ATA Holdings. The following financial data excludes the other subsidiaries of ATA Holdings (Ambassadair Travel Club, Inc., ATA Leisure Corp., Amber Travel, Inc., American Trans Air Execujet, Inc., Amber Air Freight Corporation, American Trans Air Training Academy, Inc. and Chicago Express) as ATA is the principal operating subsidiary of ATA Holdings. ATA Holdings allocates certain expenses, such as income taxes, to the various subsidiaries as if they were operating on a stand alone basis. (13) During 2001, several nonrecurring events resulted in significant changes and credits to operating loss, see "Financial Statements and Supplementary Data--Notes to Consolidated Financial Statements--Note 2--Impact of Terrorist Attacks on September 11, 2001" and "Financial Statements and Supplementary Data--Notes to Consolidated Financial Statements--Note16--Asset Impairment".
NINE MONTHS YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30, 1997 1998 1999 2000 2001 2001 2002 ---- ---- ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA:(12) Operating revenues................ $744,153 $877,187 $1,008,855 $1,180,962 $1,153,672 $929,906 $874,362 Depreciation and amortization..... 62,281 78,595 93,820 120,262 117,813 98,748 58,595 Operating income (loss)........... 10,325 80,920 97,558 18,680 (91,454) 19,864 (111,616) Interest expense, net............. 9,454 12,808 20,969 31,474 30,094 21,355 25,979 Income (loss) before income taxes. 2,627 72,528 84,989 (4,359) (115,875) 4,332 (136,621) Net income (loss)................. 69 43,329 51,951 (5,579) (76,198) 3,427 (117,052) BALANCE SHEET DATA (AT END OF PERIOD): Working capital (deficiency)(a)... $(51,939) $10,768 $(32,049) $(54,102) $11,703 $24,244 $(108,930) Property and equipment, net....... 267,556 328,661 508,210 650,185 299,255 716,140 283,471 Total assets...................... 466,923 593,489 823,090 1,050,579 1,140,988 1,382,651 773,869 Short-term debt (including current maturities)..................... 8,975 1,476 2,079 96,740 124,059 148,484 80,768 Long-term debt.................... 182,829 245,195 345,792 361,209 373,533 507,989 334,727 Total debt........................ 191,804 246,671 347,871 457,949 497,592 656,473 415,495 Shareholders' equity (deficit)(b).................... 6,762 50,091 102,039 96,461 20,263 99,888 (98,020)
(a) Working capital consists of total current assets less current liabilities. (b) No dividends were paid in any of the periods presented. 21 RISK FACTORS You should carefully read this entire prospectus and the documents incorporated by reference in this prospectus before investing in the Exchange Certificates. Among the factors that may adversely affect an investment in the Exchange Certificates are the following: RISK FACTORS RELATING TO THE COMPANY Our high proportion of debt compared to our equity capital may impair our flexibility. We have a higher proportion of debt compared to our equity capital than some of our principal competitors. We need substantial cash resources to meet scheduled debt and lease payments and to finance day-to-day operations. As a result, we may be less able than some of our competitors to withstand a prolonged recession in the airline industry or respond to changing economic and competitive conditions. We may be restricted in our ability to pursue new business opportunities. In addition, our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other purposes may be impaired. As of September 30, 2002, we had: o $113.1 million of cash and cash equivalents; and o $415.5 million of indebtedness outstanding (approximately $115.0 million of which was secured). As a result, at that date, total consolidated debt was 97.6% of total capitalization, which represents significant financial leverage, even in the highly leveraged airline industry. In addition, ATA has substantial obligations under operating leases for 62 aircraft (exclusive of the aircraft relating to the certificates), including 15 Saab 340B propeller aircraft operated by our commuter airline, Chicago Express Airlines, Inc., which are not recorded as indebtedness. In addition to these existing leases, we are committed to taking future delivery of 13 additional new aircraft (exclusive of the aircraft relating to the certificates), which we expect to finance with operating leases. We had interest expense of approximately $26.0 million for the nine months ended September 30, 2002 and $21.3 million for the nine months ended September 30, 2001. This resulted in an EBITDA to interest expense ratio of approximately 1.8 times for the nine months ended September 30, 2002 and 5.9 times for the nine months ended September 30, 2001. The ratio of EBITDAR to the sum of interest (net of capitalized interest) plus aircraft rentals was 0.5 for the nine months ended September 30, 2002 and 2.2 for the nine months ended September 30, 2001. Our ability to satisfy our obligations will be dependent upon our future performance, which is subject to general economic conditions and to financial, business and other factors, including factors beyond our control. Our operating results and cash flow could be adversely affected by many factors, including price competition, increases in fuel costs, a downturn in general economic conditions and adverse regulatory changes. 22 We generally operate with a working capital deficit, and we will require additional financing to meet our obligations. Although we, like most other airlines, generally operate with a working capital deficit, we have met our obligations as they have become due. In order to meet short-term cash needs, ATA maintains a bank credit facility. This facility would have matured January 2, 2003, however the Company has funded a government guaranteed secured term loan to replace the facility. The Company issued stock warrants to the Federal Government equalling 12 percent of the outstanding stock in conjunction with the guaranteed loan. At September 30, 2002, our current assets were $351.6 million, and our current liabilities were $380.3 million. We require significant levels of capital investment for aircraft, engine and airframe maintenance and acquisition to maintain our competitive position and to expand our operations. For the year ended December 31, 2002 we expect that: o capital expenditures for scheduled maintenance and rotable parts will total approximately $52.1 million; and o additional capital expenditures will total approximately $15.0 million. We may seek to supplement our current sources of financing with other sources of long-term financing, including obtaining vendor financing, entering into sale-leaseback transactions and making public and private debt offerings. We may also seek additional equity financing. We also may decide to refinance our long-term debt at or prior to its maturity. We cannot assure you that any such financing would be available on satisfactory terms. If we are unable to obtain sufficient financing for capital expenditures and to refinance maturing debt, our operations and ability to pay debt service may be adversely affected. Our earnings have been volatile. For the year ended December 31, 1997, we had net income of $1.6 million, for the year ended December 31, 1998, we had net income of $40.1 million, for the year ended December 31, 1999, we had net income of $47.3 million, for the year ended December 31, 2000, we had a loss available to common shareholders of $15.7 million and for the year ended December 31, 2001, we had a loss available to common shareholders of $81.9 million. In 2001, our earnings were significantly impacted by the terrorist attacks on September 11, 2001. During 2002, our earnings continue to be affected by the industry changes brought about by the events of September 11, 2001, and we expect to incur another net loss for the year ended December 31, 2002. We cannot predict when the Company will return to profitability and our results of operations may continue to be volatile in future periods. Changes in our financial condition could reduce our liquidity from credit card sales. A significant portion of our sales are paid for by customers using credit cards. Cash from these sales is normally paid to us by our credit card processing bank several days after the sale, although we may provide the purchased services days, weeks or months later. If we fail to perform pre-paid services, the purchaser may be entitled to a refund which, if not paid by us, is the obligation of the bank. To mitigate this risk, our credit card processing bank currently retains 60% of the balance of pre-paid sales. Certain adverse changes in our financial condition could trigger our 23 processing bank to retain a higher percentage of our pre-paid sales, up to 100%, which would significantly reduce our liquidity. We have the right to terminate this credit card processing agreement upon providing appropriate notice, but if we do so, the bank may retain a deposit equaling the amount of purchased services not yet performed for up to 16 months from the date of termination. We may pursue strategic alternatives that result in a change of control and increased leverage, and we may not be able to satisfy all of our obligations upon the occurrence of a change of control. We actively consider and enter into discussions regarding possible business combinations with air carriers and others, and plan to continue to do so. It is possible that we will enter into a transaction that will result in a change of control of ATA Holdings. If we enter into such a transaction, it could result in an increase in our indebtedness. In addition, a change of control of ATA Holdings must be approved by the Air Transportation Stabilization Board. In the event a change of control is accompanied by a ratings downgrade, we will be required to offer to purchase all amounts due under the 10 1/2% senior notes due 2004 and the 9 5/8% senior notes due 2005 issued by ATA Holdings at 101% of par plus accrued interest. We cannot assure you that we would be able to satisfy all of our obligations under the bank credit facilities and the notes in these circumstances. The failure to satisfy our obligations would materially adversely affect our business, operations and financial results as well as the market price of the certificates. Our existing financing agreements and operating leases contain restrictive covenants that may limit our flexibility and if we fail to comply with these restrictions, our debt obligations could be accelerated and our operating leases could be canceled. Our existing debt financing agreements and our operating leases relating to some of our aircraft contain restrictive covenants that impose significant operating and financial restrictions on us. For example, the bank credit facilities maintained by ATA and the indenture relating to our 10 1/2% senior notes due 2004 prohibit or restrict our ability to: o incur additional indebtedness; o create material liens on our assets; 24 o sell assets or engage in mergers or consolidations; o redeem or repurchase outstanding debt; o make specified investments; o pay cash dividends; and o engage in other significant transactions. The indenture relating to our 9 5/8% senior notes due 2005 contains similar restrictions. In addition, our financing agreements and our operating leases require us to maintain compliance with specified financial ratios and other financial and operating tests. These restrictions and requirements may limit our financial and operating flexibility. In addition, if we fail to comply with these restrictions or to satisfy these requirements, our obligations under our debt and operating leases may be accelerated. We cannot assure you that we would be able to satisfy all of these obligations upon acceleration. The failure to satisfy these obligations would materially adversely affect our business, operations and financial results as well as the market price of the certificates. We may incur substantial losses in the event of an aircraft accident. We may incur substantial losses in the event of an aircraft accident. These losses may include the repair or replacement of a damaged aircraft, and the consequent temporary or permanent loss of the aircraft from service, as well as claims of injured passengers and other persons. We are required by the Department of Transportation to carry liability insurance on each of our aircraft. We currently maintain liability insurance for passengers and third party damages, excluding those caused by an event of terrorism, in the amount of $1.5 billion. In addition, we currently maintain liability insurance for third party damages caused by an event of terrorism in the amount of $100.0 million, of which $50.0 million is provided by the commercial insurance market and $50.0 million is provided by the U.S. Government. The U.S. Government provides indemnification of up to $1.5 billion for third party damages in excess of $100.0 million in the event of terrorism. Although we believe our insurance coverage is adequate, we cannot assure you that the amount of our insurance coverage will not be changed or that we will not be forced to bear substantial losses from accidents. Substantial claims resulting from an accident could have a material adverse effect on our business, operations and financial results and could seriously inhibit passenger acceptance of our services. Our customers may cancel or default on their contracts with us. Customers who have contracted with us may cancel or default on their contracts, and we may not be able to obtain other business to cover the resulting loss in revenues. If customers with large contracts cancel or default and we are not able to obtain other business, our financial position could be materially adversely impacted. 25 Our largest customer during each of the last three years was the U.S. military, which accounted for 13.1% of our total operating revenues in 2001, 14.6% of our total operating revenues in 2000, and 11.2% of our total operating revenues in 1999. In 2001, our five largest non-military customers accounted for approximately 18.0% of total operating revenues. No single non-military customer accounted for more than 10% of total operating revenues during this period. Our airline business is significantly affected by seasonal factors, and our results of operations for any one quarter are not necessarily indicative of our annual results of operations. Our airline businesses are significantly affected by seasonal factors. Historically, we have experienced reduced demand during the fourth quarter as demand for leisure airline services during this period is lower relative to other times of the year. Our results of operations for any one quarter are not necessarily indicative of our annual results of operations. Many of our employees are represented by unions, and a prolonged dispute with our employees could have an adverse impact on our operations. Our flight attendants are represented by the Association of Flight Attendants (AFA). Our current collective bargaining agreement with the AFA will become subject to amendment, but will not expire, in October 2004. Our cockpit crews are represented by the Air Line Pilots Association (ALPA). Our current collective bargaining agreement with ALPA will be subject to amendment, but will not expire, in June 2006. Our dispatchers are represented by the Transport Workers Union (TWU). Our current collective bargaining agreement with the TWU will become subject to amendment, but will not expire, in August 2004. Our ramp service agents elected to be represented by the International Association of Machinists (IAM) in February 2001. Negotiations began with IAM in May 2001, but no collective bargaining agreement has been finalized. In February 2002, our aircraft mechanics elected to be represented by the Aircraft Mechanics Fraternal Association (AMFA), and negotiations with them began in October 2002. A prolonged dispute with our employees who are represented by any of these unions, or any sizable number of our employees, could have an adverse impact on our operations. Our revenues could be adversely impacted by our relationship with travel agents and tour operators. Our revenues could be adversely impacted if travel agents and tour operators elect to favor other airlines or to disfavor us. Our relationship with travel agents and tour operators may be affected by: o the size of override commissions offered by other airlines; o changes in our arrangements with other distributors of airline tickets; and o the introduction and growth of new methods of selling tickets. In 2001, approximately 67.0% of our revenues were derived from tickets sold by travel agents or tour operators, and, in 2000, approximately 64.0% of our revenues were derived from tickets sold by travel agents or tour operators. Although we will continue to strive to offer 26 competitive products to travel agencies and tour operators, we cannot assure you that we will be able to maintain favorable relationships with these ticket sellers. RISK FACTORS RELATING TO THE AIRLINE INDUSTRY Tbe terrorist attacks of September 11, 2001 continue to impact the airline industry in general. The terrorist attacks of September 11, 2001 were highly publicized. The impacts that these events will continue to have on the airline industry in general are not known at this time, but are expected to include a substantial negative impact on our ability to return to profitable operations due in part to: o A reduction in the demand for travel in the near and mid-term until public confidence in the air transportation system is restored; o An increase in costs due to enhanced security measures and government directives in response to the terrorist attacks; o An increase in the cost of aviation insurance in general, and the cost and availability of coverage for acts of war, terrorism, hijacking, sabotage and similar acts of peril in particular; and o The potential increase in fuel costs and decrease in availability of fuel if oil-producing countries are affected by the aftermath. Because the airline industry is characterized by low gross profit margins and high fixed costs, a minor shortfall from expected revenue could have a significant impact on earnings. The airline industry as a whole and scheduled service in particular are characterized by low gross profit margins and high fixed costs. The costs of operating each flight do not vary significantly with the number of passengers carried and, therefore, a relatively small change in the number of passengers or in fare pricing or traffic mix could, in the aggregate, have a significant effect on operating and financial results. Accordingly, a minor shortfall from expected revenue levels could have a significant impact on earnings. Our products and services face varying degrees of competition. Competition for Scheduled Services. In scheduled service, we compete against both the large U.S. scheduled service airlines as well as other sizable low-fare carriers, and, from time to time, against smaller regional or start-up airlines. Competition is generally based on price, schedule, quality of service and convenience. Much of our competition has greater financial resources than we do. Where we seek to expand our service by adding routes or frequency, competing airlines may respond with intense price competition. In addition, when other airlines seek to establish a presence over new routes, they may engage in significant price discounting. Because of our size and financial resources relative to the major airlines, we are less able to absorb losses from these activities than many of our competitors. Competition for Commercial Charter Services. In commercial charter service, we compete against both the major U.S. scheduled airlines and smaller U.S. charter airlines. We also compete 27 against several European and Mexican charter and scheduled airlines, some of which are larger than we are and have substantially greater financial resources than we do. Competition for Military and Other Government Charter Services. We generally compete for military and other government charters with primarily smaller U.S. passenger airlines. The allocation of U.S. military air transportation contracts is based upon the number and type of aircraft a carrier, alone or through a teaming arrangement, makes available for use to the military. The formation of competing teaming arrangements that have larger partners than those in which we participate, an increase by other air carriers in their commitment of aircraft to the military or the withdrawal of our current partners could adversely affect our U.S. military charter business. Significant increases in the cost of aircraft fuel could adversely impact our operating results. Fuel costs are a significant portion of our operating costs, comprising approximately 18.4% of our operating costs in 2001 and approximately 21.3% of our operating costs in 2000. In the nine months of 2002, fuel costs decreased 26.5% to $151.4 million as compared to $205.9 million in the same period of 2001. This decline in fuel expense is primarily driven by the replacement of certain older, less-fuel-efficient aircraft with new Boeing 757-300 and Boeing 737-800 aircraft over the last couple years. Although in recent years our fuel expense is declining, an increase in fuel price could adversely affect this declining trend. Fuel prices are affected by, among other factors, political and economic influences that we cannot control. In the event of a fuel supply shortage resulting from a disruption of oil imports or other events, higher fuel prices or the curtailment of scheduled service could result. We have worked to reduce some of the risks associated with fluctuations in fuel costs. In 2001, approximately 32.0% of our total operating revenues were derived from contracts that enable us to pass through increases in fuel costs, including contracts with the U.S. military. In 2000, approximately 33.5% of our total operating revenues were derived from these types of contracts. We are, however, exposed to increases in fuel costs that occur within 14 days of flight time, to all 28 increases associated with our scheduled service (other than bulk seat sales) and to increases affecting contracts that do not include fuel cost escalation provisions. The profitability of our operations is influenced by economic conditions as demand for leisure travel diminishes during economic downturns. The profitability of our operations is influenced by the condition of the U.S. and European economies, including fluctuations in currency exchange rates, that may impact the demand for leisure travel and our competitive pricing position. The majority of our charter and scheduled airline business, other than military, is leisure travel. Because leisure travel is discretionary, we have historically tended to experience somewhat weaker financial results during economic downturns and other events affecting international leisure travel. The airline industry is heavily regulated, and changes in our governmental authorizations or certificates, or changes in governmental regulations, could adversely impact our business. We are subject to a wide range of governmental regulation, including regulation by the Department of Transportation and the Federal Aviation Administration. A modification, suspension or revocation of any of our Department of Transportation or Federal Aviation Administration authorizations or certificates could adversely impact our business. The Department of Transportation principally regulates economic matters affecting air service, including: o air carrier certification and fitness; o security; o insurance; o leasing arrangements; allocation of route rights and authorization of proposed scheduled and charter operations; o allocation of landing slots and departure slots; o consumer protection; and o competitive practices. The Federal Aviation Administration primarily regulates flight operations, especially matters affecting air safety, including airworthiness requirements for each type of aircraft and pilot and crew certification. Changes in governmental regulation could also adversely impact our business. In recent years, for example, the Federal Aviation Administration has issued or proposed mandates relating to, among other things: o collision avoidance systems; o airborne windshear avoidance systems; 29 o noise abatement; and o increased inspections and maintenance procedures. We expect to incur expenses as we seek to comply with changes in Federal Aviation Administration regulations. The Federal Aviation Administration requires each carrier to obtain an operating certificate and operations specifications authorizing the carrier to fly to specific airports using specified equipment. Several aspects of airline operations are subject to regulation or oversight by federal agencies other than the Department of Transportation and the Federal Aviation Administration. For example, the United States Postal Service has jurisdiction over certain aspects of the transportation of mail and related services that we provide through our cargo affiliate. Labor relations in the air transportation industry are generally regulated under the Railway Labor Act, which vests in the National Mediation Board regulatory powers with respect to disputes between airlines and labor unions arising under collective bargaining agreements. We are also subject to the jurisdiction of the Federal Communications Commission regarding the use of radio facilities. In addition, we are subject to regulation on international flights by the Commerce Department, the Customs Service, the Immigration and Naturalization Service and the Animal and Plant Health Inspection Service of the Department of Agriculture. Also, while our aircraft are in foreign countries, we must comply with the requirements of similar authorities in those countries. We are also subject to compliance with standards for aircraft exhaust emissions promulgated by the Environmental Protection Agency and with regulations adopted by various local authorities that operate the airports we serve throughout our route network, including aircraft noise regulations and curfews. The Commerce Department also regulates the export and re-export of our U.S.-manufactured aircraft and equipment. While we intend to maintain all appropriate government licenses and to comply with all appropriate standards, we cannot assure you that we will be successful. We are subject to biennial inspections by the Department of Defense as a condition of retaining our eligibility to perform military charter flights. The last such inspection was completed in October 2001. As a result of our military business, we have been required from time to time to meet operational standards beyond those normally required by the Department of Transportation, the Federal Aviation Administration and other government agencies. At our aircraft line maintenance facilities, we use materials that are regulated as hazardous under federal, state and local laws. We are required to maintain programs to protect the safety of our employees who use these materials and to manage and dispose of any waste generated by the use of these materials in compliance with these laws. More generally, we are also subject at these facilities to federal, state and local regulations relating to protection of the environment and to discharge of materials into the environment. We do not expect that the costs associated with ongoing compliance with any of these regulations will have a material impact upon our capital expenditures, earnings or competitive position. Additional laws and regulations have been proposed from time to time that could significantly increase the cost of airline operations by, for instance, imposing additional requirements or restrictions on operations. In addition, laws and regulations have been considered from time to time that would prohibit or restrict the ownership and/or transfer of airline routes or takeoff and landing slots. Based upon bilateral aviation agreements between the United States and other nations, and, in the absence of such agreements, comity and reciprocity principles, we, as a charter carrier, are 30 generally not restricted as to the frequency of our flights to and from most foreign destinations. However, these agreements generally restrict us to the carriage of passengers and cargo on flights which either originate in the United States and terminate in a single foreign nation or which originate in a single foreign nation and terminate in the United States. Proposals for any additional charter service must generally be specifically approved by the civil aeronautics authorities in the relevant countries. Approval of these requests is typically based on considerations of comity and reciprocity and cannot be guaranteed. RISK FACTORS RELATING TO THE CERTIFICATES THe appraisals of the aircraft are only estimates of value, and they may differ significantly from the actual sales value of the aircraft. Three independent appraisal and consulting firms have prepared base value appraisals of the aircraft. Letters summarizing these appraisals are attached to this prospectus as Appendix II. These appraisals, which are based on the base value of the aircraft, rely on assumptions and methodologies and may not reflect current market conditions that could affect the fair market value of the aircraft. Base value is the theoretical value for an aircraft, as applicable, that assumes a balanced market, while current market value is the value for an aircraft in the actual market. The appraisals were prepared without physical inspection of the aircraft. Appraisals based on other assumptions and methodologies may result in valuations that are materially different from those contained in the appraisals. See "Description of the Aircraft and the Appraisals." An appraisal is only an estimate of value. It does not indicate the price at which an aircraft may be purchased from the manufacturer or the price at which an aircraft may be sold in connection with the exercise of remedies under any indenture. Therefore, the appraisal should not be relied upon as a measure of the actual sales value of the aircraft. The proceeds realized upon a sale of any aircraft may be less than its appraised value. In particular, the appraisals of the aircraft to be delivered after the date of this prospectus are estimates of values as of future delivery dates. The value of an aircraft, if remedies are exercised under the applicable indenture, will depend on market and economic conditions, the supply of similar aircraft, the availability of buyers, the condition of the aircraft and other factors. As a result, sale proceeds on any exercise of remedies may not be enough to pay the total amount due on the certificates. The secured promissory notes are not cross-collateralized. This means that liquidation proceeds from the sale of an aircraft in excess of the principal amount of the secured promissory notes related to that aircraft will not be available to cover losses, if any, on any other secured promissory notes. In addition, the value of the aircraft will likely be negatively affected, at least initially, as a consequence of the events of September 11, 2001. Accordingly, we cannot assure you that the proceeds realized upon any such exercise of remedies would be sufficient to satisfy in full payments due on the equipment notes relating to such aircraft or the full amount of distributions expected on the certificates. If the aircraft purchased with the proceeds of the certificates are not properly maintained, their value may be adversely affected. ATA is responsible for the maintenance, service, repair and overhaul of the aircraft purchased with the proceeds of the certificates, but only to the extent required by the relevant leases. 31 The failure of ATA to maintain, service, repair or overhaul an aircraft adequately may adversely affect its value. In addition, even if ATA complies with its obligations under the leases regarding the maintenance, service, repair and overhaul of the aircraft, the value of the aircraft may deteriorate. Any decrease in the value of an aircraft may adversely affect the holders of the secured promissory notes and the certificates upon a default by ATA (and ATA Holdings). If ATA does not maintain adequate insurance on the aircraft, the proceeds obtained in the event of a loss may not be sufficient to cover the entire loss. ATA is responsible for the maintenance of public liability, property damage and all-risk aircraft hull insurance on the aircraft to the extent required by the relevant leases or owned aircraft indentures. ATA's failure to maintain adequate levels of insurance for the aircraft, or the inclusion of deductible amounts, will affect the proceeds which could be obtained upon an event of loss and, thus, may affect the proceeds available to repay the holders of the secured promissory notes. The aircraft may be operated, registered or leased outside of the United States, which may hinder the efforts of a loan trustee to repossess an aircraft after a default under the relevant lease or owned aircraft indenture. The leases and owned aircraft indentures do not contain any general geographic restriction on ATA's ability to operate the aircraft. Although ATA has no current intention to do so, ATA is permitted, upon compliance with the leases and owned aircraft indentures, to register the aircraft in foreign jurisdictions and to lease or sublease the aircraft to other entities. While the loan trustees' rights and remedies in the event of a default under the leases and owned aircraft indentures include the right to terminate the leases and repossess the aircraft, it may be difficult, expensive and time-consuming to obtain possession of the aircraft, particularly when an aircraft located outside the United States has been registered in a foreign jurisdiction or is subleased to a foreign operator. Any exercise of the right to repossess the aircraft may be subject to the limitation and requirements of applicable law, including the need to obtain consents or approvals for deregistration or re-export of the aircraft, which may be subject to delays and to political risk. When a defaulting sublessee or other permitted transferee is the subject of a bankruptcy, insolvency or similar event, such as protective administration, additional limitations may apply. Furthermore, certain jurisdictions may accord higher priority to certain other liens or third-party rights over the aircraft. These factors could limit the benefits of the security interest in the aircraft. As permitted under the leases and owned aircraft indentures, at any time an airframe subject to a lease or owned aircraft indenture might not be equipped with engines subject to the same lease or indenture, and engines subject to a lease or indenture might not be on an airframe subject to that lease or indenture. As a result, although ATA contractually agrees to transfer title to the lessor of engines not owned by the applicable owner trustee that are attached to repossessed aircraft (or, for owned aircraft, to obtain for the related loan trustee a perfected first-priority security interest in engines attached to repossessed aircraft and not so owned), at the time of obtaining repossession it could be difficult, expensive and time-consuming to assemble an aircraft consisting of an airframe and the engines subject to the same lease or owned aircraft indenture. 32 If the controlling party sells the secured promissory notes for less than their outstanding principal amount upon a default under the relevant indenture, certificateholders will receive a smaller amount of principal distributions than expected. If a default under an indenture is continuing, whichever of the pass through trustee or the liquidity provider that is the controlling party may direct the loan trustee under that indenture to exercise remedies under that indenture. Remedies exercisable under an indenture may include accelerating the applicable secured promissory notes under the indenture or foreclosing the lien on the aircraft securing those secured promissory notes. See "Description of the Certificates -- Indenture Defaults and Certain Rights Upon an Indenture Default." The controlling party will be: the Class A pass through trustee if final distributions on the Class A certificates have not been made, and o the Class B trustee, upon payment of final distributions of the aggregate outstanding balance of the Class A certificates, together with accrued interest, to the holders of the Class A certificates. Under certain circumstances, the liquidity provider with the greater amount owed to it may elect to act as the controlling party. See "Description of the Intercreditor Agreement -- Intercreditor Rights." During the continuation of any indenture default, the controlling party may accelerate and sell the secured promissory notes issued under that indenture, subject to certain limitations. See "Description of the Intercreditor Agreement - -- Intercreditor Rights -- Sale of Secured Promissory Notes or Aircraft." The market for secured promissory notes during any indenture default may be very limited, and we cannot assure you as to the price at which they could be sold. If the controlling party sells any secured promissory notes for less than their outstanding principal amount, some certificateholders will receive a smaller amount of principal distributions than expected and will not have any claim for the shortfall against us, any owner trustee, any owner participant, any liquidity provider or any pass through trustee. The ratings of the Exchange Certificates from Moody's are subject to change. It is a condition to the issuance of each class of certificates that they receive at least the following ratings from Moody's.
MOODY'S ------- Class A Certificates..................................... Baa3 Class B Certificates..................................... Ba3
A rating is not a recommendation to purchase, hold or sell certificates, because that rating does not address market price or suitability for a particular investor. A rating may not remain for any given period of time and may be lowered or withdrawn entirely by a Rating Agency if at any time, in its judgment, circumstances in the future, including the downgrading of us, the Depositary or the liquidity provider, so warrant. 33 The rating of each class of certificates is based primarily on the default risk of the secured promissory notes purchased by that class, the Depositary for that class, the availability of the liquidity facility for the benefit of holders of that class of certificates, the collateral value provided by the aircraft relating to the secured promissory notes and the subordination provisions that apply to the certificates. Amounts deposited under the escrow agreements are not our property and are not entitled to the benefits of Section 1110 of the U.S. Bankruptcy Code. Neither the certificates nor the escrow receipts may be separately assigned or transferred. ATA's ability to pay any premium due upon distribution of deposits not used to purchase secured promissory notes during the delivery period has not been rated by Moody's. If the proceeds from the offering of the Original Certificates are not used to purchase aircraft within a specified period, they will be returned to the certificateholders. ATA may not use all of the deposits held in escrow prior to the delivery period termination date. See "Description of the Deposit Agreements -- Unused Deposits." If any funds remain as deposits with respect to any pass through trust after the delivery period termination date, those remaining funds will be withdrawn by the escrow agent for that pass through trust and distributed, with accrued and unpaid interest, to the certificateholders of that pass through trust. In addition, ATA will pay a premium with respect to those remaining deposits, but ATA will not pay a premium for any deposits that are returned because an aircraft is not delivered prior to the delivery period termination date for any reason that is not ATA's fault or caused by ATA's negligence or if such returned funds (other than unsecured deposits resulting from any such failure of delivery) are less than $5 million. See "Description of the Deposit Agreements -- Unused Deposits." The delivery of the newly manufactured aircraft as scheduled is subject to delays in the manufacturing process and to Boeing's contractual right to postpone deliveries. We expect that all aircraft which may be purchased with the proceeds of the certificates will be newly manufactured. See "Description of the Aircraft and the Appraisals -- Deliveries of Aircraft." Since the maximum principal amount of secured promissory notes may not be issued with respect to an aircraft and, in any such case, the Series B secured promissory notes are more likely not to be issued in the maximum principal amount as compared to the other secured promissory notes, it is more likely that a distribution of unused deposits will be made with respect to the Class B certificates as compared to the Class A certificates. In addition, if any aircraft expected to be delivered under an aircraft purchase agreement between GECC and the manufacturer is not leased to or owned by ATA and a substitute aircraft is not substituted therefor, the deposits relating to such aircraft may be withdrawn and distributed. The terms of the agreements relating to the secured promissory notes may differ from the terms described in this prospectus. The actual participation agreements, leases and leased aircraft indentures that we enter into may differ from the descriptions of these agreements in this prospectus because ATA, ATA Holdings or the owner participant may request changes. The degree to which these agreements may change is limited because: o the agreements are required to contain certain mandatory document terms and mandatory economic terms, which are described in this prospectus under the heading 34 "Description of the Certificates -- Obligation to Purchase Secured Promissory Notes"; o ATA must certify that changes to the form agreements do not materially and adversely affect the certificateholders; and o if ATA uses forms of financing agreements that are modified in any material respect from forms attached to the placement agreement or otherwise approved by Moody's, ATA is obligated to obtain written confirmation from Moody's that the use of those versions of agreements will not result in a withdrawal, downgrade or suspension of the rating of any class of certificates. Manufacturers of jet engines used by ATA may act as owner participants with respect to the aircraft, and the business relationship may influence their actions as owner participants. Manufacturers of jet engines used by ATA may act as owner participants with respect to aircraft, directly or through affiliates. For example, GECC, a subsidiary of General Electric Company, is expected to act as an owner participant. General Electric Company manufactures aircraft engines used by ATA. These manufacturers and their affiliates have various business relationships with ATA, including as suppliers of equipment to ATA, and these business relationships could influence the actions of these manufacturers or their affiliates as owner participants. Each owner participant will have the right to sell, assign or otherwise transfer its interests as owner participant in any of such leveraged leases, subject to the terms and conditions of the relevant participation agreement and related documents. THE EXCHANGE OFFER The following section includes a description of the procedure for tendering Outstanding Certificates and receiving Exchange Certificates in return. The issuer, together with all existing holders of the Outstanding Certificates, may decide to use different exchange procedures. TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OUTSTANDING CERTIFICATES Subject to the terms and conditions in this prospectus and in the accompanying Letter of Transmittal, we will exchange unregistered Outstanding Certificates properly tendered on before the expiration date and not withdrawn for registered Exchange Certificates. The expiration date is 5:00 p.m., New York City time, on [ ], 2002 unless we extend it. As of the date of this prospectus, $203,612,000 aggregate principal amount of class A certificates is outstanding and $56,280,000 an aggregate principal amount of class B certificates is outstanding. This prospectus, together with the Letter of Transmittal, is first being sent on or about [ ], 2002, to all holders of Outstanding Certificates known to us. Our obligation to accept Outstanding Certificates for exchange is subject to certain conditions as set forth below under "--Certain Conditions to the Exchange Offer." We may, at any time or from time to time, extend the expiration date, by giving oral or written notice of such extension in the manner described below. During any such extension, all Outstanding Certificates previously tendered will remain subject to the exchange offer and we may 35 accept them for exchange. Any Outstanding Certificates that we do not accept for exchange for any reason will be returned to you without cost as promptly as practicable after the expiration or termination of the exchange offer. Outstanding Certificates tendered in the exchange offer must be in denominations of principal amounts of $1,000 and any integral multiples thereof. We expressly reserve the right to amend or terminate the exchange offer. We also reserve the right to refuse for exchange any Outstanding Certificates not theretofore accepted for exchange, if any of the events specified below under "--Certain Conditions to the Exchange Offer" occur. We will give oral or written notice of any extension, amendment, non-acceptance or termination to you as promptly as practicable any notice with respect to any extension will be issued by means of press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. PROCEDURES FOR TENDERING OUTSTANDING CERTIFICATES Certificates for such Outstanding Certificates must be received by: (i) the Exchange Agent along with the Letter of Transmittal; or (ii) a timely confirmation of a book-entry transfer of the Outstanding Certificates, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the expiration date with the Letter of Transmittal or Agent's Message in lieu of such Letter of Transmittal; or (iii) the holder must comply with the guaranteed delivery procedures described below. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent. It forms a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which states that the participant has received and agrees to be bound by the Letter of Transmittal and that we may enforce the Letter of Transmittal against such participant. THE METHOD OF DELIVERY OF THE OUTSTANDING CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. NO LETTER OF TRANSMITTAL OR OUTSTANDING CERTIFICATES SHOULD BE SENT TO US. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by: o a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc.; 36 o a commercial bank; or o a trust company having an office or correspondent in the United States (collectively, Eligible Institutions); unless the Outstanding Certificates tendered are tendered: (i) by a registered holder of the Outstanding Certificates who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal; or (ii) for the account of an Eligible Institution. If Outstanding Certificates are registered to a person who did not sign the Letter of Transmittal, the Outstanding Certificates surrendered for exchange must be endorsed by, or be accompanied by a written transfer or exchange, duly executed by the registered holder with the signature guaranteed by an Eligible Institution. All questions of satisfaction of the form of the writing will be determined by us in our sole discretion. If the Letter of Transmittal is signed by a person other than the registered holder of any Outstanding Certificates listed therein, such Outstanding Certificates must be endorsed or accompanied by appropriate powers of attorney, signed exactly as the name of the registered holder appears on the Outstanding Certificates. If the Letter of Transmittal or any Outstanding Certificates or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by us, evidence satisfactory to us of their authority to so act must be submitted with the Letter of Transmittal. We will determine all questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of the tendered Outstanding Certificates. Our determination will be final and binding. We reserve the absolute right to reject any and all tenders of any particular Outstanding Certificates not properly tendered or to not accept any particular Outstanding Certificates our acceptance of which would, in our opinion or in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defects or irregularities or conditions of the exchange offer as to any particular Outstanding Certificates either before or after the expiration date. Our interpretation of the terms and conditions of the exchange offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Outstanding Certificates must be cured within a time period we determine. Neither we, the Exchange Agent nor any other person is under any duty to give notification of defects or irregularities with respect to tenders of Outstanding Certificates nor shall any of them incur any liability for failure to give such notification. Any Outstanding Certificates will not be considered to have been properly tendered until such defects or irregularities have been cured or waived. Any Outstanding Certificates received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost by the Exchange Agent to the tendering holders unless otherwise provided in the Letter of Transmittal as soon as practicable following the expiration date. 37 In addition, we reserve the right in our sole discretion to: (i) purchase or make offers for any Outstanding Certificates that remain outstanding subsequent to the expiration date, or, as set forth below under "--Certain Conditions to the Exchange Offer," to terminate the exchange offer; and (ii) to the extent permitted by applicable law, purchase Outstanding Certificates in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers may differ from the terms of the exchange offer. By tendering, each holder of Outstanding Certificates will represent to us, among other things that: o the Exchange Certificates acquired pursuant to the exchange offer are being obtained in the ordinary course of business of the person receiving the Exchange Certificates, whether or not that person is the holder; o neither the holder nor any other person has any arrangement or understanding with any person to participate in the distribution of the Exchange Certificates; and o such holder is not engaged in, or intends to engage in, a distribution of the Exchange Certificates. If any holder or any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company, or is engaged in or intends to engage in or has an arrangement or understanding with any person to participate in a distribution of such Exchange Certificates to be acquired in the exchange offer, such holder or any such other person: (i) could not rely on the applicable interpretations of the staff of the Commission; and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives Exchange Certificates for its own account in exchange for Outstanding Certificates, where such Outstanding Certificates were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Certificates. See "Plan of Distribution." ACCEPTANCE OF OUTSTANDING CERTIFICATES FOR EXCHANGE; DELIVERY OF EXCHANGE CERTIFICATES Upon satisfaction or waiver of the conditions to the exchange offer, we will accept, promptly, all Outstanding Certificates properly tendered and will issue the Exchange Certificates. See "--Certain Conditions to the Exchange Offer." We are deemed to have accepted properly tendered Outstanding Certificates for exchange if or when we give oral or written notice of acceptance to the Exchange Agent, with written confirmation of any oral notice to follow promptly. For each Outstanding Certificate accepted for exchange, holders of that Outstanding Certificate will receive an Exchange Certificate having a principal amount equal to that of the surrendered Outstanding Certificate. Interest on the Outstanding Certificates will accrue from the 38 most recent interest payment date or if no interest has been paid, from [ ]. Interest on the Outstanding Certificates and the Exchange Certificates is payable on each February 20, May 20, August 20 and November 20, beginning May 20, 2002. Holders of Outstanding Certificates whose Outstanding Certificates are accepted for exchange will be deemed to have waived the right to receive any payment in respect of accrued and unpaid interest on the Outstanding Certificates accrued from the most recent interest payment date or if no interest has been paid, from [ ] to the date of the issuance of the Exchange Certificates. The Exchange Certificates will entitle holders to receive any interest payment that would have otherwise been payable with respect to the Outstanding Certificates. Consequently, holders who exchange their Outstanding Certificates for Exchange Certificates will receive the same interest payment on [ ] (the first interest payment date with respect to the Outstanding Certificates and the Exchange Certificates occurring after the closing of the exchange offer) that they would have received had they not accepted the exchange offer. In all cases, issuance of Exchange Certificates for Outstanding Certificates that are accepted for exchange will be made only after timely receipt by the Exchange Agent of: (i) certificates for such Outstanding Certificates or a timely Book-Entry Confirmation of such Outstanding Certificates into the Exchange Agent's account at the Book-Entry Transfer Facility; (ii) a properly completed and duly executed Letter of Transmittal or an Agent's Message in lieu thereof; and (iii) all other required documents. If any tendered Outstanding Certificates are not accepted for any reason set forth in the terms and conditions of the exchange offer or if Outstanding Certificates are submitted for a greater principal amount than the holder desired to exchange, the unaccepted or non-exchanged Outstanding Certificates will be returned without expense to the tendering holder (or, in the case of Outstanding Certificates tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry procedures described below, the non-exchanged Outstanding Certificates will be credited to an account maintained with such Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the exchange offer. BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Outstanding Certificates at the Book-Entry Transfer Facility for purposes of the exchange offer within two business days after the date of this prospectus. Any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Outstanding Certificates by causing the Book-Entry Transfer Facility to transfer the Outstanding Certificates into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Outstanding Certificates may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof or an Agent's Message in lieu thereof), with any required signature guarantees and any other required documents, must still be transmitted to and received by the Exchange Agent at one of the addresses set forth below, under "--Exchange Agent" on or prior to the expiration date or the guaranteed delivery procedures described below must be complied with. 39 GUARANTEED DELIVERY PROCEDURES A holder who wishes to tender its Outstanding Certificates; and (i) whose Outstanding Certificates are not immediately available; or (ii) who cannot deliver their Outstanding Certificates, the Letter of Transmittal, or any other required documents to the Exchange Agent prior to the expiration date; or (iii) who cannot complete the procedure for book-entry transfer on a timely basis, may effect a tender if: (a) the tender is made through an Eligible Institution; and (b) before the expiration date, the Exchange Agent receives from the Eligible Institution: o a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder of the Outstanding Certificates; o the certificate number or numbers of such Outstanding Certificates and the principal amount of Outstanding Certificates tendered, stating that the tender is being made thereby, and guaranteeing that the certificates for all physically tendered Outstanding Certificates, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or a facsimile thereof or an Agent's Message in lieu thereof) with any required signature guarantees, and all other documents required by the Letter of Transmittal are received by the Exchange Agent within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery; and o the certificates for all physically tendered Outstanding Certificates, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or a facsimile thereof or an Agent's Message in lieu thereof), with any required signature guarantees and any other documents required by the Letter of Transmittal, that will be deposited by the Eligible Institution with the Exchange Agent within three New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery. WITHDRAWAL OF RIGHTS Except as otherwise provided herein, tenders of Outstanding Certificates may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date. To withdraw a tender of Outstanding Certificates, a written notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the expiration date. Any such notice of withdrawal must: 40 (i) specify the name of the person having tendered the Outstanding Certificates to be withdrawn (the Depositor); (ii) include a statement that the Depositor is withdrawing its election to have Outstanding Certificates exchanged, and identify the Outstanding Certificates to be withdrawn (including the certificate number or numbers and principal amount of such Outstanding Certificates); and (iii) where certificates for Outstanding Certificates have been transmitted, specify the name in which such Outstanding Certificates are registered, if different from that of the withdrawing holder. If certificates for Outstanding Certificates have been delivered or otherwise identified to the Exchange Agent, then, prior to the release of such certificates the withdrawing holder must also submit: (i) the serial numbers of the particular certificates to be withdrawn; and (ii) signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such holder is an Eligible Institution. If Outstanding Certificates have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Outstanding Certificates and otherwise comply with the procedures of the facility. We will determine all questions as to the validity, form and eligibility (including time of receipt) for such withdrawal notices. Our determination shall be final and binding on all parties. Any Outstanding Certificates so withdrawn will be considered not to have been validly tendered for purposes of the exchange offer and no Exchange Certificates will be issued with respect thereto unless the Outstanding Certificates so withdrawn are validly retendered. Any Outstanding Certificates which have been tendered but which are not accepted for exchange for any reason will be returned to the holder without cost (or, in the case of Outstanding Certificates tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such Outstanding Certificates will be credited to an account maintained with such Book-Entry Transfer Facility for the Outstanding Certificates) as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn Outstanding Certificates may be retendered by following one of the procedures described above under "--Procedures for Tendering Outstanding Certificates" at any time prior to 5:00 p.m., New York City time, on the expiration date. CERTAIN CONDITIONS TO THE EXCHANGE OFFER The exchange offer is not subject to any conditions, other than that the exchange offer does not violate applicable law or any applicable interpretation of the staff of the Commission. We cannot assure you that any such condition will not occur. Holders of Outstanding Certificates will have certain rights against us under the registration rights agreement should we fail to consummate the exchange offer. 41 If we determine that we may terminate the exchange offer, as set forth above, we may: (i) refuse to accept any Outstanding Certificates and return any Outstanding Certificates that have been tendered; (ii) extend the exchange offer and retain all Outstanding Certificates tendered prior to the expiration date, subject to the rights of such holders of tendered Outstanding Certificates to withdraw their tendered Outstanding Certificates; or (iii) waive a termination event with respect to the exchange offer and accept all properly tendered Outstanding Certificates that have not been withdrawn. If such waiver constitutes a material change in the exchange offer, we will disclose that change through a supplement to this prospectus that will be distributed to each registered holder of Outstanding Certificates. In addition, we will extend the exchange offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered holders of the Outstanding Certificates, if the exchange offer would otherwise expire during such period. EXCHANGE AGENT [ ] has been appointed as Exchange Agent for the exchange offer. All executed Letters of Transmittal and written notices of withdrawal should be directed to the Exchange Agent at one of the addresses set forth below. Questions and requests for assistance and requests for additional copies of this prospectus or of the Letter of Transmittal should be directed to the Exchange Agent addressed as follows: By Hand, Mail or Overnight Courier Facsimile Transmission Number [ ] [ ] (FOR ELIGIBLE (IF BY MAIL, REGISTERED OR INSTITUTIONS ONLY)] CERTIFIED MAIL RECOMMENDED) Confirm by Telephone [ ] DELIVERY OF THE LETTER OF TRANSMITTAL OR OF WRITTEN NOTICES OF WITHDRAWAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL. FEES AND EXPENSES We will not make any payments to brokers, dealers or other persons soliciting acceptances of the exchange offer. The estimated cash expenses to be incurred in connection with the exchange offer will be paid by us. 42 TRANSFER TAXES Holders who tender their Outstanding Certificates for exchange will not be obligated to pay any transfer taxes in connection with the exchange. However, holders who instruct us to register Exchange Certificates in the name of, or request that Outstanding Certificates not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax thereon. CONSEQUENCES OF EXCHANGING OUTSTANDING CERTIFICATES Holders of Outstanding Certificates who do not exchange them for Exchange Certificates in the exchange offer will continue to be subject to the provisions in the Indenture regarding their transfer and exchange. Any Outstanding Certificates not exchanged will continue to accrue interest, but will not retain any rights under the registration rights agreement and will bear the legend which sets forth the restrictions on transfer to which they are subject as a consequence of the issuance of the Outstanding Certificates pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Outstanding Certificates may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not currently anticipate that we will register Outstanding Certificates under the Securities Act. See "Exchange Offer; Registration Rights." Based on interpretations by the staff of the Commission, as set forth in no-action letters issued to third parties, we believe that Exchange Certificates issued in the exchange offer in exchange for Outstanding Certificates may be offered for resale, resold or otherwise transferred by holders thereof (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Certificates are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such Exchange Certificates. However, we do not intend to request the Commission to consider, and the Commission has not considered, the exchange offer in the context of a no-action letter and there can be no assurance that the staff of the Commission would make a similar determination with respect to the exchange offer as in such other circumstances. Each holder, other than a broker-dealer, must acknowledge that: (i) the Exchange Certificates received by such holder will be acquired in the ordinary course of its business; (ii) at the time of the consummation of the exchange offer such holder will have not engaged in, and does not intend to engage in, a distribution of Exchange Certificates and has no arrangement or understanding to participate in a distribution of Exchange Certificates; and (iii) such holder is not an affiliate of the Company within the meaning of Rule 405 of the Securities Act or if it is such an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act, to the extent applicable. 43 If any holder is an affiliate of the Company, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the Exchange Certificates to be acquired pursuant to the exchange offer, such holder: (i) could not rely on the applicable interpretations of the staff of the Commission; and (ii) must comply with the registration and prospectus delivery requirement of the Securities Act in connection with any resale transaction. Each broker-dealer that receives Exchange Certificates for its own account in exchange for Outstanding Certificates must acknowledge that such Outstanding Certificates were acquired by such broker-dealer as a result of market-making activities or other trading activities and that it will deliver a prospectus in connection with any resale of such Exchange Certificates. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth our ratio of earnings to fixed charges or deficiency of earnings available to cover fixed charges for the periods indicated:
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, 1997 1998 1999 2000 2001 2002 ---- ---- ---- ---- ---- ---- Ratio of Earnings to Fixed Charges............ 1.19 3.03 2.65 ---- ---- ---- Deficiency of Earnings Available to Cover Fixed Charges................................... ---- ---- ---- 23,138 130,353 139,381
For purposes of these computations, earnings consist of income (loss) before income taxes, plus fixed charges, adjusted to exclude the amount of any interest capitalized during the period. Fixed charges include the total of: (i) interest, whether expensed or capitalized; (ii) amortization of debt expense relating to any indebtedness, whether expensed or capitalized; and (iii) such portion of rental expense as can be demonstrated to be representative of the interest factor. 44 CAPITALIZATION The following table sets forth our actual consolidated capitalization derived from our unaudited consolidated financial statements at September 30, 2002.
AT SEPTEMBER 30, 2002 (UNAUDITED) ----------------------- (Dollars in thousands) Cash $ 113,058 =========== Short-term Debt BCI PDP Funding................................... 42,627 Rolls-Royce PDP Funding........................... 8,384 GE PDP Funding.................................... 14,580 Borrowings on Revolving Credit Facility........... 10,000 Other short-term debt (current maturities of long-term debt)................................. 5,177 ----------- 80,768 Long-term Debt 10.5% Unsecured Notes due 2004.................... 175,000 9.625% Unsecured Notes due 2005................... 125,000 Special Facility Revenue Bonds-Terminal, due 2029. - Special Facility Revenue Bonds-Hangar, due 2020... 6,000 Secured bank debt, due 2014....................... 8,750 Secured bank debt, due 2005....................... 18,469 Capital lease, due 2008........................... 1,610 Unsecured debt.................................... (102) ----------- Total Long-term debt............................ 334,727 ----------- Total Debt...................................... 415,495 Total Preferred Stock ($30M ILFC, $50M BCC)..... 80,000 Total shareholder's equity...................... (69,949) ----------- Total capitalization.......................... $ 425,546 ===========
45 SELECTED CONSOLIDATED FINANCIAL DATA In the table below, we provide you with selected historical financial data of ATA Holdings. We have prepared the selected financial data included in this information using the consolidated financial statements of ATA Holdings for the five years ended December 31, 2001 and the nine-month periods ended September 30, 2002 and 2001. The financial statements for the five fiscal years ended December 31, 2001 have been audited by Ernst & Young LLP, independent auditors. The selected consolidated financial data for the nine months ended September 30, 2002 and 2001 has not been audited. The unaudited consolidated financial statements include all adjustments, consisting of normal recurring accruals, that we consider necessary for the fair presentation of our financial position and results of operations for these periods. When you read this selected historical financial data, it is important that you read along with it the historical financial statements and related notes in our annual and quarterly reports filed with the SEC, as well as the section of our annual and quarterly reports titled "Management's Discussion and Analysis of Financial Condition and Results of Operations."
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, 1997 1998 1999 2000 2001 2001 2002 ---- ---- ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA: Operating revenues: Scheduled service...... $371,762 $511,254 $624,647 $753,301 $820,666 $656,044 $664,431 Charter................ 359,177 344,482 389,979 435,262 359,770 292,603 238,698 Ground package......... 22,317 23,186 58,173 59,848 52,182 45,214 30,582 Other.................. 29,937 40,447 49,567 43,142 42,866 33,988 32,689 ------- ------- --------- --------- --------- --------- ------- Total operating revenues 783,193 919,369 1,122,366 1,291,553 1,275,484 1,027,849 966,400 ------- ------- --------- --------- --------- --------- ------- Operating expenses: Salaries, wages and benefits............... 172,499 211,304 252,595 297,012 325,153 249,444 264,782 Fuel and oil........... 153,701 137,401 170,916 274,820 251,333 205,918 151,350 Handling, landing and navigation fees...... 69,383 74,640 89,302 97,414 88,653 70,299 85,473 Passenger service...... 32,812 34,031 39,231 45,571 43,856 35,725 29,677 Aircraft rentals....... 54,441 53,128 58,653 72,145 98,988 68,279 135,731 Aircraft maintenance, materials and repairs 51,465 53,655 55,645 70,432 61,394 50,064 37,388 Depreciation and amortization........... 62,468 78,665 96,038 125,041 121,327 101,400 60,258 Aircraft impairments and retirements............ 118,868 41,749 51,559 Special charges.......... 21,525 9,367 U.S. Government.......... (66,318) (62,597) 15,210 Other.................... 172,940 201,172 269,959 306,548 302,575 239,424 243,851 ------- ------- --------- --------- --------- --------- ------- Total operating expenses 769,709 843,996 1,032,339 1,288,983 1,367,354 1,009,072 1,075,279 ------- ------- --------- --------- --------- --------- ------- Operating income (loss).. 13,484 75,373 90,027 2,570 (91,870) 18,777 (108,879) ------- ------- --------- --------- --------- --------- ------- Other income (expense): Interest income.......... 1,584 4,433 5,375 8,389 5,331 4,247 2,138 Interest (expense)....... (9,454) (12,808) (20,966) (31,452) (30,082) (21,345) (25,979) Other.................... 413 212 3,361 562 554 1,763 (988) ------- ------- --------- --------- --------- --------- ------- Other income (expense)............ (7,457) (8,163) (12,230) (22,501) (24,197) (15,335) (24,829) ------- ------- --------- --------- --------- --------- ------- Income (loss) before income taxes.................... 6,027 67,210 77,797 (19,931) (116,067) 3,442 (133,708) Income taxes (credits)..... 4,455 27,129 30,455 (4,607) (39,750) 907 (19,569) ------- ------- --------- Net income (loss)........ $ 1,572 $ 40,081 $ 47,342 (15,324) (76,317) 2,535 (114,139) ======= ======= ========= --------- --------- --------- ------- Preferred stock dividends.. (375) (5,568) (3,083) (3,235) --------- --------- --------- ------- Income (loss) available to common shareholders.... $(15,699) $ (81,885) $(548) $(117,374) ======== ========= ========= ========= Net income (loss) per share-- basic.................... $0.14 $3.41 $ 3.86 (1.31) (7.14) (0.05) (10.04) ===== ===== ======= ======== ========= ========= =========
46
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, 1997 1998 1999 2000 2001 2001 2002 ---- ---- ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS) Net income (loss) per share-- diluted.................. $0.13 $3.07 $ 3.51 (1.31) (7.14) (0.05) (10.04) ===== ===== ======= ======== ========= ========= ========= BALANCE SHEET DATA (AT END OF PERIOD): $ $ $ Cash..................... $104,196 $172,936 $120,164 $ 129,137 184,439 159,948 113,058 Non-cash working capital (deficiency)(1)........ (100,731) (112,276) (128,191) (6,833) 22,331 83,462 (61,016) Property and equipment, net 267,681 329,332 511,832 522,119 314,943 732,999 293,931 Total assets............. 450,857 594,549 815,281 1,032,430 1,002,962 1,262,520 814,478 Short-term debt (including current maturities).... 8,975 1,476 2,079 96,740 124,059 148,484 80,768 Long-term debt........... 182,829 245,195 345,792 361,209 373,533 507,989 334,727 Total debt............... 191,804 246,671 347,871 457,949 497,592 656,473 415,495 Shareholders' equity ) (deficit)(2)........... 56,990 102,751 151,376 124,654 44,132 124,373 (69,949 OTHER FINANCIAL DATA: $ $ $ EBITDAR(3)............... $132,390 $211,811 $253,454 208,707 134,330 194,466 $ 88,260 EBITDA(3)................ 77,949 158,683 194,801 136,562 35,342 126,187 (47,471) Net cash provided by (used ) in) operating activities 99,936 151,812 152,673 111,692 144,424 141,974 (4,884 Net cash provided by (used in) investing activities (76,055) (142,352) (305,718) (290,837) (129,791) (308,128) 15,678 Net cash provided by (used in) financing activities 6,933 59,280 100,273 188,118 40,669 196,965 (82,175) Ratio of earnings to fixed charges(4)............. 1.19 3.03 2.65 - - - - Deficiency of earnings available to cover fixed charges(4)............. -- -- -- 23,138 130,353 7,950 139,381
- ---------------------- (1) Non-cash working capital consists of total current assets (excluding cash) less total current liabilities (excluding current maturities of long-term debt and short-term debt). (2) No common stock dividends were paid in any of the periods presented. (3) EBITDAR represents net income plus interest expense (net of capitalized interest), income tax expense, depreciation, amortization and aircraft rentals. EBITDA represents net income plus interest expense (net of capitalized interest), income tax expense, depreciation and amortization. EBITDAR and EBITDA are presented because each is a widely accepted financial indicator of a company's ability to incur and service debt. However, EBITDAR and EBITDA should not be considered in isolation, as a substitute for net income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of a company's profitability or liquidity. (4) The "ratio of earnings to fixed charges" represents earnings divided by fixed charges, as defined in the following paragraph. The "deficiency" represents the amount of fixed charges in excess of earnings. For purposes of these computations, earnings consist of income (loss) before income taxes, plus fixed charges, adjusted to exclude the amount of any interest capitalized during the period. Fixed charges include the total of: (i) interest, whether expensed or capitalized; (ii) amortization of debt expense relating to any indebtedness, whether expensed or capitalized; and (iii) such portion of rental expense as can be demonstrated to be representative of the interest factor. (5) The following summarized financial data (unaudited) in this table has been derived from the financial statements of ATA for each of the respective periods presented. ATA is the principal subsidiary of ATA Holdings. The following financial data excludes the other subsidiaries of ATA Holdings (Ambassadair Travel Club, Inc., ATA Leisure Corp., Amber Travel Inc., American Trans Air Execujet, Inc., Amber Air Freight Corporation, ATA Training Academy Inc. and Chicago Express) as ATA is the principal operating subsidiary of 47 ATA Holdings. ATA Holdings allocates certain expenses, such as income taxes, to the various subsidiaries as if they were operating on a stand-alone basis.
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, 1997 1998 1999 2000 2001 2001 2002 ---- ---- ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: (5) Operating revenues:....... $744,153 $877,187 $1,008,855 $1,180,962 $1,153,672 $ 929,906 $ 874,362 Depreciation and amortization 62,281 78,595 93,820 120,262 117,813 98,748 58,595 Operating income (loss)... 10,325 80,920 97,558 18,680 (91,454) 19,864 (111,616) Interest expense, net..... 9,454 12,808 20,969 31,474 30,094 21,355 25,979 Income (loss) before income taxes................... 2,627 72,528 84,989 (4,359) (115,875) 4,332 (136,621) Net income (loss)......... 69 43,329 51,951 (5,579) (76,198) 3,427 (117,052) BALANCE SHEET DATA (AT END OF PERIOD): Working capital (deficiency)(a)......... $(51,939) $ 10,768 $(32,049) $ (54,102) $ 11,703 $ 24,244 $(108,930) Property and equipment, net 267,556 328,661 508,210 650,185 299,255 716,140 283,471 Total assets.............. 466,923 593,489 823,090 1,050,579 1,140,988 1,382,651 773,869 Short-term debt (including current maturities)..... 8,975 1,476 2,079 96,740 124,059 148,484 80,768 Long-term debt............ 182,829 245,195 345,792 361,209 373,533 507,989 334,727 Total debt................ 191,804 246,671 347,871 457,949 497,592 656,473 415,495 Shareholder's equity(b)... 6,762 50,091 102,039 96,461 20,263 99,888 (98,020)
- -------------------- (a) Working capital consists of total current assets less current liabilities. (b) No dividends were paid in any of the periods presented. 48 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company is a leading provider of targeted scheduled airline services and charter airline services to leisure and other value-oriented travelers, and to the U.S. military. The Company, through its principal subsidiary, ATA, has been operating for 30 years and is the tenth largest U.S. airline in terms of 2001 capacity and traffic. ATA provides jet scheduled service through nonstop and connecting flights from the gateways of Chicago-Midway and Indianapolis to popular vacation destinations such as Hawaii, Phoenix, Las Vegas, Florida, California, Mexico and the Caribbean, as well as to New York's LaGuardia Airport, Philadelphia, Denver, Dallas-Ft. Worth, Washington, D.C., Boston, Seattle, Minneapolis-St. Paul, Newark and Charlotte. The Company's commuter subsidiary Chicago Express Airlines, Inc. ("Chicago Express") provides commuter scheduled service between Chicago-Midway and the cities of Indianapolis, Cedar Rapids, Des Moines, Dayton, Flint, Grand Rapids, Lexington, Madison, Milwaukee, Moline, South Bend, Springfield and Toledo. ATA also provides charter service to independent tour operators, specialty charter customers and the U.S. military. CRITICAL ACCOUNTING POLICIES "Management's Discussion and Analysis of Financial Condition and Results of Operations" discusses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities. Certain significant accounting policies applied in the preparation of the financial statements require management to make difficult, subjective or complex judgments, and are considered critical accounting policies by the Company. The Company has identified the following areas as critical accounting policies. GOODWILL ACCOUNTING. In June 2001, the FASB issued new accounting standards pertaining to goodwill in FAS 142, effective for fiscal years beginning after December 15, 2001. Under FAS 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized, but will be subject to annual impairment reviews. The Company's goodwill is related to its ATALC, ATA Cargo, Inc. ("ATA Cargo") and Chicago Express subsidiaries acquired in 1999. FAS 142 requires companies to perform transitional impairment reviews of goodwill as of the date of adoption of the statement, which was January 1, 2002. The transitional goodwill impairment test was required to be completed by June 30, 2002, based upon the carrying values and estimated fair values as of January 1, 2002. This test is a two-step process. Step one compares the fair value of a reporting unit (determined through market quotes or the present value of estimated future cash flows) with its carrying amount (assets less liabilities, including goodwill.) If the estimated fair value exceeds the carrying amount, goodwill of the reporting unit is considered not impaired, and step two of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, the second step of the goodwill impairment test is then performed, which compares the implied fair value of the reporting unit's goodwill (determined in accordance with purchase accounting), with the carrying amount of the reporting unit's goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of the goodwill, 49 an impairment loss is recognized in an amount equal to that excess. If an impairment loss is recognized, the adjusted carrying amount of the goodwill becomes the new accounting basis for future impairment tests. The fair market values of all of the Company's reporting units were estimated using discounted future cash flows, since market quotes were not readily available. For Chicago Express and ATA Cargo, future cash flows were estimated based on historical performance. In both cases, the estimated fair market value was higher than the carrying amount of the reporting unit, and thus no impairment was indicated. The fair market value of ATALC was estimated based on projected future cash flows from the Key Tours and Key Tours Las Vegas brands, estimated cash flows from royalties under the new management services contract with MTC, and incremental cash flows from the increased sale of scheduled service seats to ATA Vacations customers under the management services agreement. Based on this analysis, the estimated fair market value of ATALC was higher than its carrying amount, and thus no impairment was indicated. All of the estimates of fair market value for the Company's three reporting units involved highly subjective judgments on the part of management, including the amounts of cash flows to be received, their estimated duration, and perceived risk as reflected in selected discount rates. In some cases, cash flows were estimated without the benefit of historical data, although historical data was used where available. Although the Company believes its estimates and judgments to be reasonable, different assumptions and judgments might have resulted in the impairment of some or all of the Company's recorded goodwill of $21.8 million under the transitional testing rules of FAS 142. U. S. GOVERNMENT GRANT REIMBURSEMENT ACCOUNTING. The Air Transportation Safety and System Stabilization Act passed in response to the September 11, 2001 terrorist attacks provided for, among other things, up to $5.0 billion in compensation for the direct and incremental losses resulting from the terrorist attacks incurred by U. S. domestic passenger and cargo airlines from September 11, 2001 through December 31, 2001. Due to the limited guidance provided by the legislation and the evolving guidance provided by the interpretive rules of the Department of Transportation ("DOT"), the Company has made subjective and judgmental estimates in calculating and recording the amount of grant revenue to recognize. In the third and fourth quarters of 2001, the Company recognized $66.3 million in total grant revenues. As of December 31, 2001, $44.5 million had been received, and $21.8 million was recorded as a receivable. In the second quarter of 2002, the DOT issued new guidelines for measuring reimbursable losses and the Company submitted a final application, accompanied by the required accountant's report on agreed upon procedures. Based on review of its application with the DOT, the Company determined that it is probable that a portion of the receivable recorded in 2001 may not be collected, and therefore recorded a valuation allowance of $15.2 million against the $21.8 million receivable as of June 30, 2002. As of September 30, 2002, the remaining receivable had not yet been collected, but the Company does not currently believe that a further change to the valuation allowance is necessary. The Company is continuing to discuss its compensation claim with the DOT, and currently expects that claim to be settled during the fourth quarter of 2002. FLEET IMPAIRMENT ACCOUNTING. Effective January 1, 2002, the Company adopted FAS 144, which superseded FASB Statement of Financial Accounting Standards No. 121, Accounting for the 50 Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of ("FAS 121"), but the Company continues to account for the fleet and related assets that were impaired prior to January 1, 2002 under FAS 121, as required by FAS 144. The Company has been performing impairment reviews in accordance with FAS 121 on the Lockheed L-1011-50 and 100 and the Boeing 727-200 fleets since the end of 2000, and both fleets became impaired under FAS 121 subsequent to the events of September 11, 2001. In the third quarter of 2002, the Company retired one of its five Lockheed L-1011-500 aircraft earlier than originally planned. This event caused the Company to consider whether the net book value of the remaining four aircraft and related assets in this fleet could be recovered through future cash flows. In the third quarter of 2002, the Company performed an impairment analysis on the Lockheed L-1011-500 fleet and related assets, in accordance with FAS 144, and determined that the Lockheed L-1011-500 fleet and related assets were not impaired. Both FAS 144 and FAS 121 require that whenever events or circumstances indicate that the Company may not be able to recover the net book value of its productive assets through future cash flows, an assessment must be performed of expected future cash flows, and undiscounted estimated future cash flows must be compared to the net book value of these productive assets to determine if impairment is indicated. They specify that impaired assets be written down to their estimated fair market value by recording an impairment charge to earnings. FAS 144 and FAS 121 state that fair market values may be estimated using discounted cash flow analysis or quoted market prices, together with other available information, to estimate fair market values. The Company primarily used discounted cash flow analysis to estimate fair market value of the Lockheed L-1011-50 and 100 fleet, and quoted market prices to estimate the value of the Boeing 727-200 fleet. The application of FAS 144 and FAS 121 requires the use of significant judgment and the preparation of numerous significant estimates. The Company estimated future cash flows from the productive use of these fleets by estimating the expected net cash contribution from revenues less operating expenses, and adjusting for estimated cash outflows for heavy maintenance and estimated cash inflows from final disposal of the assets. Such estimates were required for up to ten years into the future. Although the Company believes that its estimates of cash flows in the application of FAS 144 and FAS 121 were reasonable, and were based upon all available information, including extensive historical cash flow data about the prior use of these fleets, such estimates nevertheless required substantial judgments and were based upon material assumptions about future events. Such estimates were significant in determining the amount of the impairment charge to be recorded, which could have been materially different under different sets of assumptions and estimates. As FAS 144 and FAS 121 require the Company to continuously evaluate fair market values of previously impaired assets, it is possible that future estimates of fair market value may result in additional material charges to earnings, if those estimates indicate a material reduction in fair market value as compared to the estimates made at the end of the third quarter of 2002. RESULTS OF OPERATIONS The Company had an operating loss of $91.9 million, and a net loss after taxes of $76.3 million, for the year ended December 31, 2001. Profitability in 2001 was severely impacted by the terrorist attacks on September 11, 2001, and by non-cash impairment charges associated with the Boeing 727-200 and Lockheed L-1011-50 and 100 fleets totaling $73.8 million, net of tax. 51 For the nine months ended September 30, 2002, the Company had an operating loss of $108.9 million, as compared to operating income of $18.8 million in the comparable period of 2001; and the Company had a $117.4 million net loss available to common shareholders in the nine months ended September 30, 2002, as compared to a net loss available to common shareholders of $0.5 million in the same period of 2001. Operating revenues decreased 6.0% to $966.4 million in the nine months ended September 30, 2002, as compared to $1.028 billion in the same period of 2001. Consolidated RASM decreased 9.3% to 7.41 cents in the nine months ended September 30, 2002, as compared to 8.17 cents in the same period of 2001. Scheduled service revenues increased $8.4 million between periods, while charter revenues decreased $53.9 million, and ground package revenues decreased $14.6 million. Operating expenses increased 6.5% to $1.075 billion in the nine months ended September 30, 2002, as compared to $1.009 billion in the comparable period of 2001. Consolidated CASM increased 2.7% to 8.24 cents in the nine months ended September 30, 2002, as compared to 8.02 cents in the same period of 2001. After excluding special items, consolidated CASM decreased 4.7% to 7.73 cents in the nine months ended September 30, 2002, as compared to 8.11 cents in the comparable period of 2001. 52 RESULTS OF OPERATIONS IN CENTS PER AVAILABLE SEAT MILE The following tables set forth, for the periods indicated, consolidated operating revenues and expenses expressed as cents per available seat mile ("ASM").
CENTS PER ASM YEAR ENDED DECEMBER 31, 2001 2000 1999 ----------------- ----------------- ---------------- Consolidated operating revenues 7.88 7.88 7.44 Consolidated operating expenses: Salaries, wages and benefits 2.01 1.81 1.67 Fuel and oil 1.55 1.68 1.13 Depreciation and amortization 0.75 0.76 0.64 Aircraft rentals 0.61 0.44 0.39 Handling, landing and navigation fees 0.55 0.59 0.59 Aircraft maintenance, materials and repairs 0.38 0.43 0.37 Crew and other employee travel 0.37 0.40 0.33 Passenger service 0.27 0.28 0.26 Ground package cost 0.26 0.31 0.33 Other selling expenses 0.26 0.22 0.19 Commissions 0.21 0.24 0.26 Advertising 0.16 0.13 0.12 Facilities and other rentals 0.13 0.10 0.09 Special charges 0.14 0.00 0.00 Impairment loss 0.69 0.00 0.00 U.S. Government grant (0.41) 0.00 0.00 Other 0.52 0.47 0.47 ----------------- ----------------- ---------------- Total consolidated operating expenses 8.45 7.86 6.84 ----------------- ----------------- ---------------- Consolidated operating income (loss) (0.57) 0.02 0.60 ================= ================= ================ ASMs (in thousands) 16,187,687 16,390,101 15,082,630
53
CENTS PER ASM CENTS PER ASM THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2002 2001 2002 2001 ---- ---- ---- ---- Consolidated operating revenues: 7.06 7.52 7.41 8.17 Consolidated operating expenses: Salaries, wages and benefits 2.12 1.99 2.03 1.98 Fuel and oil 1.18 1.59 1.16 1.64 Aircraft rentals 1.14 0.63 1.04 0.54 Handling, landing and navigation fees 0.65 0.51 0.65 0.56 Depreciation and amortization 0.42 0.75 0.46 0.81 Crew and other employee travel 0.32 0.35 0.32 0.37 Aircraft maintenance, materials and repairs 0.25 0.34 0.29 0.40 Other selling expenses 0.25 0.24 0.26 0.26 Passenger service 0.23 0.30 0.23 0.28 Advertising 0.22 0.17 0.23 0.16 Insurance 0.18 0.06 0.18 0.06 Facilities and other rentals 0.14 0.13 0.13 0.12 Commissions 0.09 0.18 0.14 0.23 Ground package cost 0.08 0.15 0.18 0.29 Special charges - 0.22 - 0.07 Aircraft impairment and retirements 0.76 0.88 0.40 0.33 U.S. Government grant - (1.47) 0.12 (0.50) Other 0.36 0.40 0.42 0.42 ---------- ---------- ----------- ---------- Total consolidated operating income (loss) 8.39 7.42 8.24 8.02 ---------- ---------- ----------- ---------- Consolidated operating income (loss) (1.33) 0.10 (0.83) 0.15 ========== ========== =========== ========== ASMs (in thousands) 4,494,336 4,272,432 13,050,595 12,583,425 Excluding special charges, aircraft impairment and retirement, and U.S. Government grant 7.62 7.79 7.73 8.11 ========== ========== =========== ==========
54 CONSOLIDATED FLIGHT OPERATING AND FINANCIAL DATA The following tables set forth, for the periods indicated, certain key operating and financial data for the consolidated flight operations of the Company. Data shown for "Jet" operations include the consolidated operations of Lockheed L-1011, Boeing 727-200, Boeing 737-800, Boeing 757-200, and Boeing 757-300 aircraft in all of the Company's business units. Data shown for "J31/Saab" operations include the operations of Jetsteam31 and Saab 340B propeller aircraft by Chicago Express as the ATA Connection.
TWELVE MONTHS ENDED DECEMBER 31, 2001 2000 INC (DEC) % INC (DEC) ---- ---- --------- ----------- Departures Jet 56,962 55,714 1,248 2.24 Departures J31/Saab (a) 26,836 18,985 7,851 41.35 ------------------------------------------------------------------- Total Departures (b) 83,798 74,699 9,099 12.18 ------------------------------------------------------------------- Block Hours Jet 172,207 172,824 (617) (0.36) Block Hours J31/Saab 24,836 18,708 6,128 32.76 ------------------------------------------------------------------- Total Block Hours (c) 197,043 191,532 5,511 2.88 ------------------------------------------------------------------- RPMs Jet (000s) 11,581,733 11,760,135 (178,402) (1.52) RPMs J31/Saab (000s) 94,009 56,669 37,340 65.89 ------------------------------------------------------------------- Total RPMs (000s) (d) 11,675,742 11,816,804 (141,062) (1.19) ------------------------------------------------------------------- ASMs Jet (000s) 16,041,928 16,295,730 (253,802) (1.56) ASMs J31/Saab (000s) 145,759 94,371 51,388 54.45 ------------------------------------------------------------------- Total ASMs (000s) (e) 16,187,687 16,390,101 (202,414) (1.23) ------------------------------------------------------------------- Load Factor Jet 72.20 72.17 0.03 0.04 Load Factor J31/Saab 64.50 60.05 4.45 7.41 ------------------------------------------------------------------- Total Load Factor (f) 72.13 72.10 0.03 0.04 ------------------------------------------------------------------- Passengers Enplaned Jet 8,058,886 7,686,077 372,809 4.85 Passengers Enplaned J31/Saab 576,339 320,062 256,277 80.07 ------------------------------------------------------------------- Total Passengers Enplaned (g) 8,635,225 8,006,139 629,086 7.86 ------------------------------------------------------------------- Revenue $ (000s) 1,275,484 1,291,553 (16,069) (1.24) RASM in cents (h) 7.88 7.88 - - CASM in cents (i) 8.45 7.86 0.59 7.51 Yield in cents (j) 10.92 10.93 (0.01) (0.09)
- -------------------------- See footnotes (a) through (j) on pages 58-59.
TWELVE MONTHS ENDED DECEMBER 31, 2000 1999 INC (DEC) % INC (DEC) ---- ---- --------- ----------- Departures Jet 55,714 50,207 5,507 10.97 Departures J31/Saab (a) 18,985 17,716 1,269 7.16 ----------------------------------------------------------------------- Total Departures (b) 74,699 67,923 6,776 9.98 ----------------------------------------------------------------------- Block Hours Jet 172,824 157,481 15,343 9.74 Block Hours J31/Saab 18,708 17,979 729 4.05 ----------------------------------------------------------------------- Total Block Hours (c) 191,532 175,460 16,072 9.16 ----------------------------------------------------------------------- RPMs Jet (000s) 11,760,135 10,913,081 847,054 7.76
55
TWELVE MONTHS ENDED DECEMBER 31, 2000 1999 INC (DEC) % INC (DEC) ---- ---- --------- ----------- RPMs J31/Saab (000s) 56,669 35,922 20,747 57.76 ----------------------------------------------------------------------- Total RPMs (000s) (d) 11,816,804 10,949,003 867,801 7.93 ----------------------------------------------------------------------- ASMs Jet (000s) 16,295,730 15,025,000 1,270,730 8.46 ASMs J31/Saab (000s) 94,371 57,630 36,741 63.75 ----------------------------------------------------------------------- Total ASMs (000s) (e) 16,390,101 15,082,630 1,307,471 8.67 ----------------------------------------------------------------------- Load Factor Jet 72.17 72.63 (0.46) (0.63) Load Factor J31/Saab 60.05 62.33 (2.28) (3.66) ----------------------------------------------------------------------- Total Load Factor (f) 72.10 72.59 (0.49) (0.68) ----------------------------------------------------------------------- Passengers Enplaned Jet 7,686,077 6,838,339 847,738 12.40 Passengers Enplaned J31/Saab 320,062 206,304 113,758 55.14 ----------------------------------------------------------------------- Total Passengers Enplaned (g) 8,006,139 7,044,643 961,496 13.65 ----------------------------------------------------------------------- Revenue $ (000s) 1,291,553 1,122,366 169,187 15.07 RASM in cents (h) 7.88 7.44 0.44 5.91 CASM in cents (i) 7.86 6.84 1.02 14.91 Yield in cents (j) 10.93 10.25 0.68 6.63
- --------------------- See footnotes (a) through (j) on pages 58-59. 56
THREE MONTHS ENDED SEPTEMBER 30, 2002 2001 INC (DEC) % INC(DEC) ----------------- ---------------- ---------------- ------------------ Departures Jet 17,147 14,471 2,676 18.49 Departures Saab 11,669 6,732 4,937 73.34 ----------------- ---------------- ---------------- ------------------ Total Departures (b) 28,816 21,203 7,613 35.91 ----------------- ---------------- ---------------- ------------------ Block Hours Jet 50,833 44,453 6,380 14.35 Block Hours Saab 10,982 6,224 4,758 76.45 ----------------- ---------------- ---------------- ------------------ Total Block Hours (c) 61,815 50,677 11,138 21.98 ----------------- ---------------- ---------------- ------------------ RPMs Jet (000s) 3,195,420 3,238,209 (42,789) (1.32) RPMs Saab (000s) 43,664 22,244 21,420 96.30 ----------------- ---------------- ---------------- ------------------ Total RPMs (000s) (d) 3,239,084 3,260,453 (21,369) (0.66) ----------------- ---------------- ---------------- ------------------ ASMs Jet (000s) 4,428,021 4,235,610 192,411 4.54 ASMs Saab (000s) 66,315 36,822 29,493 80.10 ----------------- ---------------- ---------------- ------------------ Total ASMs (000s) (e) 4,494,336 4,272,432 221,904 5.19 ----------------- ---------------- ---------------- ------------------ Load Factor Jet (%) 72.16 76.45 (4.29) (5.56) Load Factor Saab (%) 65.84 60.41 5.43 8.99 ----------------- ---------------- ---------------- ------------------ Total Load Factor (%) (f) 72.07 76.31 (4.24) (5.56) ----------------- ---------------- ---------------- ------------------ Passengers Enplaned Jet 2,375,954 2,070,172 305,782 14.77 Passengers Enplaned Saab 254,403 135,174 119,229 88.20 ----------------- ---------------- ---------------- ------------------ Total Passengers Enplaned (g) 2,630,357 2,205,346 425,011 19.27 ----------------- ---------------- ---------------- ------------------ Revenue $ (000s) 317,289 321,469 (4,180) (1.30) RASM in cents (h) 7.06 7.52 (0.46) (6.12) CASM in cents (i) 8.39 7.42 0.97 13.07 Yield in cents (j) 9.80 9.86 (0.06) (0.61)
- --------------------- See footnotes (b) through (j) on pages 58-59. 57
NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 INC (DEC) %INC(DEC) ----------------- ---------------- ----------------- ---------------- Departures Jet 49,305 44,167 5,138 11.63 Departures Saab 28,982 18,665 10,317 55.27 ----------------- ---------------- ----------------- ---------------- Total Departures (b) 78,287 62,832 15,455 24.60 ----------------- ---------------- ----------------- ---------------- Block Hours Jet 146,085 134,549 11,536 8.57 Block Hours Saab 27,182 17,194 9,988 58.09 ----------------- ---------------- ----------------- ---------------- Total Block Hours (c) 173,267 151,743 21,524 14.18 ----------------- ---------------- ----------------- ---------------- RPMs Jet (000s) 9,290,163 9,221,576 68,587 0.74 RPMs Saab (000s) 106,071 68,210 37,861 55.51 ----------------- ---------------- ----------------- ---------------- Total RPMs (000s) (d) 9,396,234 9,289,786 106,448 1.15 ----------------- ---------------- ----------------- ---------------- ASMs Jet (000s) 12,891,505 12,481,432 410,073 3.29 ASMs Saab (000s) 159,090 101,993 57,097 55.98 ----------------- ---------------- ----------------- ---------------- Total ASMs (000s) (e) 13,050,595 12,583,425 467,170 3.71 ----------------- ---------------- ----------------- ---------------- Load Factor Jet (%) 72.06 73.88 (1.82) (2.46) Load Factor Saab (%) 66.67 66.88 (0.21) (0.31) ----------------- ---------------- ----------------- ---------------- Total Load Factor (%) (f) 72.00 73.83 (1.83) (2.48) ----------------- ---------------- ----------------- ---------------- Passengers Enplaned Jet 6,939,844 6,395,596 544,248 8.51 Passengers Enplaned Saab 646,904 413,323 233,581 56.51 ----------------- ---------------- ----------------- ---------------- Total Passengers Enplaned (g) 7,586,748 6,808,919 777,829 11.42 ----------------- ---------------- ----------------- ---------------- Revenue $ (000s) 966,400 1,027,849 (61,449) (5.98) RASM in cents (h) 7.41 8.17 (0.76) (9.30) CASM in cents (i) 8.24 8.02 0.22 2.74 Yield in cents (j) 10.28 11.06 (0.78) (7.05)
- --------------------- See footnotes (b) through (j) on pages 58-59. (a) Chicago Express provides service between Chicago-Midway and the cities of Indianapolis, Milwaukee, Des Moines, Dayton, Grand Rapids, Madison, South Bend and Springfield as the ATA Connection, currently using 34-seat Saab 340B propeller aircraft. During 1999 and the first three quarters of 2000, Chicago Express operated up to nine 19-seat Jetstream 31 ("J31") aircraft as it phased in the Saab fleet. As of September 30, 2000, all J31 aircraft had been removed from revenue service. (b) A departure is a single takeoff and landing operated by a single aircraft between an origin city and a destination city. (c) Block hours for any aircraft represent the elapsed time computed from the moment the aircraft first moves under its own power from the origin city boarding ramp to the moment it comes to rest at the destination city boarding ramp. (d) Revenue passenger miles (RPMs) represent the number of seats occupied by revenue passengers multiplied by the number of miles those seats are flown. RPMs are an industry measure of the total seat capacity actually sold by the Company. (e) Available seat miles (ASMs) represent the number of seats available for sale to revenue passengers multiplied by the number of miles those seats are flown. ASMs are an industry measure of the total seat capacity offered for sale by the Company, whether sold or not. (f) Passenger load factor is the percentage derived by dividing RPMs by ASMs. Passenger load factor is relevant to the evaluation of scheduled service because incremental passengers normally provide incremental revenue and profitability when seats are sold individually. In the case of commercial charter and military/government charter, load factor is less relevant because the Company sells an entire aircraft instead of individual seats. Since both costs and revenues are largely fixed for these types of charter flights, changes in load factor have less impact on business unit profitability. Consolidated load factors and scheduled service load factors for the Company are shown in the appropriate tables for industry comparability, but load factors for individual charter businesses are omitted from applicable tables. (g) Passengers enplaned are the number of revenue passengers who occupied seats on the Company's flights. This measure is also referred to as "passengers boarded." (h) Revenue per ASM (expressed in cents) is total operating revenue divided by total ASMs. This measure is also referred to as "RASM." RASM measures the Company's unit revenue using total available seat capacity. In the case of scheduled service, RASM is a measure of the combined impact of load factor and yield (see (j) below for the definition of yield). (i) Cost per ASM (expressed in cents) is total operating expense divided by total ASMs. This measure is also referred to as "CASM." CASM measures the Company's unit cost using total available seat capacity. 58 (j) Revenue per RPM (expressed in cents) is total operating revenue divided by total RPMs. This measure is also referred to as "yield." Yield is relevant to the evaluation of scheduled service because yield is a measure of the average price paid by customers purchasing individual seats. Yield is less relevant to the commercial charter and military/government charter businesses because the entire aircraft is sold at one time for one price. Consolidated yields and scheduled service yields are shown in the appropriate tables for industry comparability, but yields for individual charter businesses are omitted from applicable tables. NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2001 OPERATING REVENUES SCHEDULED SERVICE REVENUES. The following table sets forth, for the periods indicated, certain key operating and financial data for the scheduled service operations of the Company. Data shown for "Jet" operations include the combined operations of Lockheed L-1011, Boeing 727-200, Boeing 737-800, Boeing 757-200, and Boeing 757-300 aircraft in scheduled service. Data shown for "Saab" operations include the operations of Saab 340B propeller aircraft by Chicago Express as the ATA Connection.
NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 INC (DEC) % INC (DEC) ------------------ ------------------ ------------------ ------------------- Departures Jet 41,347 35,056 6,291 17.95 Departures Saab 28,982 18,665 10,317 55.27 ------------------ ------------------ ------------------ ------------------- Total Departures (b) 70,329 53,721 16,608 30.92 ------------------ ------------------ ------------------ ------------------- Block Hours Jet 116,317 101,349 14,968 14.77 Block Hours Saab 27,182 17,194 9,988 58.09 ------------------ ------------------ ------------------ ------------------- Total Block Hours (c) 143,499 118,543 24,956 21.05 ------------------ ------------------ ------------------ ------------------- RPMSs Jet (000s) 7,336,282 6,722,193 614,089 9.14 RPMs Saab (000s) 106,071 68,210 37,861 55.51 ------------------ ------------------ ------------------ ------------------- Total RPMs (000s) (d) 7,442,353 6,790,403 651,950 9.60 ------------------ ------------------ ------------------ ------------------- ASMs Jet (000s) 9,785,177 8,653,441 1,131,736 13.08 ASMs Saab (000s) 159,090 101,993 57,097 55.98 ------------------ ------------------ ------------------ ------------------- Total ASMs (000s) (e) 9,944,267 8,755,434 1,188,833 13.58 ------------------ ------------------ ------------------ ------------------- Load Factor Jet (%) 74.97 77.68 (2.71) (3.49) Load Factor Saab (%) 66.67 66.88 (0.21) (0.31) ------------------ ------------------ ------------------ ------------------- Total Load Factor (%) (f) 74.84 77.56 (2.72) (3.51) ------------------ ------------------ ------------------ ------------------- Passengers Enplaned Jet 5,970,143 5,199,950 770,193 14.81 Passengers Enplaned Saab 646,904 413,323 233,581 56.51 ------------------ ------------------ ------------------ ------------------- Total Passengers Enplaned (g) 6,617,047 5,613,273 1,003,774 17.88 ------------------ ------------------ ------------------ ------------------- Revenue $ (000s) 664,431 656,044 8,387 1.28 RASM in cents (h) 6.68 7.49 (0.81) (10.81) CASM in cents (i) 8.93 9.66 (0.73) (7.56) Yield in cents (j) 100.41 116.87 (16.46) (14.08)
- --------------------- See footnotes (b) through (j) on pages 58-59. Scheduled service revenues in the nine months ended September 30, 2002 increased 1.3% to $664.4 million from $656.0 million in the same period of 2001. Scheduled service revenues comprised 73.0% and 68.8%, respectively, of consolidated revenues in the quarter and nine months ended September 30, 2002, as compared to 64.9% and 63.8%, respectively, of consolidated revenues in the same periods of 2001. While the Company's capacity in 2002 has increased from 2001, both load factor and yield have declined from the prior year. The Company's third quarter 2002 scheduled service at Chicago-Midway accounted for approximately 67.8% of scheduled service ASMs and 87.4% of scheduled service departures, as 59 compared to 63.6% and 85.8%, respectively, in the third quarter of 2001. In the third quarter of 2002, the Company began nonstop service from Chicago-Midway to Charlotte. In the first quarter of 2002, the Company began nonstop international service to Aruba, Cancun, Grand Cayman and Guadalajara. In the third and fourth quarters of 2001, the Company began operating nonstop between Chicago-Midway and the cities of Newark and Miami. The Company began nonstop service from Chicago-Midway to San Jose, California on October 1, 2002 and has announced nonstop service to Montego Bay, Jamaica and Puerto Vallarta, Mexico beginning in the fourth quarter of 2002. Chicago Express operates, as of September 30, 2002, 17 34-seat Saab 340B aircraft between Chicago-Midway and the cities of Indianapolis, Cedar Rapids, Des Moines, Dayton, Flint, Grand Rapids, Lexington, Madison, Milwaukee, Moline, Springfield, South Bend and Toledo. The Company anticipates that its Chicago-Midway operation will continue to represent a substantial proportion of its scheduled service business throughout 2002 and beyond. Chicago Express has been performing well as a feeder of passengers to the jet system. The Company operated 140 peak daily jet and commuter departures from Chicago-Midway and served 34 destinations on a nonstop basis in the third quarter of 2002, as compared to 111 peak daily jet and commuter departures and 27 nonstop destinations in the third quarter of 2001. The Company's anticipated growth at Chicago-Midway will be accomplished in conjunction with the completion of new terminal and gate facilities at the Chicago-Midway Airport. In March 2001, the Company occupied 24 newly constructed ticketing and passenger check-in spaces in the new terminal, an increase from 16 ticketing and passenger check-in spaces previously occupied. Once all construction is complete in 2004, the Company expects to occupy at least 12 jet gates and one commuter aircraft gate at the new airport concourses. One new gate was occupied in October 2001, and the Company moved to seven additional new gates in the first quarter of 2002. The five remaining gates are expected to be available for use by the Company in 2004. The construction of a Federal Inspection Service ("FIS") facility at Chicago-Midway was completed in the first quarter of 2002, and the opening of this facility allowed the Company to begin nonstop international services from Chicago-Midway in the first quarter of 2002, as noted above. The Company plans to continue to add new nonstop jet service to international destinations using this customs facility at Chicago-Midway Airport. The Company's Hawaii service accounted for 16.9% of scheduled service ASMs and 3.8% of scheduled service departures in the third quarter of 2002, as compared to 23.1% and 5.1%, respectively, in the third quarter of 2001. The Company provided nonstop services in both periods from Los Angeles, Phoenix and San Francisco to both Honolulu and Maui, with connecting service between Honolulu and Maui. From June to September 2002, the Company operated seasonal service to Lihue from Los Angeles and San Francisco. The Company provides these services through a marketing alliance with the largest independent tour operator serving leisure travelers to Hawaii from the United States. The Company distributes the remaining seats on these flights through normal scheduled service distribution channels. The Company's Indianapolis service accounted for 10.0% of scheduled service ASMs and 6.0% of scheduled service departures in the third quarter of 2002, as compared to 7.7% and 5.9%, respectively, in the third quarter of 2001. In both quarters, the Company operated nonstop to Cancun, Ft. Lauderdale, Ft. Myers, Las Vegas, Los Angeles, Orlando, St. Petersburg, San Francisco and Sarasota. The Company also began limited jet service, in the second quarter of 2002, between 60 Indianapolis and Chicago-Midway, with continuing service to Seattle, and began nonstop service to New York LaGuardia and Phoenix from Indianapolis beginning in the third quarter of 2002. The Company has served Indianapolis for 30 years through the Ambassadair Travel Club, and in scheduled service since 1986. COMMERCIAL CHARTER REVENUES. The Company's commercial charter revenues are derived principally from independent tour operators and specialty charter customers. The Company's commercial charter product provides full-service air transportation to hundreds of customer-designated destinations throughout the world. Commercial charter revenues accounted for 6.5% and 11.2%, respectively of consolidated revenues in the quarter and nine months ended September 30, 2002, as compared to 16.6% in each of the comparable periods of 2001. 61 The following table sets forth, for the periods indicated, certain key operating and financial data for the commercial charter operations of the Company.
THREE MONTHS ENDED SEPTEMBER 30, 2002 2001 INC (DEC) % INC (DEC) ---------------- ---------------- ---------------- ----------------- Departures (b) 1,157 1,972 (815) (41.33) Block Hours (c) 3,888 6,792 (2,904) (42.76) RPMs (000s) (d) 246,956 675,275 (428,319) (63.43) ASMs (000s) (e) 304,538 798,277 (493,739) (61.85) Passengers Enplaned (g) 166,148 315,603 (149,455) (47.36) Revenue $ (000s) 20,626 53,329 (32,703) (61.32) RASM in cents (h) 6.77 6.68 0.09 1.35 RASM excluding fuel escalation in cents (k) 6.56 6.52 0.04 0.61 NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 INC (DEC) % INC (DEC) ----------------- --------------- ---------------- ------------------ Departures (b) 5,257 6,386 (1,129) (17.68) Block Hours (c) 17,949 21,387 (3,438) (16.08) RPMs (000s) (d) 1,228,998 1,755,865 (526,867) (30.01) ASMs (000s) (e) 1,535,375 2,239,239 (703,864) (31.43) Passengers Enplaned (g) 792,176 1,017,639 (225,463) (22.16) Revenue $ (000s) 108,120 170,124 (62,004) (36.45) RASM in cents (h) 7.04 7.60 (0.56) (7.37) RASM excluding fuel escalation in cents (k) 6.96 7.26 (0.30) (4.13)
- --------------------- See footnotes (b) through (h) on page 58. (k) Commercial charter contracts generally provide that the tour operator will reimburse the Company for certain fuel cost increases, which, when earned, are accounted for as additional revenue. A separate RASM calculation, excluding the impact of fuel reimbursements, is provided as a separate measure of unit revenue changes. The majority of the decline in commercial charter revenues in the third quarter and nine months ended September 30, 2002, as compared to the same periods of 2001, was due to the retirement of certain Lockheed L-1011 and Boeing 727-200 aircraft that the Company has traditionally used in commercial charter flying. Since aircraft utilization (number of productive hours of flying per aircraft each month) is typically much lower for commercial charter, as compared to scheduled service flying, the Company's replacement fleets of new Boeing 737-800 and Boeing 757-300 aircraft are economically disadvantaged when used in the charter business, because of their higher fixed-ownership cost. Consequently, the Company expects its commercial charter revenues to continue to decline throughout the remainder of 2002 as the fleet supporting this business continues to shrink through aircraft retirements. The Company operates in two principal components of the commercial charter business, known as "track charter" and "specialty charter." The larger track charter business component is generally comprised of low frequency but repetitive domestic and international flights between city pairs, which support high passenger load factors and are marketed through tour operators, providing value-priced and convenient nonstop service to vacation destinations for the leisure traveler. Since track charter resembles scheduled service in terms of its repetitive flying patterns between fixed city pairs, it allows the Company to achieve reasonable levels of crew and aircraft utilization (although less than for scheduled service), and provides the Company with meaningful protection from some fuel price increases through the use of fuel escalation reimbursement clauses in tour operator contracts. Track charter accounted for approximately $16.1 million and $84.2 million, respectively, in revenues in the quarter and nine months ended September 30, 2002, as compared to $44.9 million and $135.6 million, respectively, in the comparable periods of 2001. 62 Specialty charter (including incentive travel programs) is a product which is designed to meet the unique requirements of the customer and is a business characterized by lower frequency of operation and by greater variation in city pairs served than the track charter business. Specialty charter includes such diverse contracts as flying university alumni to football games, transporting political candidates on campaign trips and moving NASA space shuttle ground crews to alternate landing sites. Specialty charter accounted for approximately $2.5 million and $9.8 million, respectively, in revenues in the quarter and nine months ended September 30, 2002, as compared to $4.5 million and $14.0 million, respectively, in the comparable periods of 2001. MILITARY/GOVERNMENT CHARTER REVENUES. The following table sets forth, for the periods indicated, certain key operating and financial data for the military/ government flight operations of the Company.
THREE MONTHS ENDED SEPTEMBER 30, 2002 2001 INC (DEC) (DEC) % INC ------------------------------------------------------------------------ Departures (b) 959 854 101 11.83 Block Hours (c) 4,175 3,831 344 8.98 RPMs (000s) (d) 252,215 255,560 (3,345) (1.31) ASMs (000s) (e) 554,979 491,359 63,620 12.95 Passengers Enplaned (g) 60,140 53,714 6,426 11.96 Revenue $ (000s) 47,559 40,300 7,259 18.01 RASM in cents (h) 8.57 8.20 0.37 4.51 RASM excluding fuel escalation in cents (1) 8.52 7.89 0.63 7.98 NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 INC (DEC) (DEC) % INC ------------------------------------------------------------------------ Departures (b) 2,679 2,709 (30) (1.11) Block Hours (c) 11,732 11,756 (24) (0.20) RPMs (000s) (d) 719,779 738,316 (18,537) (2.51)) ASMs (000s) (e) 1,559,070 1,580,397 (21,327) (1.35) Passengers Enplaned (g) 175,380 176,572 (1,192) (0.68) Revenue $ (000s) 130,578 122,479 8,099 6.61 RASM in cents (h) 8.38 7.75 0.63 8.13 RASM excluding fuel escalation in cents (l) 8.40 7.43 0.97 13.06
- --------------------- See footnotes (b) through (h) on page 58. (l) Military/government reimbursements to the Company are calculated based upon a "cost plus" formula, including an assumed average fuel price for each contract year. If actual fuel prices differ from the contract rate, revenues are adjusted up or down to neutralize the impact of the change on the Company. A separate RASM calculation is provided, excluding the impact of the fuel price adjustments. The Company participates in two related military/government charter programs known as "fixed-award" and "short-term expansion." Pursuant to the U.S. military's fixed-award system, each participating airline is awarded certain "mobilization value points" based upon the number and type of aircraft made available by that airline for military flying. In order to increase the number of points awarded, the Company has traditionally participated in contractor teaming arrangements with other airlines. Under these arrangements, the team has a greater likelihood of receiving fixed-award business and, to the extent that the award includes passenger transport, the opportunity for the Company to operate this flying is enhanced since the Company represents a majority of the passenger transport capacity of the team. As part of its participation in this teaming arrangement, the Company pays a commission to the team, which passes that revenue on to all team members based upon their mobilization points. All airlines participating in the fixed-award business contract annually with the U.S. military from October 1 to the following September 30. For each contract year, reimbursement rates are determined for all aircraft types and mission categories based upon operating cost data 63 submitted by the participating airlines. These contracts generally are not subject to renegotiation once they become effective. Short-term expansion business is awarded by the U.S. military first on a pro rata basis to those carriers who have been provided fixed-award business and then to any other carrier with aircraft availability. Expansion flying is generally offered to airlines on very short notice. The overall amount of military flying that the Company performs in any one year is dependent upon several factors, including (i) the percentage of mobilization value points represented by the Company's team as compared to total mobilization value points of all providers of military service; (ii) the percentage of passenger capacity of the Company with respect to its own team; (iii) the amount of fixed-award and expansion flying required by the U.S. military in each contract year; and (iv) the availability of the Company's aircraft to accept and fly expansion awards. The Company earned $175.6 million in military/government charter revenues in the contract year ended September 30, 2002. The increase in RASM for military/government charter revenues in the quarter and nine months ended September 30, 2002, as compared to the same periods of 2001, was due primarily to rate increases awarded for the current contract year ending September 30, 2002, based upon cost data submitted to the U.S. military by the Company and other air carriers providing these services, and partially due to the mix of aircraft hours flown. The Company has renewed its U.S. military contract for the fiscal year beginning October 1, 2002, and has obtained an average rate nearly unchanged as compared to the prior contract year. The Company expects the volume of military flying to be higher than in the contract year ended September 30, 2002, but due to the small rate changes expects military/government charter RASM in the contract year beginning October 1, 2002 to be only slightly higher than the current contract year. GROUND PACKAGE REVENUES. The Company earns ground package revenues through the sale of hotel, car rental and cruise accommodations in conjunction with the Company's air transportation product. The Company markets these ground packages through its ATALC and Ambassadair subsidiaries. Ambassadair Travel Club offers tour-guide-accompanied vacation packages to its approximately 32,000 individual and family members. ATALC offers numerous ground accommodations to the general public, which are marketed through travel agents, as well as directly by the Company. In the third quarter of 2002, ground package revenues decreased 35.6% to $5.6 million, as compared to $8.7 million in the third quarter of 2001, and in the nine months ended September 30, 2002, ground package revenues decreased 32.3% to $30.6 million, as compared to $45.2 million in the same period of 2001. The decline in ground package sales (and related ground package costs) in the first nine months of 2002, as compared to the first nine months of 2001, is partially due to the reduced demand for leisure travel subsequent to the terrorist attacks of September 11, 2001. Also, effective July 1, 2002, the Company outsourced the management and marketing of its ATA Vacations and Travel Charter, International brands to MTC. Under that outsourcing agreement, MTC will directly sell ground arrangements to customers who also purchase charter or scheduled service air transportation from the Company. Therefore, the Company anticipates that ground package sales (and related ground package costs) will continue to experience significant year-over-year declines in the remainder of 2002, as these sales will no longer be recorded by the Company for ATA Vacations and Travel Charter, International. 64 OTHER REVENUES. Other revenues are comprised of the consolidated revenues of certain affiliated companies, together with miscellaneous categories of revenue associated with the scheduled, charter and ground package operations of the Company, such as cancellation and miscellaneous service fees, Ambassadair Travel Club membership dues and cargo revenue. Other revenues increased 12.3% to $11.9 million in the third quarter of 2002, as compared to $10.6 million in the third quarter of 2001, and decreased 3.8% to $32.7 million in the nine months ended September 30, 2002, as compared to $34.0 million in the same period of 2001. Although certain administrative fee revenues increased between periods, most other revenues declined in association with the ongoing diminished travel demand subsequent to the terrorist attacks of September 11, 2001. OPERATING EXPENSES SALARIES, WAGES AND BENEFITS. Salaries, wages and benefits include the cost of salaries and wages paid to the Company's employees, together with the Company's cost of employee benefits and payroll-related local, state and federal taxes. Salaries, wages and benefits expense in the third quarter of 2002 increased 11.9% to $95.1 million, as compared to $85.0 million in the third quarter of 2001, and in the nine months ended September 30, 2002, increased 6.2% to $264.8 million, as compared to $249.4 million in the same period of 2001. On July 16, 2002, the Company's cockpit crewmembers, who are represented by the Air Line Pilots Association ("ALPA"), ratified an amended collective bargaining agreement, which became effective July 1, 2002. The Company expects future salaries, wages and benefits costs to be significantly increased by the ratified amended cockpit crewmember contract. The amended contract is expected to increase cockpit crewmembers' average salaries by approximately 80% over the four year contract period. Additionally, the amended contract provides for expanded retirement benefits for cockpit crewmembers. Although their existing 401(k) employer match will be capped in future years, a defined contribution plan has been established for cockpit crewmembers effective January 1, 2003. Certain insurance benefits for cockpit crewmembers have also been enhanced as a result of the amended contract. The increase in salaries, wages and benefits in the quarter and nine months ended September 30, 2002, as compared to the same periods of 2001, is primarily due to the Company recording $9.9 million for a signing bonus as provided by the amended cockpit crewmember contract. Also, impacting the quarter and nine months ended September 30, 2002, were cockpit crewmember contract rate increases effective July 1, 2002, and generally increasing costs for all employee's medical and workers' compensation benefits. FUEL AND OIL. Fuel and oil expense decreased 21.9% to $53.0 million in the third quarter of 2002, as compared to $67.9 million in the same period of 2001, and decreased 26.5% to $151.4 million in the nine months ended September 30, 2002, as compared to $205.9 million in the same period of 2001. Total jet block hours increased 14.4% and 8.6%, respectively, in the quarter and nine months ended September 30, 2002, as compared to the same periods of 2001. Despite this increase, the Company consumed 14.9% and 14.7% fewer gallons of jet fuel for flying operations, respectively, between the quarter and nine-month periods ended September 30, 2002 and 2001, which resulted in a decrease in fuel expense of approximately $10.4 million and $30.9 million, respectively. This decrease was primarily due to the addition of Boeing 737-800 and Boeing 757-300 aircraft to the Company's fleet beginning in May 2001. These aircraft replaced certain less-fuel-efficient Boeing 727-200 and Lockheed L-1011 aircraft, which were retired from revenue service. 65 During the quarter and nine months ended September 30, 2002, the Company's average cost per gallon of jet fuel consumed decreased by 2.6% and 13.2%, respectively, as compared to the same periods of 2001, resulting in a decrease in fuel and oil expense of approximately $3.4 million and $23.9 million, respectively, between those periods. Periodically, the Company has entered into fuel price hedge contracts to reduce the risk of fuel price fluctuations. No material gains or losses were recorded in any period presented. As of September 30, 2002, the Company had no outstanding fuel hedge agreements. AIRCRAFT RENTALS. The Company's operating leases require periodic cash payments that vary in amount and frequency. The Company accounts for aircraft rentals expense in equal monthly amounts over the life of each operating lease. As of September 30, 2002 and December 31, 2001, the Company had recorded $75.8 million and $49.2 million, respectively, of prepaid aircraft rent under its operating leases. Aircraft rentals expense for the third quarter of 2002 increased 90.3% to $51.2 million from $26.9 million in the third quarter of 2001, and increased 98.7% to $135.7 million in the nine months ended September 30, 2002, as compared to $68.3 million in the same period of 2001. The increase was mainly attributable to the delivery of 25 leased Boeing 737-800 and 10 leased Boeing 757-300 aircraft between May 2001 and September 2002, which resulted in an increase in rental expense of $26.9 million and $71.5 million, respectively, in the quarter and nine months ended September 30, 2002, as compared to the same periods of 2001. This increase was partially offset by a decline in rental expense recognized in the third quarter and nine months ended September 30, 2001, of $5.0 million and $6.2 million, respectively, associated with the accrual of rents under operating leases for certain Boeing 727-200s which were removed from revenue service shortly after the events of September 11, 2001. No such expense was incurred in 2002. HANDLING, LANDING AND NAVIGATION FEES. Handling and landing fees include the costs incurred by the Company at airports to land and service its aircraft and to handle passenger check-in, security, cargo and baggage where the Company elects to use third-party contract services in lieu of its own employees. Where the Company uses its own employees to perform ground handling functions, the resulting cost appears within salaries, wages and benefits. Air navigation fees are incurred when the Company's aircraft fly over certain foreign airspace. Handling, landing and navigation fees increased by 35.6% to $29.3 million in the third quarter of 2002, as compared to $21.6 million in the third quarter of 2001, and increased by 21.6% to $85.5 million in the nine months ended September 30, 2002, as compared to $70.3 million in the same period of 2001. The increase in handling, landing and navigation fees between the third quarters of 2002 and 2001 and the nine months ended September 30, 2002 and 2001, was partly due to an increase in system-wide jet departures, which increased by 18.5% between the third quarters of 2002 and 2001 and which increased 11.6% between the nine months ended September 30, 2002 and 2001. The Company's average cost to handle its aircraft also increased in 2002, as compared to 2001, primarily due to higher costs incurred for airport security as a result of the terrorist attacks on September 11, 2001. DEPRECIATION AND AMORTIZATION. Depreciation reflects the periodic expensing of the recorded cost of owned airframes and engines, leasehold improvements and rotable parts for all fleet types, together with other property and equipment owned by the Company. Amortization is primarily the periodic expensing of capitalized airframe and engine overhauls on a units-of-production basis using aircraft flight hours and cycles (landings) as the units of measure. Depreciation and amortization expense decreased 41.3% to $18.9 million in the third quarter of 2002, as compared to $32.2 million in the 66 third quarter of 2001, and decreased 40.5% to $60.3 million in the nine months ended September 30, 2002, as compared to $101.4 million in the same period of 2001. In 2001, the Company retired three Lockheed L-1011-50 aircraft from revenue service early, immediately preceding their next heavy maintenance check. In the first nine months of 2002, the Company retired another five L-1011-50/100 aircraft earlier than planned. During the fourth quarter of 2001, the Company also determined that the remaining ten Lockheed L-1011-50/100 aircraft, rotable parts and inventory were impaired. These assets were subsequently classified as held for use in accordance with FAS 121, requiring them to be recorded on the balance sheet at their estimated fair market value at the time of impairment, which is the new asset basis to be depreciated over their estimated remaining useful lives. Due primarily to the reduced cost basis of the remaining ten aircraft, and the early retirement of eight aircraft, the Company recorded $5.0 million and $14.6 million, respectively, less depreciation and amortization expense for this fleet in the quarter and nine months ended September 30, 2002, as compared to the same periods of 2001. Following the events of September 11, 2001, the Company decided to retire its Boeing 727-200 fleet earlier than originally planned. Most of the aircraft were retired from revenue service in the fourth quarter of 2001, although some were used for charter service through the first five months of 2002. As a result, these aircraft were determined to be impaired under FAS 121. Boeing 727-200 aircraft not already transferred to BATA Leasing LLC ("BATA") have been classified in the balance sheets as assets held for sale. In accordance with FAS 121, depreciation expense was not recorded after the fleet was deemed impaired and held for disposal, and will not be recorded in future accounting periods. As a result, the Company did not record any depreciation expense on the Boeing 727-200 fleet in the quarter and nine months ended September 30, 2002, which resulted in a decrease of $7.8 million and $28.7 million, respectively, in depreciation and amortization expense in the quarter and nine months ended September 30, 2002, as compared to the same periods of 2001. Partially offsetting these decreases were increased amortization of capitalized engine and airframe overhauls on the Lockheed L-1011-500 fleet, and increases in depreciation and amortization expense associated with other fleet rotable parts, owned engines and the provision for inventory obsolescence, along with fluctuations in expenses related to furniture and fixtures, computer hardware and software, and debt issue costs between periods, none of which were individually significant. CREW AND OTHER EMPLOYEE TRAVEL. Crew and other employee travel is primarily the cost of air transportation, hotels and per diem reimbursements to cockpit and cabin crew members incurred to position crews away from their bases to operate Company flights throughout the world. The cost of crew and other employee travel decreased 4.0% to $14.5 million in the third quarter of 2002, as compared to $15.1 million in the third quarter of 2001, and decreased 10.3% to $41.9 million in the nine months ended September 30, 2002, as compared to $46.7 million in the same period of 2001. These decreases were mainly due to the Company's benefiting from lower hotel rates which became available after the September 11, 2001 terrorist attacks. The average hotel cost per full-time-equivalent crew decreased 6.4% in the third quarter of 2002 and 15.8% in the first nine months of 2002, as compared to the same periods of 2001. The decreases also reflect a decline in non-crew employee travel in the first nine months of 2002, as compared to the first nine months of 2001, due to the Company's cost-cutting initiatives. These decreases in the third quarter of 2002 were offset by an increase in crew per diem of nearly $1.0 million as compared to the third quarter of 2001. The amended cockpit crewmember contract substantially increased per diem rates paid to cockpit 67 crewmembers. As stipulated in the flight attendants' collective bargaining agreement, the Company must also pay these amended per diem rates to the flight attendant group. AIRCRAFT MAINTENANCE, MATERIALS AND REPAIRS. This expense includes the cost of expendable aircraft spare parts, repairs to repairable and rotable aircraft components, contract labor for maintenance activities, and other non-capitalized direct costs related to fleet maintenance, including spare engine leases, parts loan and exchange fees, and related shipping costs. It also includes the costs incurred under hourly engine maintenance agreements the Company has entered into on its Boeing 737-800 and Saab 340B power plants. These agreements provide for the Company to pay monthly fees based on a specified rate per engine flight hour, in exchange for major engine overhauls and maintenance. Aircraft maintenance, materials and repairs expense decreased 23.1% to $11.3 million in the third quarter of 2002, as compared to $14.7 million in the third quarter of 2001, and decreased 25.3% to $37.4 million in the nine months ended September 30, 2002, as compared to $50.1 million in the same period of 2001. The decline in maintenance, material and repairs expense in the third quarter and nine months ended September 30, 2002, as compared to the same periods of 2001, was primarily attributable to a decrease in materials consumed and components repaired related to maintenance on the Company's aging fleets of Lockheed L-1011-50/100 and Boeing 727-200 aircraft. During 2001 and the first nine months of 2002, the Company placed 20 Boeing 727-200 aircraft into BATA, and retired eight Lockheed L-1011-50/100 aircraft prior to the due dates of heavy maintenance visits. Maintenance, materials and repairs expense associated with these two fleets decreased $4.4 million and $16.6 million, respectively, in the third quarter and nine months ended September 30, 2002, as compared to the same periods of 2001. This decline in maintenance, materials and repairs was partially offset by an increase in the cost of the hourly engine maintenance agreement for the Company's growing fleet of Saab 340B propeller aircraft operated by Chicago Express. OTHER SELLING EXPENSES. Other selling expenses are comprised primarily of booking fees paid to computer reservation systems ("CRS"), credit card discount expenses incurred when selling to customers using credit cards for payment, and toll-free telephone services provided to single-seat and vacation package customers who contact the Company directly to book reservations. Other selling expenses increased 7.8% to $11.1 million in the third quarter of 2002, as compared to $10.3 million in the third quarter of 2001, and increased 3.7% to $33.5 million in the nine months ended September 30, 2002, as compared to $32.3 million in the same period of 2001. These increases are primarily the result of a greater portion of the Company's sales being made on credit cards, and slightly higher CRS fees. PASSENGER SERVICE. Passenger service expense includes the onboard costs of meal and non-alcoholic beverage catering, the cost of alcoholic beverages and in-flight movie headsets sold, and the cost of onboard entertainment programs, together with certain costs incurred for mishandled baggage and passengers inconvenienced due to flight delays or cancellations. For the third quarter of 2002 and 2001, catering represented 79.9% and 72.5%, respectively, of total passenger service expense, while catering represented 79.6% and 72.6%, respectively, of total passenger service expense for the nine month periods ended September 30, 2002 and 2001. The total cost of passenger service decreased 17.5% to $10.4 million in the third quarter of 2002, as compared to $12.6 million in the third quarter of 2001 and decreased 16.8% to $29.7 million in the nine months ended September 30, 2002, as compared to $35.7 million in the same period of 68 2001. The Company experienced a decrease of approximately 32.0% and 21.9%, respectively, in the average unit cost of catering each passenger between the quarter and nine months ended September 30, 2002, and comparable periods of 2001, primarily because in the first three quarters of 2002 the Company boarded a higher ratio of scheduled service passengers to charter passengers than in the same periods of 2001. Scheduled service passengers are provided a significantly less expensive catering service than is provided to commercial charter and military passengers. In addition, the Company introduced round-trip catering for flights originating in Chicago-Midway to reduce catering service charges in the quarter and nine months ended September 30, 2002. These differences resulted in a price-and-business-mix decrease of $3.3 million and $5.7 million, respectively, in catering expense between the quarter and nine months ended September 30, 2002, and the comparable periods of 2001. Total jet passengers boarded increased 14.8% and 8.5%, respectively, between the same time periods, resulting in approximately $2.5 million and $3.6 million, respectively, in higher volume-related catering expenses between the same sets of comparative periods. In the quarter and nine months ended September 30, 2002, as compared to the same periods of 2001, the Company also incurred approximately $1.9 million and $4.2 million, respectively, less expense for mishandled baggage and passenger inconvenience, due to significantly fewer flight delays and cancellations in 2002. ADVERTISING. Advertising expense increased 33.3% to $9.6 million in the third quarter of 2002, as compared to $7.2 million in the third quarter of 2001, and increased 45.9% to $30.2 million in the nine months ended September 30, 2002, as compared to $20.7 million in the same period of 2001. The Company incurs advertising costs primarily to support single-seat scheduled service sales. The increase in advertising was primarily attributable to the promotion of the new scheduled service destinations added in the first nine months of 2002 and the promotion of low fares in a market that had less demand for service. The Company also increased advertising in an effort to increase consumer preference for the Company's enhanced product, especially in its important Chicago-Midway hub. INSURANCE. Insurance expense represents the Company's cost of hull and liability insurance and the costs of general insurance policies held by the Company, including workers' compensation insurance premiums and claims handling fees. The total cost of insurance increased 220.0% to $8.0 million in the third quarter of 2002, as compared to $2.5 million in the third quarter of 2001, and increased 238.6% to $23.7 million in the nine months ended September 30, 2002, as compared to $7.0 million in the same period of 2001. Liability insurance increased $4.1 million and $12.5 million in the quarter and nine months ended September 30, 2002, as compared to the same periods of 2001. Immediately following the September 11, 2001 terrorist attacks, the Company's insurer reduced the maximum amount of insurance coverage they would underwrite for liability to persons other than employees or passengers resulting from acts of terrorism, war, hijacking, or other similar perils (war-risk coverage) and significantly increased their premiums for this reduced coverage. Pursuant to the Air Transportation Safety and System Stabilization Act and other enabling legislation, the U.S. Government has issued supplemental war-risk coverage to U.S. air carriers, including the Company, which is expected to continue through late 2003. It is anticipated that after this date a commercial product for war-risk coverage will become available, but the Company may continue to incur significant additional costs for this coverage. Hull insurance increased $1.0 million and $3.0 million in the quarter and nine months ended September 30, 2002, as compared to the same periods of 2001. The increase is mainly attributable to 69 the increase in the Company's hull value between periods due to the addition of the new Boeing 737-800 and Boeing 757-300 aircraft. The increase is also attributable to an increase in premium rates following the September 11, 2001 terrorist attacks. Expenses related to the Company's general insurance policies increased $0.4 million and $1.2 million in the quarter and nine months ended September 30, 2002, as compared to the same periods of 2001, due primarily to an increase in workers' compensation premiums and claims handling fees between periods. FACILITIES AND OTHER RENTALS. Facilities and other rentals include the cost of all ground facilities that are leased by the Company such as airport space, regional sales offices and general offices. The cost of facilities and other rentals increased 18.9% to $6.3 million in the third quarter of 2002, as compared to $5.3 million in the third quarter of 2001, and increased 19.0% to $17.5 million in the nine months ended September 30, 2002, as compared to $14.7 million in the same period of 2001. Growth in facilities costs between periods was primarily attributable to facilities at airport locations required to support new scheduled service destinations added in the last three months of 2001 and the first nine months of 2002, and expanded services at existing destinations. COMMISSIONS. The Company incurs commissions expense in association with the sale by travel agents of single seats on scheduled service. In addition, the Company incurs commissions to secure some commercial and military/government charter business. Commissions expense decreased 48.1% to $4.0 million in the third quarter of 2002, as compared to $7.7 million in the third quarter of 2001, and decreased 36.5% to $18.1 million in the nine months ended September 30, 2002, as compared to $28.5 million in the same period of 2001. The Company experienced a decrease in commissions of $0.6 million and $3.2 million, respectively, in the quarter and nine months ended September 30, 2002, attributable to commissions paid to travel agents by ATALC, which is consistent with the decrease in related revenue. In addition, scheduled service commissions decreased $3.1 million and $6.9 million, respectively, in the quarter and nine months ended September 30, 2002, primarily due to the elimination of standard travel agency commissions for sales made after March 21, 2002. The Company continues to pay special travel agency commissions targeted to specific markets and periods of the year. GROUND PACKAGE COST. Ground package cost is incurred by the Company with hotels, car rental companies, cruise lines and similar vendors who provide ground and cruise accommodations to Ambassadair and ATALC customers. Ground package cost decreased 40.6% to $3.8 million in the third quarter of 2002, as compared to $6.4 million in the third quarter of 2001, and decreased 35.1% to $23.8 million in the nine months ended September 30, 2002, as compared to $36.7 million in the same period of 2001. Ground package costs between years decreased in approximate proportion to the decrease in ground package revenues. See the "Ground Package Revenues" section above for an explanation of the decline in ground package sales and related costs. SPECIAL CHARGES. Special charges represent direct expenses which, due to the events of September 11, 2001, were considered unusual in nature under the provisions of APB Opinion 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and the Extraordinary, Unusual and Infrequently Occurring Events and Transactions" ("APB 30"). Special charges for both the three and nine months ended September 30, 2001 were $9.4 million, while no expenses were classified as special charges in 2002. The 2001 special charges were comprised primarily of costs associated with the early retirement of the Company's Boeing 727 fleet, a decision made immediately after September 11, 2001, costs associated with the Company's proposed transaction in which ATA Holdings would have been taken private, which was substantially 70 complete by September 11, 2001, when the Company lost financing as a results of the attacks, and expenses directly associated with the FAA's temporary mandated suspension of commercial flights on September 11, 2001 and for several days thereafter. AIRCRAFT IMPAIRMENTS AND RETIREMENTS. Aircraft impairment and retirement costs decreased 8.8% to $34.3 million in the third quarter of 2002, as compared to $37.6 million in the third quarter of 2001, and increased 23.7% to $51.6 million in the nine months ended September 30, 2002, as compared to $41.7 million in the same period of 2001. Following the events of September 11, 2001, the Company decided to retire its Boeing 727-200 fleet earlier than originally planned. Most of the aircraft were retired from revenue service in the fourth quarter of 2001, although some were used for charter service through the first five months of 2002. In accordance with FAS 121, the Company determined in 2001 that the estimated future undiscounted cash flows expected to be generated by the Boeing 727-200s were less than the net book value of these aircraft and the related rotable parts and inventory. Therefore, an impairment charge was recorded in 2001. In accordance with FAS 121, the Company continues to re-evaluate current fair market values of previously impaired assets. In the three and nine months ended September 30, 2002, the Company recorded asset impairment charges of $18.8 million and $33.6 million, respectively, and $35.2 million for the same periods of 2001, related to its remaining net book value of Boeing 727-200 aircraft, including those recorded as an investment in BATA. Significant assumptions were required concerning the estimated fair market value of the fleet, since FAS 121 specifies that impaired assets be written down to their estimated fair market value by recording an impairment charge to earnings. As FAS 121 requires the Company to continuously evaluate fair market values of previously impaired assets, it is possible that future estimates of fair market value may result in additional material charges to earnings, if those estimates indicate a material reduction in fair market value as compared to the estimates made on September 30, 2002. In the third quarter of 2002, the Company retired two Lockheed L-1011-50/100 aircraft, resulting in a charge of $6.6 million. In the third quarter of 2002, the Company also decided to retire one Lockheed L-1011-500 aircraft in the fourth quarter of 2002. The Company will write off the remaining value of that aircraft ratably over its remaining estimated life. In the third quarter of 2002, the Company recorded a charge of $8.9 million related to the retirement of this aircraft, which is reported as part of aircraft impairments and retirements. U.S. GOVERNMENT GRANT. As a result of the terrorist attacks of September 11, 2001 President Bush signed into law the Air Transportation Safety and System Stabilization Act ("Act"). The Act, among other things, provided $5.0 billion in compensation for the direct losses incurred by all U.S. airlines and air cargo carriers as a result of the closure by the FAA of U.S. airspace following the September 11, 2001 terrorist attacks and for incremental losses incurred by air carriers through December 31, 2001. Each qualified air carrier is entitled to receive the lesser of: (1) its actual direct and incremental losses incurred between September 11, 2001 and December 31, 2001 or (2) its proportion of the $5.0 billion of total compensation available to all qualified air carriers under the Act allocated based on August 2001 available seat miles or ton miles. The Company believes it is eligible to receive up to approximately $74.0 million in connection with the Act, based on the Company's allocation calculated from August 2001 available seat miles. In 2001, the Company calculated its direct and incremental losses to be $66.3 million, and recorded that amount as U.S. Government grant compensation. The $66.3 million was comprised of lost profit contribution and certain special charges deemed directly attributable to the 71 terrorist attacks, partially offset by expense reductions as a direct result of lower costs incurred by the Company after the attacks. The Company received $44.5 million in cash compensation under the Act in 2001, and recorded a receivable for the remaining amount of $21.8 million. The DOT issued revised guidelines for compensation in April 2002, and the Company completed and submitted its third and final application, in the second quarter of 2002. The Company continues to review its application with the DOT. Based on these discussions with the DOT, the Company has determined that a portion of the receivable recorded in 2001 may not be collected when the DOT provides its final ruling of what qualifies as reimbursable. The Company recorded a valuation allowance of $15.2 million against the receivable in the second quarter of 2002 and made no adjustment to that allowance in the third quarter of 2002. The Company currently expects to receive a final decision on its pending application with the DOT during the fourth quarter of 2002. OTHER OPERATING EXPENSES. Other operating expenses decreased 5.2% to $16.3 million in the third quarter of 2002, as compared to $17.2 million in the third quarter of 2001, and increased 4.2% to $55.2 million in the nine months ended September 30, 2002, as compared to $53.0 million in the same period of 2001. No line item changes were individually significant between these periods. INTEREST INCOME AND EXPENSE. Interest expense in the quarter and nine months ended September 30, 2002 increased to $7.7 million and $26.0 million, respectively, as compared to $7.0 million and $21.3 million, respectively, in the same periods of 2001. The Company incurred $2.3 million in the nine months ended September 30, 2002, in interest expense relating to certain Boeing 757-300 and Boeing 737-800 aircraft which were temporarily financed with bridge debt. No such financing was in place in the first nine months of 2001. These aircraft were refinanced with operating leases by the end of the third quarter of 2002. The Company also capitalized interest of $2.2 million less, between the nine months ended September 30, 2002 and 2001, associated with its funding of the aircraft pre-delivery deposit requirements. The Company invested excess cash balances in short-term government securities and commercial paper and thereby earned $0.6 million and $2.1 million, respectively, in interest income in the quarter and nine months ended September 30, 2002, as compared to $1.2 million and $4.2 million, respectively, in the same periods of 2001. The decrease in interest income between periods is primarily due to a decline in the average interest rate earned. INCOME TAX EXPENSE. In the quarter and nine months ended September 30, 2002 the Company recorded an income tax credit of $6.7 million and $19.6 million, respectively, applicable to $67.4 million and $133.7 million, respectively, in pre-tax loss for those periods, while in the quarter and nine months ended September 30, 2001 the Company recorded income tax expense of $16,000 and $0.9 million, respectively, applicable to $0.4 million and $3.4 million, respectively, in pre-tax income for those periods. The effective tax rate applicable to the quarter and nine months ended September 30, 2002 were 14.6% and 10.0%, respectively, as compared to 4.0% and 26.4%, respectively, in the same periods of 2001. The Company expects to incur a loss for the full year of 2002. When combined with annual losses reported in 2000 and 2001, this three-year cumulative loss creates a presumption under accounting principles generally accepted in the United States that net deferred tax assets should be fully reserved, if their recovery cannot be reasonably assured through carry-backs or other tax strategies. As of September 30, 2002 the Company projects that it will have a net deferred tax asset of $57.7 million as of the end of 2002, and that it can be reasonably assured of recovering $18.4 million of that deferred tax asset in cash refunds in 2003, using a five-year carry-back of expected 72 2002 alternative minimum tax net operating losses to the years 1997 through 2001. Therefore, the Company has determined that a full valuation allowance against the remaining net deferred tax asset of $39.3 million is required, by adjusting the Company's effective tax rate for 2002 prospectively from the third quarter. This allowance adjustment, included in income tax expense, resulted in an effective tax rate of 14.6% for tax credits applicable to losses incurred through the third quarter of 2002. 73 YEAR ENDED DECEMBER 31, 2001, VERSUS YEAR ENDED DECEMBER 31, 2000 OPERATING REVENUES Total operating revenues in 2001 decreased 1.3% to $1.275 billion, as compared to $1.292 billion in 2000. This decrease was due to a $54.5 million decrease in commercial charter revenues, a $21.1 million decrease in military/government charter revenues, a $7.6 million decrease in ground package revenues, and a $0.3 million decrease in other revenues, partially offset by a $67.4 million increase in scheduled service revenues. SCHEDULED SERVICE REVENUES. The following table sets forth, for the periods indicated, certain key operating and financial data for the scheduled service operations of the Company. Data shown for "Jet" operations include the combined operations of Lockheed L-1011, Boeing 727-200, Boeing 757-200, Boeing 757-300 and Boeing 737-800 aircraft in scheduled service. Data shown for "J31/Saab" operations include the operations of Jetstream 31 and Saab 340B propeller aircraft by Chicago Express as the ATA Connection.
TWELVE MONTHS ENDED DECEMBER 31, ----------------------------------------------------------------------- 2001 2000 INC (DEC) % INC (DEC) ----------------------------------------------------------------------- Departures Jet 45,951 40,892 5,059 12.37 Departures J31/Saab (a) 26,836 18,985 7,851 41.35 ----------------------------------------------------------------------- Total Departures (b) 72,787 59,877 12,910 21.56 ----------------------------------------------------------------------- Block Hours Jet 131,495 118,473 13,022 10.99 Block Hours J31/Saab 24,836 18,708 6,128 32.76 ----------------------------------------------------------------------- Total Block Hours (c) 156,331 137,181 19,150 13.96 ----------------------------------------------------------------------- RPMs Jet (000s) 8,600,314 7,700,639 899,675 11.68 RPMs J31/Saab (000s) 94,009 56,669 37,340 65.89 ----------------------------------------------------------------------- Total RPMs (000s) (d) 8,694,323 7,757,308 937,015 12.08 ----------------------------------------------------------------------- ASMs Jet (000s) 11,297,545 10,025,603 1,271,942 12.69 ASMs J31/Saab (000s) 145,759 94,371 51,388 54.45 ----------------------------------------------------------------------- Total ASMs (000s) (e) 11,443,304 10,119,974 1,323,330 13.08 ----------------------------------------------------------------------- Load Factor Jet 76.13 76.81 (0.68) (0.89) Load Factor J31/Saab 64.50 60.05 4.45 7.41 ----------------------------------------------------------------------- Total Load Factor (f) 75.98 76.65 (0.67) (0.87) ----------------------------------------------------------------------- Passengers Enplaned Jet 6,703,150 5,873,598 829,552 14.12 Passengers Enplaned J31/Saab 576,339 320,062 256,277 80.07 ----------------------------------------------------------------------- Total Passengers Enplaned (g) 7,279,489 6,193,660 1,085,829 17.53 ----------------------------------------------------------------------- Revenue $ (000s) 820,666 753,301 67,365 8.94 RASM in cents (h) 7.17 7.44 (0.27) (3.63) Yield in cents (j) 9.44 9.71 (0.27) (2.78) Revenue per segment $ (m) 112.74 121.62 (8.88) (7.30)
- -------------------- 74 See footnotes (a) through (j) on pages 58-59. (m) Revenue per segment flown is determined by dividing total scheduled service revenues by the number of passengers boarded. Revenue per segment is a broad measure of the average price obtained for all flight segments flown by passengers in the Company's scheduled service route network. Scheduled service revenues in 2001 increased 8.9% to $820.7 million from $753.3 million in 2000. Scheduled service revenues were 64.3% of consolidated revenues in 2001, as compared to 58.3% of consolidated revenues in 2000. As described in "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 2 - Impact of Terrorist Attacks on September 11, 2001," the Company's scheduled service operations were adversely affected by the terrorist attacks of September 11. The Company estimates that it lost approximately $80.0 million in scheduled service revenues between September 11 and December 31, 2001, as a result of flights which were canceled, and as a result of flights operated with lower load factors and yields. In the eight months ended August 31, 2001, the Company's scheduled service RASM was virtually unchanged at 7.72 cents, as compared to 7.71 cents in the comparable period of 2000. However, due to the decrease in scheduled service demand after the terrorist attacks, resulting in lower load factors and yields, the Company's scheduled service RASM in the last four months of 2001 was 5.92 cents, a decrease of 14.3%, as compared to 6.91 cents in the last four months of 2000. The Company's scheduled service at Chicago-Midway accounted for approximately 66.8% of scheduled service ASMs and 86.6% of scheduled service departures in 2001, as compared to 63.5% and 83.5%, respectively, during 2000. During the third and fourth quarters of 2001, the Company began operating nonstop flights to Newark and Miami. During the second and third quarters of 2000, the Company began operating nonstop flights to Ronald Reagan Washington National Airport, Boston, Seattle and Minneapolis-St. Paul. In addition to this new service, the Company served the following existing jet markets in both years: Dallas-Ft. Worth, Denver, Ft. Lauderdale, Ft. Myers, Las Vegas, Los Angeles, New York's LaGuardia Airport, Orlando, Philadelphia, Phoenix, St. Petersburg, San Francisco, San Juan and Sarasota. In April 1999, the Company acquired all of the issued and outstanding stock of Chicago Express which then operated 19-seat Jetstream 31 propeller aircraft between Chicago-Midway and the cities of Indianapolis, Milwaukee, Des Moines, Dayton, Grand Rapids, Lansing and Madison. Chicago Express began service to South Bend, Indiana and Springfield, Illinois, respectively, in October 2000 and August 2001, and ceased flying to Lansing, Michigan, in November 2000. In the first three quarters of 2000, Chicago Express completed the replacement of nine 19-seat Jetstream 31 aircraft with nine 34-seat Saab 340B aircraft. Chicago Express purchased two additional Saab 340B aircraft in the third quarter of 2001. The Company anticipates that its Chicago-Midway operation will represent an increasing proportion of its scheduled service business in 2002 and beyond. The Company operated 109 peak daily jet and commuter departures from Chicago-Midway in 2001, as compared to 94 in 2000, and served 28 destinations on a nonstop basis in 2001, as compared to 25 nonstop destinations served in 2000. In order to accommodate the growth in jet departures in the existing terminal, in October 2000 Chicago Express established a remote boarding operation at Chicago-Midway Airport with shuttle bus service between the remote location and the main terminal. This change has allowed the Company to convert the former Chicago Express gate to a jet departure gate. 75 The Company's anticipated growth at Chicago-Midway will be accomplished in conjunction with the construction of new terminal and gate facilities at the Chicago-Midway Airport. In March 2001, the Company occupied 24 newly constructed ticketing and passenger check-in spaces in the new terminal, an increase from 16 ticketing and passenger check-in spaces previously occupied. Once all construction is complete in 2004, the Company expects to occupy 12 jet gates and one commuter aircraft gate at the new airport concourses. One of the gates which the Company will occupy opened on October 30, 2001. The Company moved to seven additional new gates in the first quarter of 2002, and five additional gates are expected to be available for use by the Company in 2004. In addition, construction of a Federal Inspection Service ("FIS") facility at Chicago-Midway was completed in the first quarter of 2002. The Company began nonstop international services from this facility in early 2002 to Aruba, Cancun, Grand Cayman and Guadalajara. The Company's Hawaii service accounted for 18.6% of scheduled service ASMs and 3.9% of scheduled service departures in 2001, as compared to 17.0% and 4.3%, respectively, in 2000. The Company provided nonstop service in both years from Los Angeles, Phoenix and San Francisco to both Honolulu and Maui, with connecting service between Honolulu and Maui. The Company provides these services through a marketing alliance with the largest independent tour operator serving leisure travelers to Hawaii from the United States. The Company distributes the remaining seats on these flights through normal scheduled service distribution channels. The Company believes it has superior operating efficiencies in west coast-Hawaii markets due to the high daily hours of utilization obtained for both aircraft and crews. The Company's Indianapolis service accounted for 9.2% of scheduled service ASMs and 6.5% of scheduled service departures in 2001, as compared to 12.2% and 8.8%, respectively, in 2000. In both years, the Company operated nonstop to Cancun, Ft. Lauderdale, Ft. Myers, Las Vegas, Orlando, St. Petersburg and Sarasota. The Company has served Indianapolis for 29 years through the Ambassadair Travel Club and through scheduled service since 1986. The Company continuously evaluates the profitability of its scheduled service markets and expects to adjust its schedule and flight frequencies from time to time, particularly with reference to the ongoing impacts of the terrorist attacks. Although unit revenues did partially recover toward the end of 2001, unit revenues in the first quarter of 2002 are expected to be below first quarter 2001 levels. Weak revenues are related to both the ongoing impact of the September 11, 2001 terrorist attacks on the demand for air travel, and continued weakness in the U.S. domestic economy. The Company is adding a small amount of capacity to its scheduled service network in the first quarter of 2002 as it continues to accept new aircraft deliveries. The Company cannot predict when year-over-year unit revenue growth will resume in its scheduled service business. COMMERCIAL CHARTER REVENUES. The Company's commercial charter revenues are derived principally from independent tour operators and specialty charter customers. The Company's commercial charter product provides full-service air transportation to customer-designated destinations throughout the world. Commercial charter revenues accounted for 15.1% of consolidated revenues in 2001 as compared to 19.1% in 2000. The impact of the September 11, 2001 terrorist attacks was less significant on the commercial charter business than on scheduled service. The Company estimates that it lost approximately $1.4 million in commercial charter revenues as a result of flight cancellations during the FAA-mandated air system shutdown from September 11 until September 13, and decreased demand for commercial charter flights following September 11. The majority of the decline in commercial charter revenues 76 in 2001, as compared to 2000, was principally due to the retirement of certain Lockheed L-1011 and Boeing 727-200 aircraft that the Company has traditionally used in commercial charter flying. Since aircraft utilization (number of productive hours of flying per aircraft each month) is typically much lower for commercial charter, as compared to scheduled service flying, the Company's replacement fleets of new Boeing 737-800 and Boeing 757-300 aircraft are economically disadvantaged when used in the charter business, because of their higher fixed-ownership cost. Consequently, the Company expects its commercial charter revenues to continue to decline in future periods as the fleet supporting this business continues to shrink through aircraft retirements. Although total commercial charter revenues have declined in 2001, as compared to 2000, commercial charter RASM has increased over the same time periods. The Company has eliminated lower-RASM flying as this business has been reduced in size, thus increasing average RASM on the flying that it has retained. The following table sets forth, for the periods indicated, certain key operating and financial data for the commercial charter operations of the Company.
TWELVE MONTHS ENDED DECEMBER 31, 2001 2000 INC (DEC) % INC (DEC) ---- ---- --------- ----------- Departures (b) 7,293 9,722 (2,429) (24.98) Block Hours (c) 24,495 34,356 (9,861) (28.70) RPMs (000s) (d) 2,010,477 2,687,051 (676,574) (25.18) ASMs (000s) (e) 2,588,780 3,610,413 (1,021,633) (28.30) Passengers Enplaned (g) 1,128,660 1,472,340 (343,680) (23.34) Revenue $ (000s) 192,246 246,705 (54,459) (22.07) RASM in cents (h) 7.43 6.83 0.60 8.78 RASM excluding fuel escalation in cents (k) 7.13 6.47 0.66 10.20
- ----------------------- See footnotes (b) through (h) on page 58. See footnote (k) on page 62. The Company operates in two principal components of the commercial charter business, known as "track charter" and "specialty charter." The larger track charter business component is generally comprised of low-frequency but repetitive domestic and international flights between city pairs, which support high-passenger load factors and are marketed through tour operators, providing value-priced and convenient nonstop service to vacation destinations for the leisure traveler. Since track charter resembles scheduled service in terms of its repetitive flying patterns between fixed-city pairs, it allows the Company to achieve reasonable levels of crew and aircraft utilization (although less than for scheduled service), and provides the Company with meaningful protection from some fuel price increases through the use of fuel escalation reimbursement clauses in tour operator contracts. Track charter accounted for approximately $149.7 million in revenues in 2001, as compared to $192.8 million in 2000. Specialty charter is a product that is designed to meet the unique requirements of a customer and is a business characterized by lower frequency of operation and by greater variation in city pairs served than the track charter business. Specialty charter includes such diverse contracts as flying university alumni to football games, transporting political candidates on campaign trips and moving NASA space shuttle ground crews to alternate landing sites. The Company also has operated trips in 77 an all-first-class configuration for certain corporate and high-end leisure clients. Although lower utilization of crews and aircraft and infrequent service to specialty destinations often result in higher average operating costs, the Company has determined that the revenue premium earned by meeting special customer requirements more than compensates for these increased costs. The diversity of the Company's fleet types also permits the Company to meet a customer's particular needs by choosing the aircraft type that provides the most economical solution for those requirements. Specialty charter accounted for approximately $18.8 million in revenues in 2001, as compared to $31.5 million in 2000. The remainder of commercial charter revenues are attributable primarily to the air revenues of ATALC and Ambassadair, which did not change significantly between years. MILITARY/GOVERNMENT CHARTER REVENUES. The following table sets forth, for the periods indicated, certain key operating and financial data for the military/government charter operations of the Company.
TWELVE MONTHS ENDED DECEMBER 31, 2001 2000 INC (DEC) % INC (DEC) ---- ---- --------- ----------- Departures (b) 3,702 4,961 (1,259) (25.38) Block Hours (c) 16,159 19,443 (3,284) (16.89) RPMs (000s) (d) 965,740 1,339,545 (373,805) (27.91) ASMs (000s) (e) 2,147,248 2,605,791 (458,543) (17.60) Passengers Enplaned (g) 225,641 329,200 (103,559) (31.46) Revenue $ (000s) 167,524 188,557 (21,033) (11.15) RASM in cents (h) 7.80 7.24 0.56 7.73 RASM excluding fuel escalation in cents (l) 7.58 6.88 0.70 10.17
See footnotes (b) through (h) on page 58. See footnote (l) on page 63. The Company estimates that it lost approximately $1.0 million in military revenues, net of cancellation fees, due to the FAA-mandated shut down of the air traffic system from September 11 until September 13. After having resumed flight operations late in the day on September 13, 2001, the Company's military flight schedule quickly returned to normal. Although current military flight operations of the Company have not been significantly affected by the terrorist attacks of September 11, future operations may be significantly affected by changes in the transportation needs of the U.S. military, possibly in association with military operations in the United States and abroad. Heightened military activities related to international conflict usually bring reduced demand to the Company's scheduled service business. The Company cannot predict the magnitude and possible future impact on its results of operations and financial condition, if any, of these possible future events. The decline in military revenues in 2001, as compared to 2000, was primarily due to changes in teaming arrangements used both by the Company and some of the Company's competitors in the military/government charter business. Such changes reduced the fixed-award flying allocated to the Company for the contract year ending September 30, 2001. The Company earned $159.3 million in military/government charter revenues in the contract year ended September 30, 2001, a 6.0% reduction as compared to $169.5 million earned in the preceding contract year ended September 30, 78 2000. Under its current teaming arrangement, the Company expects its military/government charter revenues to increase slightly in the contract year ending September 2002. The increase in RASM for military/charter revenues in 2001, as compared to 2000, was due to rate increases awarded for the current contract year, based upon cost data submitted to the U.S. military by the Company and other air carriers providing these services. The Company participates in two related military/government charter programs known as "fixed-award" and "short-term expansion." Pursuant to the U.S. military's fixed-award system, each participating airline is awarded certain "mobilization value points" based upon the number and type of aircraft made available by that airline for military flying. In order to increase the number of points awarded, the Company has traditionally participated in contractor teaming arrangements with other airlines. Under these arrangements, the team has a greater likelihood of receiving fixed-award business and, to the extent that the award includes passenger transport, the opportunity for the Company to operate this flying is enhanced since the Company typically represents a majority of the passenger transport capacity of its team. As part of its participation in this teaming arrangement, the Company pays a commission to the team, which passes that revenue on to all team members based upon their mobilization value points. All airlines participating in the fixed-award business contract annually with the U.S. military from October 1 to the following September 30. For each contract year, reimbursement rates are determined for aircraft types and mission categories based upon operating cost data submitted by the participating airlines. These contracts generally are not subject to renegotiation once they become effective. Short-term expansion business is awarded by the U.S. military first on a pro rata basis to those carriers who have been provided fixed-award business and then to any other carrier with aircraft availability. Short-term expansion flying is generally offered to airlines on very short notice. The overall amount of military flying that the Company performs in any one year is dependent upon several factors, including (1) the percentage of mobilization value points represented by the Company's team as compared to total mobilization value points of all providers of military service; (2) the percentage of passenger capacity of the Company with respect to its own team; (3) the amount of fixed-award and expansion flying required by the U.S. military in each contract year; and (4) the availability of the Company's aircraft to accept and fly expansion awards. GROUND PACKAGE REVENUES. The Company earns ground package revenues through the sale of hotel, car rental, cruise and other accommodations in conjunction with the Company's air transportation product. The Company markets these ground packages through its ATALC subsidiary and to its Ambassadair Travel Club members. Ambassadair Travel Club offers tour-guide-accompanied vacation packages to its approximately 34,000 individual and family members annually. ATALC offers numerous ground accommodations to the general public in many areas of the United States, Mexico and the Caribbean. These packages are marketed through travel agents, as well as directly by the Company. In 2001, ground package revenues decreased 12.7% to $52.2 million, as compared to $59.8 million in 2000. The number of ground packages sold and the average revenue earned by the Company for a ground package sale are a function of the seasonal mix of vacation destinations served, the quality and types of ground accommodations offered and general competitive conditions in the Company's markets, all of which factors can change from period to period. 79 OTHER REVENUES. Other revenues are comprised of the consolidated revenues of certain affiliated companies, together with miscellaneous categories of revenue associated with the scheduled, charter and ground package operations of the Company, such as cancellation and service fees, Ambassadair Travel Club membership dues and cargo revenue. Other revenues decreased 0.5% to $42.9 million in 2001, as compared to $43.1 million in 2000. OPERATING EXPENSES SALARIES, WAGES AND BENEFITS. Salaries, wages and benefits include the cost of salaries and wages paid to the Company's employees, together with the Company's cost of employee benefits and payroll-related local, state and federal taxes. Salaries, wages and benefits expense in 2001 increased 9.5% to $325.2 million from $297.0 million in 2000. The Company increased its average equivalent employees by approximately 4.7% between 2001 and 2000. This annual growth rate combines employment growth in conjunction with a growing flight schedule prior to the terrorist attacks on September 11, offset by the employee furloughs under the Company's cost-cutting initiatives implemented shortly after the attacks. Through the first nine months of the year, the average equivalent headcount increased approximately 11.0%, which primarily reflected growth in categories of employees that were required for the increased flight activity the Company was experiencing prior to September 11. In the fourth quarter of 2001, employment declined by approximately 12.5%, as compared to the fourth quarter of 2000. By the middle of October 2001, the Company had furloughed approximately 1,100 employees as a result of a 20% flight capacity reduction implemented after the September 11 attacks. As of December 31, 2001, the Company had recalled approximately half of those employees furloughed during the fourth quarter of 2001. Additionally, in May 2000, the Company replaced its contracted ground handler at its busiest airport, Chicago-Midway, with its own ramp employees. Although this contributed to a year-over-year increase in salaries, wages and benefits, the Company experienced a corresponding reduction in handling, landing and navigation fees, where third-party handling expenses are classified. Chicago Express salaries, wages and benefits also increased in 2001, as compared to 2000, due to the replacement of nine 19-seat Jetstream 31 aircraft with 11 34-seat Saab 340B aircraft, thus more than doubling total commuter seat capacity between years. Also contributing to the increase in salaries, wages and benefits, is an increase of approximately $7.8 million in benefits expenses to $34.3 million in 2001 as compared to $26.5 million in 2000. This increase is primarily due to increases in medical insurance claims and workers' compensation costs between years. FUEL AND OIL. Fuel and oil expense decreased 8.6% to $251.3 million in 2001, as compared to $274.8 million in 2000. The Company consumed 5.8% fewer gallons of jet fuel for flying operations in 2001, as compared to 2000, which resulted in a decrease in fuel expense of approximately $13.7 million between periods. Fuel consumption varies with changes in jet block hours flown, and with changes in the fleet mix. The Company flew 172,207 jet block hours in 2001, as compared to 172,824 jet block hours in 2000, a decrease of 0.4% between years. Fuel consumption in 2001 was more significantly affected by the delivery of 14 Boeing 737-800 aircraft and five Boeing 757-300 aircraft, replacing certain less-fuel-efficient Boeing 727-200 and Lockheed L-1011 aircraft subsequently retired from service. The Company estimates that approximately $9.4 million of the variance attributable to lower fuel consumption resulted from flying approximately 18,000 of these 80 block hours using the 19 new aircraft, as compared to flying those block hours with the less-fuel-efficient fleets. During 2001, the Company's average cost per gallon of jet fuel consumed decreased by 6.0% as compared to 2000, resulting in a decrease in fuel and oil expense of approximately $12.6 million between periods. During 2001 and 2000, the Company entered into several fuel price hedge contracts under which the Company sought to reduce the risk of fuel price fluctuations. The Company recorded losses of $2.6 million on these hedge contracts in 2001 as compared to gains of $0.1 million in 2000. As of December 31, 2001, the Company had entered into swap agreements for approximately 6.3 million gallons of heating oil for future delivery between January 2002 and June 2002, which represented approximately 2.6% of total expected fuel consumption in 2002. See "Quantitative and Qualitative Disclosures about Market Risk," and "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 15 - Fuel Price Risk Management" for more information on the Company's fuel price risk management program. DEPRECIATION AND AMORTIZATION. Depreciation reflects the periodic expensing of the recorded cost of owned airframes and engines, leasehold improvements and rotable parts for all fleet types, together with other property and equipment owned by the Company. Amortization is primarily the periodic expensing of capitalized airframe and engine overhauls for all fleet types on a units-of-production basis using aircraft flight hours and cycles (landings) as the units of measure. Depreciation and amortization expense decreased 3.0% to $121.3 million in 2001, as compared to $125.0 million in 2000. During the first nine months of 2001, the Company was depreciating the L-1011-50 and 100 fleet assuming a common retirement date of 2004. However, during 2001, the Company decided to retire several of these aircraft as of their next scheduled heavy maintenance check. During the first nine months of 2001, the Company retired three L-1011-50 aircraft from revenue service in this manner, recording a loss on disposal of $6.6 million for these aircraft in other operating expense. During the fourth quarter of 2001, the Company determined that the remaining 10 L-1011-50 and 100 aircraft, together with related rotable parts and inventory, were impaired in accordance with FAS 121 (See "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 16 - Asset Impairment.") Because the Company continues to utilize these assets, they are classified as held for use under FAS 121, and are recorded on the balance sheet at their estimated fair market value at the time of impairment, which is the new asset basis to be depreciated over the assets' estimated remaining useful lives. The useful life of each aircraft is now assumed to end immediately prior to its next scheduled heavy maintenance check. Due primarily to the reduced cost basis of the remaining 10 aircraft, and the retirement of three aircraft, the Company recorded $5.0 million less engine and airframe overhaul amortization expense for the L-1011-50 and 100 fleet in 2001 than in 2000. In March 2001, the Company entered into an agreement to transfer its entire fleet of 24 Boeing 727-200 aircraft to BATA by May 2002. (See "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 12 - Commitments and Contingencies.") As a result, in the first quarter of 2001, the Company implemented a change in accounting estimate to adjust the estimated useful lives and salvage value of these aircraft to the terms of the BATA agreement. This change in accounting estimate resulted in an increase of depreciation expense of $2.5 million in 2001, as compared to 2000. 81 Immediately following the terrorist attacks of September 11, 2001, the Company decided to retire its Boeing 727-200 fleet from revenue service, although some aircraft will be used for charter service through the first half of 2002. These aircraft were determined to be impaired under FAS 121. Boeing 727-200 aircraft not already transferred to BATA have been classified in the accompanying balance sheet as assets held for sale. In accordance with FAS 121, depreciation expense was not recorded after the fleet was deemed impaired and will not be recorded in future accounting periods. As a result, the Company did not record any depreciation expense on the Boeing 727-200 fleet in the last four months of 2001, which resulted in a $13.3 million decrease in depreciation expense in 2001, as compared to 2000. Amortization of capitalized engine and airframe overhauls on the Boeing 757-200 and Lockheed L-1011-500 fleets increased $9.0 million in 2001, as compared to 2000, after including amortization of related manufacturers' credits. This increase is primarily due to amortization of engine overhauls on the Lockheed L-1011-500 and Boeing 757-200 aircraft. Both fleets are relatively new to the Company and neither required overhauls until late 2000. The remaining $3.1 million increase in depreciation and amortization expense in 2001 as compared to 2000 represents primarily fluctuations associated with rotable parts, owned engines and the provision for inventory obsolescence, along with fluctuations in expenses related to furniture and fixtures, computer hardware and software, and debt issue costs between periods, none of which are individually significant. AIRCRAFT RENTALS. Aircraft rentals expense for 2001 increased 37.3% to $99.0 million, as compared to $72.1 million in 2000. The Company took delivery of two Boeing 757-200 aircraft in June 2000 and two Boeing 757-200 aircraft in November 2000, all of which were financed under operating leases. These four aircraft added $10.3 million to aircraft rentals expense in 2001, as compared to 2000. Aircraft rent also increased $17.6 million for 2001, as compared to 2000, as a result of the delivery of 14 leased Boeing 737-800 and five leased Boeing 757-300 aircraft between May and December of 2001. Also during 2001, the Company terminated leases on five Boeing 727-200s which were transferred to BATA. The Company also transferred seven owned Boeing 727-200 aircraft to BATA. Subsequently, the Company leased certain of those aircraft from BATA under short-term operating leases. These transactions resulted in a net decrease in aircraft rent of approximately $2.9 million in 2001. Additional Chicago Express aircraft and spare engine leases generated an increase in aircraft rent expense of approximately $1.9 million in 2001, as compared to 2000. HANDLING, LANDING AND NAVIGATION FEES. Handling and landing fees include the costs incurred by the Company at airports to land and service its aircraft and to handle passenger check-in, security, cargo and baggage where the Company elects to use third-party contract services in lieu of its own employees. Where the Company uses its own employees to perform ground handling functions, the resulting cost appears within salaries, wages and benefits. Air navigation fees are incurred when the Company's aircraft fly over certain foreign airspace. Handling, landing and navigation fees decreased by 8.9% to $88.7 million in 2001 as compared to $97.4 million in 2000, although the total number of system-wide jet departures between 2001 and 2000 increased by 2.2% to 56,962 from 55,714. The decrease in handling, landing and navigation fees is primarily due to the reduction in commercial and military/government charter flying between years (much of which is operated to and from international airports), since international handling and landing fees are generally more expensive than at domestic U.S. airports, 82 and air navigation fees apply only to international flying. In 2001, international departures were 6,469, a reduction of 16.7% as compared to international departures of 7,763 in 2000. The Company also recorded $2.9 million less in de-icing expense in 2001 due to relatively milder weather than as compared to 2000. AIRCRAFT MAINTENANCE, MATERIALS AND REPAIRS. This expense includes the cost of expendable aircraft spare parts, repairs to repairable and rotable aircraft components, contract labor for maintenance activities and other non-capitalized direct costs related to fleet maintenance, including spare engine leases, parts loan and exchange fees, and related shipping costs. It also includes the costs incurred under hourly engine maintenance agreements the Company has entered into on its Boeing 737-800 and Saab 340B power plants. These agreements provide for the Company to pay monthly fees based on a specified rate per engine flight hour, in exchange for major engine overhauls and maintenance. Aircraft maintenance, materials and repair expense decreased 12.8% to $61.4 million in 2001, as compared to $70.4 million in 2000. The 2001 decline in maintenance, materials and repairs expense was primarily attributable to a decrease in materials consumed and components repaired related to maintenance on the Company's aging fleets of Lockheed L-1011 and Boeing 727-200 aircraft. During 2001, the Company placed 12 Boeing 727-200 aircraft into BATA and retired three Lockheed L-1011 aircraft from service before related heavy airframe maintenance checks were due to be performed. The Company expects maintenance, materials and repair expense to continue to decline in future quarters as its older fleets of aircraft continue to be replaced by newer and more technologically advanced twin-engine aircraft with lower maintenance needs. The Company also recorded a decrease of $3.0 million in maintenance, materials and repairs in 2001, as compared to 2000, due to a negotiated elimination of return condition requirements on one leased Lockheed L-1011 aircraft and the recognition of a return condition receivable on one leased Boeing 757-200 aircraft. The Company accrues estimated costs and credits associated with maintenance return conditions for aircraft on leases as a component of maintenance, materials and repairs expense. The Company recognized an increase in aircraft maintenance, materials and repairs of $3.0 million in 2001, as compared to 2000, relating to the 11 Saab 340B aircraft operated by Chicago Express. CREW AND OTHER EMPLOYEE TRAVEL. Crew and other employee travel consists primarily of the cost of air transportation, hotels and per diem reimbursements to cockpit and cabin crewmembers incurred to position crews away from their bases to operate Company flights throughout the world. The cost of crew and other employee travel decreased 9.9% to $59.3 million in 2001 as compared to $65.8 million in 2000. The decrease in crew and employee travel in 2001, as compared in 2000, was mainly due to a significant decrease in crew positioning expense. The average cost of crew positioning per full-time-equivalent crew member deceased 20.9% in 2001, as compared to 2000. The decrease was primarily due to the decrease in military and charter flights, which often operate to and from points remote from the Company's crew bases, thus requiring significant positioning expenditures for cockpit and cabin crews on other airlines. For those positioning events which did occur, the Company was also able to obtain lower prices from other air carriers through specifically negotiated agreements, as well as benefiting from lower airfares which became generally available in the second half of 2001. Crew 83 and other employee travel also declined due to a decrease in hotel expenses, also resulting primarily from the decline in international flying. PASSENGER SERVICE. Passenger service expense includes the costs of onboard meal and non-alcoholic beverage catering, the cost of alcoholic beverages and in-flight movie headsets sold, and the cost of onboard entertainment programs, together with certain costs incurred for mishandled baggage and passengers inconvenienced due to flight delays or cancellations. For 2001 and 2000, catering represented 74.4% and 78.8%, respectively, of total passenger service expense. The total cost of passenger service decreased 3.7% to $43.9 million in 2001, as compared to $45.6 million in 2000. The Company experienced a decrease of approximately 14.2% in the average unit cost of catering each passenger between 2001 and 2000, primarily because in 2001 there were fewer military and commercial charter passengers in the Company's business mix, which are provided a more expensive catering product due to the longer stage length of these flights. This resulted in a price-and-business-mix decrease of $5.4 million in catering expense in 2001, as compared to 2000. Total jet passengers boarded increased 4.9% between years, resulting in approximately $2.1 million in higher volume-related catering expenses between the same sets of comparative periods. In 2001, as compared to 2000, the Company incurred approximately $1.8 million in higher expenses for mishandled baggage and passenger inconvenience due to flight delays and cancellations. GROUND PACKAGE COST. Ground package cost is incurred by the Company with hotels, car rental companies, cruise lines and similar vendors who provide ground and cruise accommodations to Ambassadair and ATALC customers. Ground package cost decreased 17.1% to $42.2 million in 2001, as compared to $50.9 million in 2000. Ground package costs vary based on the mix of vacation destinations served, the quality and types of ground accommodations offered, and general competitive conditions in the Company's markets, all of which factors can change from period to period. This decline was more significant than the decline in ground package revenue in 2001 as compared to 2000, because the Company received discounted hotel pricing in the last half of the year due to the weakening economy and the reduction in travel demand after the September 11 attacks. OTHER SELLING EXPENSES. Other selling expenses are comprised primarily of fees paid to computer reservation systems ("CRS") for scheduled service bookings, credit card discount expenses incurred when selling single seats and ground packages to customers using credit cards for payment, and toll-free telephone services provided to single-seat and vacation package customers who contact the Company directly to book reservations. Other selling expenses increased 13.4% to $41.6 million in 2001, as compared to $36.7 million in 2000. Approximately $3.7 million of this increase in 2001 resulted from an increase in CRS fees. This increase resulted partially from the growth in single-seat sales volumes between periods and partially because of increases in rates charged by CRS systems for improved booking functionality. Credit card discount expense increased $1.5 million as compared to 2000, primarily due to higher volumes of scheduled service tickets sold using credit cards as form of payment. COMMISSIONS. The Company incurs commissions expense in association with the sale by travel agents of vacation packages and single seats on scheduled service. In addition, the Company incurs commissions to secure some commercial and military/government charter business. Commissions expense decreased 11.0% to $34.8 million in 2001, as compared to $39.1 million in 2000. 84 Approximately $3.8 million of the decrease in commissions in 2001, as compared to 2000, was attributable to lower military commissions, which is consistent with the decrease in military revenue between the same time periods. The Company also experienced a decrease of $2.5 million between 2001 and 2000 in commissions paid to travel agents by ATALC, which is consistent with the decrease in related revenues for that affiliate. These decreases were partially offset by increases in scheduled service commissions of $2.2 million between 2001 and 2000 due to an increase in scheduled service sales made by travel agents. ADVERTISING. Advertising expense increased 20.0% to $26.4 million in 2001, as compared to $22.0 million in 2000. The Company routinely incurs advertising costs primarily to support single-seat scheduled service sales and the sale of air and ground packages. In 2001, the Company increased its advertising (introducing a new marketing campaign) primarily in Chicago in connection with the arrival of the new Boeing 737-800 and 757-300 aircraft, the opening of new ticketing and baggage claim facilities at Chicago-Midway Airport, the announcement of new scheduled service destinations, and the promotion of low fares as compared to the competition. The Company expects to continue to increase advertising expenditures as it seeks to increase consumer preference for the Company's enhanced product, especially in its important Chicago-Midway hub. The Company also incurred $6.3 million of incremental advertising costs in 2001 associated with rebuilding customer demand after the September 11 terrorist attacks, but due to their unusual nature, these expenses were included as special charges on the income statement. See "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 2 - Impact of Terrorist Attacks on September 11, 2001." FACILITIES AND OTHER RENTALS. Facilities and other rentals include the cost of all ground facilities that are leased by the Company such as at airports, regional sales offices and general offices. The cost of facilities and other rentals increased 27.8% to $20.2 million in 2001, as compared to $15.8 million in 2000. Growth in facilities costs between periods was primarily attributable to the need to provide maintenance, flight crew and passenger service facilities at airport locations to support new scheduled service destinations and higher frequencies to existing destinations. The Company also began occupancy of significantly expanded and improved passenger check-in and baggage claim facilities at Chicago-Midway Airport beginning in March 2001. SPECIAL CHARGES. Special charges represent expenses arising from September 11, 2001 terrorist attacks which have been classified as unusual in nature under Accounting Principles Board Opinion No. 30, Reporting the Results of Operations - - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions ("APB 30"). Special charges incurred in 2001 amounted to $21.5 million. For additional details with respect to the special charges, see "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 2- Impact of Terrorist Attacks on September 11, 2001." IMPAIRMENT LOSS. Following the events of September 11, 2001, the Company decided to retire its Boeing 727-200 fleet earlier than originally planned. Most of the aircraft were retired from revenue service in the fourth quarter of 2001, although some are being used for charter service through the first half of 2002. In accordance with FAS 121, the Company determined that the estimated future undiscounted cash flows expected to be generated by the Boeing 727-200s was less than the net book value of these aircraft and the related rotable parts and inventory. Therefore, these assets were impaired under FAS 121. In 2001, the Company recorded an asset impairment charge on these assets of $44.5 million. 85 Also, in the fourth quarter of 2001, the Company determined that, in accordance with FAS 121, the estimated future undiscounted cash flows expected to be generated by the Lockheed L-1011-50 and 100 fleet was less than the current net book value of these aircraft and the related rotable parts and inventory. Therefore, the assets were impaired under FAS 121. The Company recorded an asset impairment charge on these assets of $67.8 million in 2001. FAS 121 requires that whenever events or circumstances indicate that the Company may not be able to recover the net book value of its productive assets through future cash flows, an assessment must be performed of expected future cash flows, and undiscounted estimated future cash flows must be compared to the net book value of these productive assets to determine if impairment is indicated. The Company had been routinely performing FAS 121 impairment evaluations for its Lockheed L-1011-50 and 100, and Boeing 727-200 fleets for several quarters, due to their expected replacement by newer aircraft which were ordered in May 2000. Prior to the events of September 11, 2001 no impairment was indicated under FAS 121 for either fleet. However, the terrorist attacks of September 11 significantly reduced demand for air travel in the United States, causing the Company, and most major airlines, to reduce available seat capacity by 20%. This reduction in future flying caused the Company to reduce its estimates of future cash flows for these fleets over their remaining useful lives, causing both fleets to meet the impairment criteria of FAS 121. The application of FAS 121 requires the use of significant judgment and the preparation of numerous significant estimates. The Company estimated future cash flows from the productive use of these fleets by estimating the expected net cash contribution from revenues less operating expenses, and adjusting for estimated cash outflows for heavy maintenance and estimated cash inflows from final disposal of the assets. Such estimates were required for up to seven years into the future. Although the Company believes that its estimates of cash flows in the application of FAS 121 were reasonable, and were based upon all available information, including extensive historical cash flow data about the prior use of these fleets, such estimates nevertheless required substantial judgments and were based upon material assumptions about future events. Further significant assumptions were required concerning the estimated fair market value of both fleets, since FAS 121 specifies that impaired assets be written down to their estimated fair market value by recording an impairment charge to earnings. As provided under FAS 121, the Company primarily used discounted cash flow analysis, together with other available information, to estimate fair market values. Such estimates were significant in determining the amount of the impairment charge to be recorded in 2001, which could have been materially different under different sets of assumptions and estimates. As FAS 121 requires the Company to continuously evaluate fair market values of previously impaired assets, it is possible that future estimates of fair market value may result in additional material charges to earnings, if those estimates indicate a material reduction in fair market value as compared to the estimates made at the end of 2001. For additional details with respect to these asset impairments, see "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 16 - Asset Impairment." U.S. GOVERNMENT GRANT. On September 22, 2001 President Bush signed into law the Air Transportation Safety and System Stabilization Act ("Act"). Among other things, this legislation was enacted to provide direct payments of cash to domestic U.S. airlines to compensate them for certain economic losses attributable to the terrorist attacks of September 11, 2001. Under the provisions of the Act, U.S. domestic passenger and cargo airlines may receive up to $5.0 billion in total cash grants, with $4.5 billion being specifically reserved for passenger airlines such as the 86 Company. Each passenger airline may receive no more cash than its pro rata share of the $4.5 billion, based upon the ratio of that airline's ASMs to total passenger airline ASMs for the month of August 2001. However, cash compensation paid to any airline must be based upon actual direct and incremental losses incurred by that airline, between September 11, 2001 and December 31, 2001, as a direct result of the terrorist attacks. Therefore, the amount of cash received by any airline is limited by actual direct and incremental losses incurred, which could result in payments to an airline which are less that the maximum amount permitted under the upper limit provided for by the August 2001 ASM calculations. The DOT was directed by the Act to administer the distribution of grant money to eligible air carriers. The DOT subsequently published regulations under which eligible air carriers were required to submit applications for disbursements of grant monies. Such applications required financial information, documenting to the satisfaction of the DOT that the air carrier had incurred direct and incremental losses attributable to the terrorist attacks. Two such applications were filed by many passenger airlines, including the Company, during the third and fourth quarters of 2001. As a result of the approval of its applications by the DOT, the Company received payments of $32.6 million in the third quarter and $11.9 million in the fourth quarter. The Company accrued total U.S. Government grant revenues of $66.3 million in the second half of 2001 relating to its estimates of direct and incremental losses it incurred during that time period, recording a current receivable of $21.8 million for the balance of cash expected to be paid in 2002. Based upon the Company's current estimate of its ratio of ASMs to total passenger airline ASMs in August 2001 (which calculations have not yet been finalized or approved by the DOT), the Company estimates that the maximum amount of cash compensation available to it under the Act for direct and incremental losses incurred is approximately $74.0 million. The DOT is expected to publish soon final rules concerning certain agreed upon procedures ("AUPs") to be performed by certified public accountants on financial and other information to be included in air carriers' third and final applications for grant assistance. The DOT has not specified when final applications, including reports on AUPs, will be accepted for processing, but the Company currently estimates that this is likely to occur in the second quarter of 2002. Generally accepted accounting principles in the United States ("GAAP") pertaining to revenue recognition provide that revenue should be recognized when: (1) substantially all requirements or conditions to earn that revenue are completed or satisfied; (2) the dollar amount of such revenues can be reasonably estimated; and (3) such revenues have been realized in cash, or future realization in cash is reasonably assured. The application of GAAP to the specific circumstances of the Act required significant judgments and estimates to be made by the Company. The term "direct and incremental losses attributable to the terrorist attacks of September 11, 2001" was not defined in detail by either the Act or the interpreting DOT regulations, nor were specific measurement guidelines provided for any particular loss item. Such terms as "direct," "incremental," and "loss" can have different meanings in common usage and in economic, accounting or other business literature. In its two grant applications to the DOT in 2001, the Company chose to use GAAP in selecting and measuring direct and incremental losses to be reimbursed under the Act. The Company applied significant judgment in determining which GAAP loss items met the conditions for reimbursement under the Act and associated regulations, and applied further significant judgments in estimating the amounts of such losses. For example, the Company 87 estimated revenues lost as a direct result of reduced air travel demand immediately after the attacks and claimed the loss of these revenues as reimbursable under the Act. Estimates of such losses required substantial judgment, as they needed to be made with reference to expectations of what revenues would likely have been if the attacks had never taken place. The Company used all objective evidence available to it in making such estimates. In the case of estimating lost revenues, the Company analyzed and made comparisons of post-attack revenues to actual revenues earned immediately prior to the attacks, as well as to actual revenues earned by the Company in the same months of prior years, and with reference to revenue forecasts prepared prior to the attacks. The amounts of U.S. Government grant compensation recorded in 2001 could have been materially different using different assumptions and judgments. The DOT, upon processing the Company's second application, disallowed reimbursement to the Company under the Act of certain losses included in the Company's results of operations under GAAP in 2001. These disallowed reimbursements included impairment losses on the Company's Boeing 727-200 aircraft and future rent payments due under Boeing 727-200 leases for aircraft idled immediately after the attacks. Although the DOT did not provide any official reasons for this decision to the Company, nor has it published any related guidance in its regulations concerning the treatment of these loss items under the Act, the Company has not accrued any U.S. Government grant revenue pertaining to these disallowed items. The Company is protesting the specific disallowances made by the DOT on its applications. If the Company prevails in this protest, it could record additional U.S. Government grant compensation of up to $7.7 million. Under the provisions of the Act, all airlines receiving cash compensation are subject to audit by agencies of the U.S. Government for up to five years. It is possible that upon audit by such agencies loss items for which the Company has recorded U.S. Government grant revenues in 2001 may be disallowed under new regulations, or according to audit interpretations by those agencies of the Company's accounting estimates and judgments. It is therefore possible that material adjustments to U.S. Government grant revenues recorded in 2001 may be required in future years. OTHER OPERATING EXPENSES. Other operating expenses increased 10.9% to $84.6 million in 2001, as compared to $76.3 million in 2000. The purchase by ATALC of charter air services from airlines other than the Company was $4.0 million higher in 2001 than in 2000. Flight simulator rentals increased $3.3 million between years due to the crew training required to introduce the new aircraft. The Company also recorded a loss on disposal of three Lockheed L-1011-50 aircraft in 2001, as compared to one Lockheed L-1011-50 aircraft in 2000, resulting in an increase of loss on disposal of $4.4 million in 2001 as compared to 2000. These increases were partially offset by net decreases in other expenses included in this category, none of which were individually significant. INTEREST INCOME AND EXPENSE. Interest expense in 2001 decreased 4.4% to $30.1 million, as compared to $31.5 million in 2000. The Company capitalized additional interest totaling $10.8 million in 2001, as compared to 2000, on aircraft pre-delivery deposits. Additional interest expense of $7.4 million, all of which was capitalized, was incurred in 2001, as compared to 2000, for incremental borrowings made to fund a portion of aircraft pre-delivery deposits. The Company also incurred approximately $2.0 million in interest expense in 2001, relating to three Boeing 757-300 aircraft which were temporarily financed with bridge debt immediately after the September 11, 2001 terrorist attacks. These aircraft were refinanced with operating leases at the end of 2001. 88 The Company invested excess cash balances primarily in commercial paper and money market funds and thereby earned $5.3 million in interest income in 2001, as compared to $8.4 million in 2000. The decrease in interest income between periods is mainly due to a decline in the average interest rate earned between periods on these investments. INCOME TAX EXPENSE. In 2001, the Company recorded $39.8 million in income tax credits applicable to $116.1 million of pre-tax loss for that period, while in 2000 the Company recorded $4.6 million in income tax credits applicable to $19.9 million of pre-tax loss. The effective tax rate applicable to credits in 2001 was 34.2%, as compared to an effective tax rate of 23.1% in 2000. Income tax credits in both periods were affected by the permanent non-deductibility for federal income tax purposes of 40% of certain amounts paid for crew per diem. The value of these permanent differences was not significantly different in 2001 as compared to 2000, so they impacted 2000 taxable loss more significantly. YEAR ENDED DECEMBER 31, 2000, VERSUS YEAR ENDED DECEMBER 31, 1999 OPERATING REVENUES Total operating revenues in 2000 increased 15.2% to $1.292 billion from $1.122 billion in 1999. This increase was due to a $128.7 million increase in scheduled service revenues, a $62.3 million increase in military/government charter revenues and a $1.7 million increase in ground package revenues, offset by a $6.4 million decrease in other revenues and a $17.1 million decrease in commercial charter revenues. SCHEDULED SERVICE REVENUES. The following table sets forth, for the periods indicated, certain key operating and financial data for the scheduled service operations of the Company. Data shown for "Jet" operations include the combined operations of Lockheed L-1011, Boeing 727-200 and Boeing 757-200 aircraft in scheduled service. Data shown for "J31/Saab" include the operations of Jetstream 31 and Saab 340B propeller aircraft by Chicago Express as the ATA Connection.
TWELVE MONTHS ENDED DECEMBER 31, 2000 1999 INC (DEC) % INC (DEC) ---- ---- --------- ----------- Departures Jet 40,892 35,402 5,490 15.51 Departures J31/Saab (a) 18,985 17,716 1,269 7.16 ----------------------------------------------------------------------- Total Departures (b) 59,877 53,118 6,759 12.72 ----------------------------------------------------------------------- Block Hours Jet 118,473 104,555 13,918 13.31 Block Hours J31/Saab 18,708 17,979 729 4.05 ----------------------------------------------------------------------- Total Block Hours (c) 137,181 122,534 14,647 11.95 ----------------------------------------------------------------------- RPMs Jet (000s) 7,700,639 6,828,181 872,458 12.78 RPMs J31/Saab (000s) 56,669 35,922 20,747 57.76 ----------------------------------------------------------------------- Total RPMs (000s) (d) 7,757,308 6,864,103 893,205 13.01 ----------------------------------------------------------------------- ASMs Jet (000s) 10,025,603 8,809,564 1,216,039 13.80 ASMs J31/Saab (000s) 94,371 57,630 36,741 63.75 ----------------------------------------------------------------------- Total ASMs (000s) (e) 10,119,974 8,867,194 1,252,780 14.13 -----------------------------------------------------------------------
89
TWELVE MONTHS ENDED DECEMBER 31, 2000 1999 INC (DEC) % INC (DEC) ---- ---- --------- ----------- Load Factor Jet 76.81 77.51 (0.70) (0.90) Load Factor J31/Saab 60.05 62.33 (2.28) (3.66) ----------------------------------------------------------------------- Total Load Factor (f) 76.65 77.41 (0.76) (0.98) ----------------------------------------------------------------------- Passengers Enplaned Jet 5,873,598 4,878,643 994,955 20.39 Passengers Enplaned J31/Saab 320,062 206,304 113,758 55.14 ----------------------------------------------------------------------- Total Passengers Enplaned (g) 6,193,660 5,084,947 1,108,713 21.80 ----------------------------------------------------------------------- Revenue $ (000s) 753,301 624,647 128,654 20.60 RASM in cents (h) 7.44 7.04 0.40 5.68 Yield in cents (j) 9.71 9.10 0.61 6.70 Revenue per segment $ (m) 121.62 122.84 (1.22) (0.99)
- -------------------- See footnotes (a) through (j) on pages 58-59. See footnote (m) on page 75. Scheduled service revenues in 2000 increased 20.6% to $753.3 million from $624.6 million in 1999. Scheduled service revenues were 58.3% of consolidated revenues in 2000, as compared to 55.7% of consolidated revenues in 1999. The Company's scheduled service at Chicago-Midway accounted for approximately 63.5% of scheduled service ASMs and 83.5% of scheduled service departures in 2000, as compared to 56.7% and 77.2%, respectively, during 1999. During the second and third quarters of 2000, the Company began operating nonstop flights to Ronald Reagan Washington National Airport, Boston, Seattle and Minneapolis-St. Paul, none of which were served in the comparable periods of 1999. In addition to this new service, the Company served the following existing jet markets in both years: Dallas-Ft. Worth, Denver, Ft. Lauderdale, Ft. Myers, Las Vegas, Los Angeles, New York's John F. Kennedy Airport (seasonal), New York's LaGuardia Airport, Orlando, Phoenix, St. Petersburg, San Francisco, San Juan and Sarasota. The Company, in cooperation with a tour operator partner, began nonstop service to Hawaii from Chicago-O'Hare International Airport and New York's John F. Kennedy International Airport in December of 2000, but discontinued this service during 2001. The Company operated 94 peak daily jet and commuter departures from Chicago-Midway in 2000, as compared to 67 in 1999, and served 25 destinations on a nonstop basis in 2000, as compared to 22 nonstop destinations served in 1999. The Company's Hawaii service accounted for 17.0% of scheduled service ASMs and 4.3% of scheduled service departures in 2000, as compared to 18.5% and 4.7%, respectively, in 1999. The Company provided nonstop service in both years from Los Angeles, Phoenix and San Francisco to both Honolulu and Maui, with connecting service between Honolulu and Maui. The Company's Indianapolis service accounted for 12.2% of scheduled service ASMs and 8.8% of scheduled service departures in 2000, as compared to 14.0% and 10.8%, respectively, in 1999. In both years, the Company operated nonstop to Cancun, Ft. Lauderdale, Ft. Myers, Las Vegas, Los Angeles (service was discontinued as of August 2000), Orlando, St. Petersburg and Sarasota. 90 COMMERCIAL CHARTER REVENUES. Commercial charter revenues accounted for 19.1% of consolidated revenues in 2000 as compared to 23.5% in 1999. The following table sets forth, for the periods indicated, certain key operating and financial data for the commercial charter operations of the Company.
TWELVE MONTHS ENDED DECEMBER 31, 2000 1999 INC (DEC) % INC (DEC) ---- ---- --------- ----------- Departures (b) 9,722 10,212 (490) (4.80) Block Hours (c) 34,356 37,119 (2,763) (7.44) RPMs (000s) (d) 2,687,051 3,253,165 (566,114) (17.40) ASMs (000s) (e) 3,610,413 4,129,966 (519,553) (12.58) Passengers Enplaned (g) 1,472,340 1,753,237 (280,897) (16.02) Revenue $ (000s) 246,705 263,766 (17,061) (6.47) RASM in cents (h) 6.83 6.39 0.44 6.89 RASM excluding fuel escalation in cents (k) 6.47 6.35 0.12 1.89
- ---------------------- See footnotes (b) through (h) on page 58. See footnote (k) on page 62. Track charter accounted for approximately $192.8 million in revenues in 2000, as compared to $193.8 million in 1999. Specialty charter accounted for approximately $31.5 million in revenues in 2000, as compared to $40.0 million in 1999. MILITARY/GOVERNMENT CHARTER REVENUES. Military/government charter revenues accounted for 14.6% of consolidated revenues in 2000, as compared to 11.2% in 1999. The following table sets forth, for the periods indicated, certain key operating and financial data for the military/government charter operations of the Company.
TWELVE MONTHS ENDED DECEMBER 31, 2000 1999 INC (DEC) % INC (DEC) ---- ---- --------- ----------- Departures (b) 4,961 4,444 517 11.63 Block Hours (c) 19,443 15,354 4,089 26.63 RPMs (000s) (d) 1,339,545 818,627 520,918 63.63 ASMs (000s) (e) 2,605,791 2,027,471 578,320 28.52 Passengers Enplaned (g) 329,200 199,013 130,187 65.42 Revenue $ (000s) 188,556 126,213 62,343 49.40 RASM in cents (h) 7.24 6.23 1.01 16.21 RASM excluding fuel escalation in cents (l) 6.88 6.21 0.67 10.79
See footnotes (b) through (h) on page 58. See footnote (l) on page 63. GROUND PACKAGE REVENUES. In 2000, ground package revenues increased 2.7% to $59.8 million, as compared to $58.2 million in 1999. The number of ground packages sold and the average revenue earned by the Company for a ground package sale are a function of the seasonal mix of vacation destinations served, the quality and types of ground accommodations offered and general competitive conditions in the Company's markets, all of which factors can change from period to period. 91 OTHER REVENUES. Other revenues decreased 13.1% to $43.1 million in 2000, as compared to $49.6 million in 1999. OPERATING EXPENSES SALARIES, WAGES AND BENEFITS. Salaries, wages and benefits expense in 2000 increased 17.6% to $297.0 million from $252.6 million in 1999. The Company increased its average equivalent employees by approximately 20.4% between 2000 and 1999. This growth was most significant in categories of employees that are influenced directly by flight activity, such as flight crews and maintenance staff. Beginning in May 2000, the Company replaced its contracted ground handler at its busiest airport, Chicago-Midway, with its own ramp employees. Although this contributed to the increase in salaries, wages and benefits, the Company experienced a corresponding reduction in handling, landing and navigation fees. Some further employment growth in 2000 was also provided to improve customer service in targeted areas by increasing customer service staff, such as at airport ticket counters, in reservations facilities and in other staff groups primarily involved in delivering services to the Company's customers. Staff increases also occurred for Chicago Express as a result of increased passengers boarded due to the conversion from 19-seat to 34-seat aircraft in the first nine months of 2000. The Company also experienced a significant increase in employee benefit costs in 2000, as compared to 1999. These increases in salaries, wages and benefits costs were partially offset by the elimination of employee incentive awards in 2000. In 1999, the Company recognized $6.4 million in incentive awards while no incentive awards were earned in 2000. FUEL AND OIL. Fuel and oil expense increased 60.8% to $274.8 million in 2000, as compared to $170.9 million in 1999. The Company consumed 8.1% more gallons of jet fuel for flying operations between 2000 and 1999, which resulted in an increase in fuel expense of approximately $14.1 million between periods. Jet fuel consumption increased primarily due to the increased number of block hours of jet flying operations between periods. The Company flew 172,824 jet block hours in 2000, as compared to 157,481 jet block hours in 1999, an increase of 9.7% between years. During 2000, the Company's average cost per gallon of jet fuel consumed increased by 49.7% as compared to 1999, resulting in an increase in fuel and oil expense of approximately $91.6 million between periods. The Company contracts with most commercial charter customers, the U.S. military, and with certain bulk-seat purchasers to provide for fuel escalation revenue, which partially offset the impact of higher fuel prices. In 2000, the Company recognized $26.4 million in fuel escalation revenue, as compared to $1.8 million recognized in 1999. The Company implemented a fuel hedge program beginning in the third quarter of 2000, consisting of swap agreements for heating oil. As of December 31, 2000, the Company had entered into swap agreements for approximately 13.6 million gallons of heating oil for future delivery between January 2001 and September 2001, which represented approximately 6.3% of total expected fuel consumption for that period. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased 30.2% to $125.0 million in 2000, as compared to $96.0 million in 1999. Depreciation expense attributable to owned airframes, engines and leasehold improvements increased $9.3 million in 2000, as compared to 1999. The Company added four owned Lockheed L-1011-500s, to the Company's fleet from late 1999 through 2000. The Company also purchased 92 seven hushkits for Boeing 727-200 aircraft and two spare engines for the Lockheed L-1011-500s late in 1999 through 2000. The Company also increased its investment in rotable parts, furniture and fixtures, and computer hardware and software, and increased its provision for inventory obsolescence and amortization of debt issue costs between years. These changes resulted in an increase in depreciation and amortization expense of $8.4 million in 2000, as compared to 1999. Amortization of capitalized engine and airframe overhauls increased $8.5 million in 2000, as compared to 1999, after including amortization of related manufacturers' credits. Changes to the cost of overhaul amortization were partly due to the increase in total block hours and cycles flown between comparable periods for the Lockheed L-1011 fleet, since such expense varies with that activity, and partly due to the completion of more engine and airframe overhauls in 2000 for the Boeing 727-200 and Lockheed L-1011 fleets. Rolls-Royce-powered Boeing 757-200 aircraft, 13 of which were delivered new from the manufacturer since late 1995, are starting to generate engine and airframe overhaul expense. This resulted in a $1.2 million increase in amortization costs between periods. The cost of engine overhauls that become worthless due to early engine failures and which cannot be economically repaired is charged to depreciation and amortization expense in the period the engine fails. Depreciation and amortization expense attributable to these early engine failures increased $2.5 million in 2000, as compared to 1999. When these early engine failures can be economically repaired, the related repairs are charged to aircraft maintenance, materials and repairs expense. AIRCRAFT RENTALS. Aircraft rentals expense for 2000 increased 22.8% to $72.1 million from $58.7 million in 1999. The Company accepted delivery of six Boeing 757-200 aircraft from the manufacturer (two in the fourth quarter of 1999, two in June 2000 and two in November 2000), adding $10.8 million to aircraft rentals expense in 2000, as compared to 1999. Chicago Express aircraft rentals increased by $2.4 million in 2000 as compared to 1999, due to the replacement of 19-seat Jetstream aircraft with 34-seat Saab 340B aircraft. The Company also incurred $2.8 million in higher rentals in 2000, as compared to 1999, due to the lease of spare engines to support the Boeing 757-200 and Lockheed L-1011-500 fleets. The Company purchased 12 Boeing 727-200 aircraft between the first quarter of 1999 and fourth quarter of 2000, which had previously been financed through operating leases, resulting in a decrease in aircraft rentals of $1.5 million between periods. HANDLING, LANDING AND NAVIGATION FEES. Handling, landing and navigation fees increased by 9.1% to $97.4 million in 2000 as compared to $89.3 million in 1999. The total number of system-wide jet departures between 2000 and 1999 increased by 11.0% to 55,714 from 50,207. The lower rate of growth in handling costs in 2000, as compared to the growth in departures, was partly due to the implementation of self-handling on the ramp at Chicago-Midway Airport beginning in May 2000, which was done with third-party contractors during all of 1999. A corresponding increase in salaries, wages and benefits attributable to self-handling was experienced during the remainder of 2000. AIRCRAFT MAINTENANCE, MATERIALS AND REPAIRS. Aircraft maintenance, materials and repair expense increased 26.6% to $70.4 million in 2000, as compared to $55.6 million in 1999. The Company performed a total of 62 maintenance checks on its fleet during 2000 as compared to 53 such checks in 1999. The cost of materials consumed and components repaired in association with such checks and other maintenance activity increased by $9.0 million between 2000 and 1999. The Company recognized an increase in aircraft maintenance, materials and repairs of $2.5 million in 2000, as compared to 1999, due to the consolidation of the results of its wholly owned 93 subsidiary, Chicago Express. The results of operation for Chicago Express were consolidated with the Company beginning in May 1999. CREW AND OTHER EMPLOYEE TRAVEL. The cost of crew and other employee travel increased 32.4% to $65.8 million in 2000 as compared to $49.7 million in 1999. Positioning and hotel costs increased significantly in 2000 due primarily to the substantial increase in military departures in 2000, as compared to 1999. Military flights often operate to and from points remote from the Company's crew bases, thus requiring significant positioning expenditures for cockpit and cabin crews on other airlines. Also, due to heavy airline industry load factors in 2000, the Company paid higher average fares to position crews. Average hotel costs are also higher for military operations since hotel rates at international locations generally exceed domestic U.S. hotel rates. PASSENGER SERVICE. For 2000 and 1999, catering represented 78.8% and 82.0%, respectively, of total passenger service expense. The total cost of passenger service increased 16.3% to $45.6 million in 2000, as compared to $39.2 million in 1999. The Company experienced an increase of approximately 2.1% in the average unit cost of catering each passenger between 2000 and 1999, primarily because in 2000 there were relatively more military passengers in the Company's business mix, who are provided a more expensive catering product due to military catering specifications and the longer average duration of these flights. This resulted in a price-and-business-mix increase of $0.8 million in catering expense in 2000, as compared to 1999. Total jet passengers boarded, however, increased 12.4% between years, resulting in approximately $3.7 million in higher volume-related catering expenses between the same sets of comparative periods. In 2000, as compared to 1999, the Company experienced increased departure delays over 15 minutes of 34.3%. These irregular operations resulted in higher costs to handle inconvenienced passengers and misconnected baggage. In 2000, as compared to 1999, such costs were $2.6 million higher. GROUND PACKAGE COST. Ground package cost increased 3.9% to $50.9 million in 2000, as compared to $49.0 million in 1999. Ground package costs increased in proportion to the increase in ground package revenues. OTHER SELLING EXPENSES. Other selling expenses increased 30.6% to $36.7 million in 2000, as compared to $28.1 million in 1999. Approximately $6.3 million of this increase in 2000 resulted from an increase in CRS fees. This increase resulted partially from the growth in single-seat sales volumes between periods and partially from increases in rates charged by CRS systems. Credit card discount expense increased $3.0 million in 2000, as compared to 1999, primarily due to higher volumes of scheduled service tickets sold using credit cards as form of payment. Toll-free telephone services decreased by $0.8 million in 2000, as compared to 1999, due to billing rate reductions secured from related vendors. COMMISSIONS. Commissions expense remained unchanged at $39.1 million between 2000 and 1999. The Company incurred higher military commissions expense of $4.4 million in 2000, as compared to 1999, which is consistent with growth in military revenues between years. These increases were largely offset by decreases in scheduled service commissions of $4.9 million due to an industry reduction in travel agency commission from 8.0% to 5.0% effective in the fourth quarter of 1999. 94 ADVERTISING. Advertising expense increased 18.3% to $22.0 million in 2000, as compared to $18.6 million in 1999. Such expenses were higher in the spring and summer months of 2000, as advertising support was provided for the introduction of scheduled service to the new destinations of Boston, Seattle, Washington, D.C. and Minneapolis-St. Paul. Advertising also increased due to increased marketing emphasis on commuter and Florida markets in 2000. FACILITIES AND OTHER RENTALS. The cost of facilities and other rentals increased 18.8% to $15.8 million in 2000, as compared to $13.3 million in 1999. Growth in facilities costs between periods was primarily attributable to the need to provide facilities at airport locations to support new scheduled service destinations and expanded services at existing destinations. OTHER OPERATING EXPENSES. Other operating expenses increased 5.7% to $76.3 million in 2000, as compared to $72.2 million in 1999. The purchase by ATALC of charter air services from airlines other than the Company was $7.5 million less in 2000 than in 1999, due to the increased utilization of the Company's own aircraft for ATALC charter programs. In 1999, the Company incurred $3.1 million in Chicago Express code-share expenses, which were not incurred during any period in 2000. Other expenses included in this category increased in 2000 as the Company's flight activity increased. Expenses increasing year over year included flight simulator rentals, professional fees, insurance and supplies. The Company also incurred higher costs associated with irregular flight operations in 2000, as compared to 1999. INTEREST INCOME AND EXPENSE. Interest expense in 2000 increased 50.0% to $31.5 million, as compared to $21.0 million in 1999. The increase in interest expense between periods was primarily due to changes in the Company's capital structure resulting from the sale in December 1999 of $75.0 million in principal amount of 10.5% unsecured senior notes. Additional interest expense of $7.7 million was recorded in 2000 applicable to these notes, as compared to 1999. The Company invested excess cash balances in short-term government securities and commercial paper and thereby earned $8.4 million in interest income in 2000, as compared to $5.4 million in 1999, when less cash was available for such investment. OTHER NON-OPERATING INCOME. Other non-operating income decreased 82.4% to $0.6 million in 2000, as compared to $3.4 million in 1999. The Company holds a membership interest in the SITA Foundation ("SITA"), an organization that provides data communication services to the airline industry. SITA's primary asset is its ownership in Equant N.V. ("Equant"). In February and December 1999, SITA sold a portion of its interest in Equant in a secondary public offering and distributed the pro rata proceeds to certain of its members (including the Company) that elected to participate in the offering. The Company recorded a gain of $1.7 million in the first quarter of 1999 and a similar gain of $1.3 million in the fourth quarter of 1999. INCOME TAX EXPENSE. In 2000, the Company recorded $4.6 million in income tax credits applicable to $19.9 million of pre-tax loss for that period, while in 1999 income tax expense was $30.5 million on pre-tax income of $77.8 million. The effective tax rate applicable to credits in 2000 was 23.1%, as compared to an effective tax rate of 39.1% in 1999. Income tax expense in both sets of comparative periods was affected by the permanent non-deductibility for federal income tax purposes of a percentage of certain amounts paid for crew per diem (40% in 2000 and 45% in 1999). The effect of this and other permanent differences on the effective income tax rate for financial accounting purposes is to increase the effective rate as amounts of pre-tax income decrease and to decrease tax credits otherwise applicable to pre-tax losses. 95 LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS. In the nine months ended September 30, 2002, net cash used in operating activities was $4.9 million, as compared to net cash provided by operating activities of $142.0 million for the same period in 2001. The change in cash provided by or used in operating activities between periods was primarily due to a decrease in earnings, and lower depreciation and amortization expense due to the retirement and impairment of certain Boeing 727-200 and Lockheed L-1011-50 and 100 aircraft in the second half of 2001 and the first nine months of 2002. These decreases were partially offset by changes in operating assets and liabilities, most significantly in accounts receivable, which resulted primarily from a decrease in the U.S. Government grant receivable. Net cash provided by investing activities was $15.7 million in the first nine months of 2002, while net cash used in investing activities was $308.1 million in the nine-month period ended September 30, 2001. Such amounts included capital expenditures totaling $57.6 million and $251.0 million, respectively in the first nine months of 2002, as compared to the same period in 2001. In the first nine months of 2001, the Company's capital expenditures consisted of approximately $137.0 million for the purchase of certain Boeing 737-800 and Boeing 757-300 aircraft and engines and the purchase of certain Boeing 727-200 aircraft off of operating leases, which did not occur in the same periods of 2002. Also, in the first nine months of 2002, the Company incurred $39.7 million for engine and airframe overhauls, airframe improvements and the purchase of rotable parts, as compared to $92.8 million in the same period of 2001. This decline is primarily due to fewer engine overhauls in the first nine months of 2002 as compared to the same period of 2001 on the Lockheed L1011-500 and the Boeing 727-200 fleets, and declining capitalized interest as more aircraft deliveries were completed. Also contributing to the difference in net cash provided by (used in) investing activities is the progress in new aircraft deliveries. In the first nine months of 2002 as new aircraft were delivered, the Company was refunded through operating leases $77.4 million of aircraft pre-delivery deposits, net of new deposits made for future deliveries. In contrast, the Company paid $61.7 million of pre-delivery deposit payments in the first nine months of 2001. Net cash used in financing activities was $82.2 million in the nine months ended September 30, 2002, while net cash provided by financing activities was $197.0 million in the nine months ended September 30, 2001. In the first nine months of 2002, the Company borrowed and repaid $192.5 million in temporary financing related to the purchase of certain Boeing 737-800 and Boeing 757-300 aircraft, which were subsequently financed through operating leases, while in the first nine months of 2001, the Company borrowed $102.2 million to temporarily finance certain new aircraft. In the first nine months of 2002, the Company repaid $52.6 million in short term debt which had financed pre-delivery deposits on certain aircraft delivered during that period, while in the same period of 2001, the Company financed $43.9 million in pre-delivery deposits. In addition, in the nine months ended September 30, 2002, the Company made net payments of $25.0 million on its revolving credit facility, while in the same period of 2001, the Company borrowed $49.0 million under its bank credit facility. In 2001, 2000 and 1999, net cash provided by operating activities was $144.4 million, $111.7 million and $152.7 million, respectively. The increase in cash provided by operating activities between 2000 and 2001 primarily resulted from changes in operating assets and liabilities, the non-cash impact of impairment losses recognized on the Boeing 727-200 and Lockheed L-1011-50 and 100 fleets, partially offset by lower earnings. Significant changes in operating assets and liabilities in 2001 included: (1) an increase in receivables, primarily comprised of a receivable 96 for $21.8 million for U.S. Government grant compensation due under the Air Transportation Safety and System Stabilization Act; (2) an increase in trade payables of $16.9 million, representing extended payment terms negotiated with trade vendors subsequent to the events of September 11; and (3) an increase in accrued expenses of $32.8 million, approximately $16.0 million of which represents deferred payment of certain federal and state taxes authorized by several taxing jurisdictions until the first quarter of 2002. The decrease in operating cash flows between 1999 and 2000 was primarily attributable to lower earnings, partially offset by higher depreciation and amortization charges. Net cash used in investing activities was $129.8 million, $290.8 million and $305.7 million, respectively, in the years ended December 31, 2001, 2000 and 1999. In 2001, $30.8 million of expenditures were made for pre-delivery deposits on future deliveries of new aircraft, net of returned deposits on delivered aircraft, as compared to $117.0 million and $7.4 million made for these deposits in 2000 and 1999, respectively. Capital expenditures totaling $119.8 million, $146.5 million and $266.9 million, respectively, were made in 2001, 2000 and 1999 primarily for aircraft purchases, engine and airframe overhauls, airframe improvements, hushkit installations, and the purchase of rotable parts. In 1999, the Company's capital expenditures also included $115.7 million for the purchase and modification of five L-1011-500 aircraft and the purchase of nine Boeing 727-200 aircraft that were previously leased. In 2001, net cash used in investing activities was reduced by $27.3 million in cash provided from BATA upon transfer of 12 Boeing 727-200 aircraft to this joint venture. In 2001, 2000 and 1999, noncurrent prepaid aircraft rent increased $17.2 million, $16.8 million and $15.2 million, respectively, reflecting primarily the cash rent pre-payments due at inception of many new Boeing 737-800, Boeing 757-200 and Boeing 757-300 operating leases. The increase in other assets in 1999 included $24.4 million in goodwill associated with the acquisitions of units of ATALC, Chicago Express and 50% of ATA Cargo. Net cash provided by financing activities for the years ended December 31, 2001, 2000 and 1999 was $40.7 million, $188.1 million and $100.3 million, respectively. In all years, cash provided by financing activities was primarily attributable to proceeds from short-term and long-term debt, net of repayments, which in 2001 primarily consisted of $28.4 million in proceeds related to the financing of pre-delivery deposits on aircraft, the borrowing of $35.0 million under the Company's bank credit facility, and the repayment of $17.0 million in special facility revenue bonds. Also in 2001, the Company borrowed and repaid $153.4 million in temporary bridge debt related to the purchase of three Boeing 757-300 aircraft, which were subsequently financed with operating leases in late 2001. In 2000, net proceeds from short-term and long-term debt primarily consisted of $89.9 million from the financing of pre-delivery deposits on aircraft and proceeds of $23.0 million in notes collateralized by two L-1011-500 aircraft. In 1999, the Company received $75.0 million in proceeds from unsecured senior notes. Net cash provided from financing activities in 2000 also included $80.0 million in proceeds from the issuance of preferred stock. The Company presently expects that cash generated by operations, together with available borrowings under collateralized credit facilities, the return of pre-delivery deposits held by the manufacturers on future aircraft and engine deliveries, the receipt of additional U.S. Government grant compensation and the receipt of funds from the pending U.S. Government-guaranteed secured term loan, will be sufficient to fund operations during the next 12 months. If the Company does not obtain the U.S. Government-guaranteed loan, or the existing credit facility is not extended past its current expiration date of January 2, 2003, the Company will pursue other sources to fund operations during the next 12 months. 97 DEBT AND OPERATING LEASE CASH PAYMENT OBLIGATIONS. The Company is required to make cash payments in the future on debt obligations and operating leases. The Company's operating leases require periodic cash payments that vary in amount and frequency. The Company accounts for aircraft rentals expense in equal monthly amounts over the life of each operating lease. Although the Company is obligated on a number of long-term operating leases which are not recorded on the balance sheet under accounting principles generally accepted in the United States, the Company has no off-balance sheet debt and, with the exception of insignificant amounts not requiring disclosure, does not guarantee the debt of any other party. The following table summarizes the Company's contractual debt and operating lease obligations at September 30, 2002, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.
CASH PAYMENTS CURRENTLY SCHEDULED ----------------------------------------------------------------------------------------- TOTAL 4QTR 2003 2005 AFTER AS OF 9/30/02 2002 -2004 -2006 2006 -------------- -------------- --------------- --------------- --------------- (in thousands) Current and long-term debt $ 415,495 $ 58,476 $ 203,113 $ 135,640 $ 18,266 Lease obligations 3,381,484 45,391 523,487 481,677 2,330,929 -------------- -------------- --------------- --------------- --------------- Total contractual cash obligations $3,796,979 $ 103,867 $ 726,600 $ 617,317 $ 2,349,195 ============== ============== =============== =============== ===============
In addition, the Company is committed to taking future delivery of 16 new Boeing 757-300 and Boeing 737-800 aircraft, as well as four spare engines. The estimated amounts of future cash payments relating to financing of these aircraft and engines are not included in the table. The Company intends to finance these aircraft and engines with operating leases. AIRCRAFT AND FLEET TRANSACTIONS. In 2000, the Company entered into a purchase agreement with the Boeing Company to purchase directly from Boeing 10 new Boeing 757-300s and 20 new Boeing 737-800s. The Boeing 737-800 aircraft are powered by General Electric CFM56-7B27 engines, and the Boeing 757-300 aircraft are powered by Rolls-Royce RB211-535 E4C engines. The Company also received purchase rights for an additional 50 aircraft. The manufacturer's list price is $73.6 million for each 757-300 and $52.4 million for each 737-800, subject to escalation. The Company's purchase price for each aircraft is subject to various discounts. To fulfill its purchase obligations, the Company has arranged for each of these aircraft, including the engines, to be purchased by third parties that will, in turn, enter into long-term operating leases with the Company. As of September 30, 2002, the Company had taken delivery of eight Boeing 737-800s and 10 Boeing 757-300s obtained directly from Boeing. All remaining aircraft to be purchased directly from Boeing are scheduled for delivery between October 2002 and August 2004. Aircraft pre-delivery deposits are required for these purchases, and the Company has funded these deposits using operating cash and primarily short-term deposit finance facilities. As of September 30, 2002, the Company had $93.3 million in pre-delivery deposits outstanding for these aircraft, of which $65.6 million was provided by deposit finance facilities with various lenders. Upon delivery of the aircraft, pre-delivery deposits funded with operating cash will be returned to the Company, and those funded with deposit facilities will be used to repay those facilities. In December 2001, the Company entered into an agreement to exercise purchase rights on two Boeing 757-300 aircraft to be delivered in May and June 2003. The Company has purchase rights remaining for eight Boeing 757-300 aircraft and 40 Boeing 737-800 aircraft. The Company has operating lease agreements in place to lease 14 new Boeing 737-800s from ILFC. As of September 30, 2002, the Company had taken delivery of 12 Boeing 737-800s that are 98 being leased from ILFC. The remaining aircraft under these operating lease agreements are scheduled for delivery in June 2003 and May 2004. The Company has an agreement to acquire five additional new Boeing 737-800s to be financed by operating leases with GECAS. The Company took delivery of the fifth Boeing 737-800 aircraft being leased from GECAS in the third quarter of 2002. Although the Company typically finances aircraft with long-term operating leases, it has a bridge financing facility which provides for maximum borrowings of $400.0 million to finance new Boeing 737-800 aircraft and new Boeing 757-300 aircraft. Borrowings under the facility bear interest, at the option of ATA, at LIBOR plus a margin, which depends on the percentage of the purchase price borrowed and whether the borrowing matures 18 or 24 months after the aircraft delivery date. During the first four months of 2002, the Company borrowed $192.5 million, under this bridge facility, for the purchase of certain Boeing 737-800 and Boeing 757-300 aircraft. As of June 30, 2002, these borrowings were repaid in full, while the related aircraft were financed under long-term operating leases. The Company has an agreement with General Electric to purchase four spare engines, which are scheduled for delivery between 2003 and 2006. The Company has acquired two spare Rolls Royce engines, one of which was delivered in 2001, and the other in June 2002. In May 2002, the Company entered into an agreement with AMR Leasing Corporation to lease six Saab 340B aircraft, with options to lease up to 10 additional aircraft. As of September 30, 2002, the Company had taken delivery of all six Saab 340B aircraft under this agreement. In March 2001, the Company entered into a limited liability company agreement with BCC to form BATA, a 50/50 joint venture. Because the Company does not control BATA, the Company's investment is being accounted for under the equity method. BATA is expected to remarket the Company's fleet of Boeing 727-200 aircraft in either passenger or cargo configurations. In exchange for supplying the aircraft and certain operating services to BATA, the Company has and will continue to receive both cash and equity in the income or loss of BATA. The Company transferred 12 Boeing 727-200 aircraft to BATA in 2001, and transferred eight of the remaining 12 Boeing 727-200 aircraft to BATA in June 2002. SIGNIFICANT FINANCINGS. As of December 31, 2001, the Company's revolving bank credit facility provided for maximum borrowings of $100.0 million, including up to $50.0 million for stand-by letters of credit. In March 2002, the Company amended the credit facility to reduce the maximum borrowings to $75.0 million, declining to $60.0 million as of September 30, 2002, and to modify certain financial covenants. The amended facility matures January 2, 2003, and borrowings under the facility bear interest, at the option of ATA, at either LIBOR plus a margin or the agent bank's prime rate. This facility is currently collateralized by six Lockheed L-1011-50 and L-1011-100 aircraft and engines, three Lockheed L-1011-500 aircraft and engines, two Saab 340B aircraft, Boeing 727-200 spare engines, certain rotable parts and eligible receivables. The facility agreement provides that in the event of a material adverse occurrence, the lenders can elect not to fund any additional borrowings, and can require repayment of any outstanding balance immediately. No such determination was made relative to the terrorist attacks on September 11, 2001. As of September 30, 2002, the Company had borrowings of $10.0 million against the facility, and had outstanding letters of credit of $48.4 million secured by the facility. As of September 30, 2002, the bank has assigned a collateral borrowing base of $65.4 million to the various aircraft and parts securing the bank credit facility, which is less than their book value. 99 The Company is seeking a $168.0 million secured term loan that would replace the existing credit facility. The Company filed an application with the Air Transportation Stabilization Board, ("ATSB") for a $148.5 million Federal guarantee of that loan, and on September 26, 2002, received conditional approval of the loan guarantee. The approval is subject to several conditions, including increased fees and warrants, resolution of certain issues regarding dividend restrictions, change of control terms of existing indebtedness, the results of on-going due diligence by the ATSB and the absence of any material adverse change in the condition, business, property, operations, prospects, assets or liabilities of the Company. The Company believes the conditions can be met, and expects the guaranteed loan to close in the fourth quarter of 2002. The proceeds of the loan will be used to repay any borrowings on the existing bank credit facility and to support the nearly $50.0 million in letters of credit required by certain of the Company's creditors. The remaining proceeds will be used for general corporate purposes. The loan will be secured with collateral similar to that securing the current credit facility, plus some additional equipment and receivables. The loan interest rate is expected to be variable, based on LIBOR, and the loan is expected to have a term of six years. In addition to interest on the loan, the Company expects to be required to pay to the Federal Government certain guarantee fees, based on the outstanding loan balance. Interest and guarantee fees will be payable quarterly in advance, beginning at closing, and principal repayments will begin 18 months after funding of the loan. As part of the guaranteed loan transaction, the Company also expects to issue stock warrants to the Federal Government. The amount of warrants required has not yet been determined. The Company expects the loan to be subject to certain restrictive covenants. In September 2000, the Company issued and sold 300 shares of Series B convertible redeemable preferred stock, without par value. In December 2000, the Company issued and sold 500 shares of Series A redeemable preferred stock, without par value. The proceeds from the issuance and sale of the Series B and the Series A preferred stock were used for aircraft pre-delivery deposits and general corporate purposes. In December 2000, the Company entered into three finance facilities with Banca Commerciale Italiana, GE Capital Aviation Services, Inc., and Rolls-Royce plc., to fund pre-delivery deposits on new Boeing 757-300 and Boeing 737-800 aircraft. These facilities provide for up to $173.2 million in pre-delivery deposit funding, and as of September 30, 2002, the Company had borrowed $65.6 million against these three facilities. All of this debt has been classified as short-term in the accompanying balance sheets because it will be repaid through the return of related pre-delivery deposits through lease financing of aircraft scheduled for delivery within the next 12 months. Interest on these facilities is payable monthly. CARD AGREEMENT. The Company accepts charges to most major credit and debit cards ("cards") as payment from its customers. Approximately 90% of scheduled service and vacation package sales are purchased using these cards. More than half of these card sales are made using MasterCard or Visa cards. The Company maintains an agreement with a bank for the processing and collection of charges to these cards. Under this agreement, a sale is normally charged to the purchaser's card account and is paid to the Company in cash within a few days of the date of purchase, although the Company may provide the purchased services days, weeks or months later. In 2001, the Company processed approximately $535.0 million in MasterCard and Visa charges under its merchant processing agreement. 100 On September 21, 2001, the bank notified the Company that it had determined that the terrorist attacks of September 11, 2001, the ensuing grounding of commercial flights by the FAA, and the significant uncertainty about the level of future air travel entitled the bank to retain cash collected by it on processed card charges as a deposit, up to 100% of the full dollar amount of purchased services to be provided at a future date. If the Company fails to perform pre-paid services which are purchased by a charge to a card, the purchaser may be entitled to obtain a refund which, if not paid by the Company, is the obligation of the bank. The deposit secures this potential obligation of the bank to make such refunds. The bank exercised its right to withhold distributions beginning shortly after its notice to the Company. It subsequently agreed to accept a letter of credit as security for this potential liability. As of December 31, 2001, the bank had withheld $3.1 million in cash with an additional $20.0 million secured by a letter of credit provided on behalf of the Company by the Company's senior lenders under its revolving bank facility. As of September 30, 2002, the bank had withheld $11.8 million in cash, and $20.0 million was secured by the letter of credit. The deposits and letter of credit as of September 30, 2002, and December 31, 2001, constituted approximately 60% of the Company's total future obligations to provide services purchased by charges to card accounts as of those dates. The bank has agreed to a 60% deposit, with that percentage being subject to increase up to 100% at any time at the sole discretion of the bank. A deposit of 100% of this obligation would have resulted in the additional retention of $15.4 million by the bank at December 31, 2001, and $21.2 million at September 30, 2002. The bank's right to maintain a deposit does not terminate unless, in its reasonable judgment and at its sole discretion, it determines that a deposit is no longer required. The Company has the right to terminate its agreement with the bank upon providing appropriate notice. In the event of such termination, the bank may retain a deposit equal to the amount of purchased services not yet performed, for up to 16 months from the date of termination. SURETY BONDS. The Company has historically provided surety bonds to airport authorities and selected other parties, to secure the Company's obligation to these parties. The DOT also requires the Company to provide a surety bond or an escrow to secure potential refund claims of charter customers who have made prepayments to the Company for future transportation. One issuer currently provides all surety bonds issued on behalf of the Company. Prior to the terrorist attacks of September 11, 2001 the Company had provided a letter of credit of $1.5 million as security to the issuer for its total estimated surety bond obligations, which were $20.9 million at August 31, 2001. Effective October 5, 2001, the issuer required the Company to increase its letter of credit to 50% of its estimated surety bond liability. Effective January 16, 2002, the issuer implemented a requirement for the Company's letter of credit to secure 100% of estimated surety bond obligations, which totaled $19.8 million. The Company's letter of credit was adjusted accordingly, and the Company is subject to future adjustments of its letter of credit based upon further revisions to the estimated liability for total surety bonds outstanding. As of September 30, 2002, the letter of credit requirement decreased to $15.2 million. The Company has the right to replace the issuer with one or more alternative issuers of surety bonds, although the Company can provide no assurance that it will be able to secure more favorable terms from other issuers. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to certain market risks, including commodity price risk resulting from aircraft fuel price fluctuations and interest rate risk. The adverse effects of potential changes in 101 these market risks are discussed below. The sensitivity analyses presented do not consider the effects that such adverse changes may have on overall economic activity, nor do they consider additional actions management might take to mitigate the adverse impact of such changes on the Company. See the notes to consolidated financial statements for a description of the Company's accounting policies and other information related to these financial instruments. AIRCRAFT FUEL PRICES. The Company's results of operations are significantly impacted by changes in the price of aircraft fuel. During 2001, aircraft fuel accounted for approximately 18.4% of the Company's operating expenses, compared to 21.3% in 2000. In addition to purchasing fuel-hedging contracts, the Company obtains fuel price fluctuation protection from escalation clauses in certain commercial charter, military charter, bulk scheduled service and mail contracts. During 2001 and 2000, the Company entered into fuel hedge contracts to reduce the volatility of fuel prices, using heating oil swaps. As of December 31, 2001, the Company had outstanding fuel hedge agreements totaling 6.3 million gallons of heating oil, corresponding to 2.6% of the Company's projected aircraft fuel requirements for 2002, as compared to 4.8% of the Company's projected aircraft fuel requirements for 2001 hedged at December 31, 2000. During the first nine months of 2002, the Company entered into additional heating oil swap agreements to further minimize the risk of jet fuel price fluctuations, all of which have expired. As of September 30, 2002, the Company had no outstanding fuel hedge agreements. INTEREST RATES. The Company's results of operations are affected by fluctuations in market interest rates. As of December 31, 2001 and 2000, the majority of the Company's variable-rate debt was comprised of approximately $35.0 million and $0.0 of variable-rate debt through a revolving credit facility and approximately $118.2 million and $89.9 million of variable-rate debt funding aircraft pre-delivery deposits, respectively. If interest rates average 100 basis points more on variable-rate debt in 2002, as compared to 2001 average rates, the Company's interest expense on these debt instruments would increase by approximately $1.5 million. As of December 31, 2001 and 2000, the majority of the Company's fixed-rate debt was comprised of unsecured debt with a carrying value of $300.0 million. Based upon discounted future cash flows using current incremental borrowing rates as of the end of the year for similar types of instruments, the fair value as of December 31, 2001 of this fixed-rate debt is estimated to be approximately $308.2 million. Market risk, estimated as the potential increase in fair value resulting from a hypothetical 100 basis point decrease in market interest rates, was approximately $17.2 million as of December 31, 2001. As of December 31, 2000, that risk was approximately $14.5 million. If 2002 average short-term interest rates decreased by 100 basis points as compared to 2001 average rates, the Company's projected interest income from short-term investments would decrease by approximately $1.8 million. In comparison, the Company estimated that if 2001 average short-term interest rates decreased by 100 basis points as compared to 2000 average rates, the Company's interest income from short-term investments would have decreased by approximately $1.5 million as of December 31, 2000. All estimated changes in interest income and expense are determined by considering the impact of hypothetical changes in interest rates on the Company's debt and cash balances at December 31, 2001 and 2000. 102 BUSINESS ATA Holdings (the "Company") owns American Trans Air, Inc. ("ATA"), the tenth largest passenger airline in the United States (based upon 2001 capacity and traffic) and a provider of airline-related services in selected markets. The Company is the largest commercial charter airline in the United States based upon revenues for the twelve months ended June 30, 2002, and is one of the largest providers of passenger airline services to the U.S. military, based upon 2001 revenue. For the year ended December 31, 2001, the revenues of the Company consisted of 64.3% scheduled service, 15.1% commercial charter service and 13.1% military charter service, with the balance derived from related services. The Company was incorporated in Indiana in 1984. SCHEDULED SERVICE The Company provides scheduled service through ATA to selected destinations primarily from its gateways at Chicago-Midway and Indianapolis and also provides transpacific services between the western United States and Hawaii. The Company focuses on routes where it believes it can be a leading provider of nonstop service and targets leisure and value-oriented business travelers. The Company believes that it has significant competitive advantages in each of its primary markets. o Chicago-Midway, the Company's largest and fastest growing gateway, represented approximately 66.8% of the Company's total scheduled service capacity in 2001. The Company believes its service at this gateway would be difficult to replicate because of limited airport capacity. This competitive position is enhanced by Chicago-Midway's proximity to downtown Chicago and the fact that, for a substantial portion of the population within the metropolitan region, Chicago-Midway is the most convenient airport. The Company's Chicago-Midway operations include service to a number of midwestern cities provided by its commuter airline subsidiary, Chicago Express Airlines, Inc. ("Chicago Express"). This service provides an increasingly important source of feeder traffic for longer-haul jet flights from Chicago-Midway. The Company began jet service at Chicago-Midway in December 1992, and initiated its commuter operation in 1997. o Hawaii represented approximately 18.6% of the Company's total scheduled service capacity in 2001. The Company believes it is the lowest-cost provider of scheduled service between the western United States and Hawaii, which is critical in this price-sensitive, predominantly leisure market. Furthermore, a majority of the Company's capacity in the Hawaiian market is contracted to the nation's largest independent Hawaiian tour operator, which assumes capacity, yield and most fuel-price risk. The Company has served the Hawaiian market since 1974 through its commercial charter operations and since 1987 through its scheduled service operations. o Indianapolis represented approximately 9.2% of the Company's total scheduled service capacity in 2001. The Company began scheduled service from Indianapolis in 1986 and believes that it benefits from being perceived as the hometown airline. In Indianapolis, the Company operates Ambassadair Travel Club, Inc. ("Ambassadair"), the nation's largest travel club, with approximately 34,000 individual or family 103 memberships, providing the Company with a local marketing advantage similar to a frequent flier program. COMMERCIAL CHARTER SERVICE The Company provides commercial passenger charter airline services throughout the world, primarily through U.S. tour operators. The Company seeks to maximize the profitability of these operations by leveraging its leading market position, diverse aircraft fleet and worldwide operating capability. The Company believes its commercial charter services are a predictable source of revenues and operating profits in part because its commercial charter contracts require tour operators to assume capacity, yield and fuel price risk, and also because of the Company's ability to re-deploy assets into alternate markets. MILITARY/GOVERNMENT CHARTER SERVICE The Company has provided passenger airline services to the U.S. military since 1983 and is currently one of the largest commercial airline providers of these services. The Company believes that because these operations are generally less seasonal than leisure travel, they have tended to have a stabilizing impact on the Company's operating margins. The U.S. Government awards one year contracts for its military charter business and pre-negotiates contract prices for each type of aircraft that a carrier makes available. The Company believes that its fleet of aircraft is well suited to the needs of the military. STRATEGY The Company intends to enhance its position as a leading provider of passenger airline services to selected markets where it can capitalize on its competitive strengths. The key components of this strategy are: Participate in Markets Where It Can be a Leader The Company focuses on markets where it can be a leading provider of airline services. In scheduled service, the Company concentrates on routes where it can be the number one or number two carrier. The Company achieves this result principally through nonstop schedules, value-oriented pricing, focused marketing efforts and certain airport and aircraft advantages. The Company is a leading provider of commercial and military charter services in large part because of its variety of aircraft types, superior operational performance and its worldwide service capability. Maintain Low-Cost Position For 2001, 2000 and 1999, the Company's consolidated operating cost per available seat mile ("CASM") of 8.45(cent), 7.86(cent) and 6.84(cent), respectively, was one of the lowest among large U.S. passenger airlines. The Company believes that its lower costs provide a significant competitive advantage, allowing it to operate profitably while pricing competitively in the scheduled service and commercial and military charter markets. The Company believes its low-cost position is primarily derived from its simplified product, route structure and low overhead costs. In May 2000, the Company entered into a series of agreements to acquire new Boeing 737-800 aircraft and new Boeing 757-300 aircraft to replace the Company's older fleets of Lockheed L-1011-50 and 100, and Boeing 727-200 aircraft. The Company expects to achieve significant 104 operating cost savings with the introduction of new aircraft, including (1) reduced fuel consumption; (2) transition from three-person to two-person cockpit crews; (3) lowered maintenance costs; and (4) improved utilization and dispatch reliability. Target Growth Opportunities The Company intends to expand its operations selectively in areas where it believes it can achieve attractive financial returns. Scheduled Service Expansion at Chicago-Midway. The Company plans to increase frequencies and potentially add new destinations from Chicago-Midway over the next 12 months. The Company will also occupy additional gates upon completion of the new terminal at Chicago-Midway to facilitate these expanding operations. In the first nine months of 2002, the Company began operating nonstop service from Chicago-Midway to Charlotte, Aruba, Cancun, Grand Cayman and Guadalajara. Selected Strategic Transactions. The Company continually evaluates possible acquisitions of related businesses or interests therein to enhance its competitive position in its market segments. In addition, the Company has and will continue to evaluate other possible business combinations or other strategic transactions, some of which could result in an increase in indebtedness, a change of control in the Company, or both. INDUSTRY OVERVIEW Scheduled Airline Service The Company is a leading provider of targeted scheduled airline services and charter airline services to leisure and other value-oriented travelers, and to the U.S. military. The Company, through its principal subsidiary, ATA, has been operating for 30 years and is the tenth largest U.S. airline in terms of 2001 capacity and traffic. ATA provides scheduled service through nonstop and connecting flights from the gateways of Chicago-Midway and Indianapolis to popular vacation destinations such as Hawaii, Phoenix, Las Vegas, Florida, California, Mexico and the Caribbean, as well as to New York's LaGuardia Airport, Philadelphia, Denver, Dallas-Ft. Worth, Washington, D.C., Boston, Seattle, Minneapolis-St. Paul, Newark and Charlotte. Chicago Express also provides commuter passenger service between Chicago-Midway and the cities of Indianapolis, Cedar Rapids, Des Moines, Dayton, Flint, Grand Rapids, Lexington, Madison, Milwaukee, Moline, South Bend, Springfield and Toledo. ATA also provides charter service to independent tour operators, specialty charter customers and the U.S. military. Commercial and Military/Government Charter Airline Service In the United States, the passenger charter airline business is served by major scheduled airlines and a number of U.S. and non-U.S. charter airlines. Historically, charter airlines have supplemented the service provided by scheduled airlines by providing additional capacity at times of peak demand and on a longer-term basis to supplement the U.S. military's own passenger fleet. Based upon the most recently available U.S. Department of Transportation ("DOT") statistics, total charter flights by all U.S. airlines represented approximately 2.2% of all available seat miles ("ASMs") flown within the United States during the 12 months ended June 30, 2002. 105 Commercial charter revenues decreased $54.5 million in 2001, as compared to 2000. The majority of this revenue decline is attributable to the retirement of Lockheed L-1011-50 aircraft, and Boeing 727-200 aircraft, both of which have been traditionally used by the Company in commercial charter applications due to their low ownership costs relative to newer aircraft. Since aircraft utilization (or the number of hours of revenue flying per aircraft per month) is much lower for commercial charter flying than for scheduled service flying, the Company's replacement fleets of Boeing 737-800 and Boeing 757-300 aircraft are economically disadvantaged when used in the charter business, as high monthly utilization is needed to recover their much higher fixed-ownership costs. For this reason, and also due to higher maintenance and fuel costs on the Lockheed and Boeing aging aircraft remaining in service, the Company is becoming less cost competitive in the charter business segment than in past years. For this reason, the Company expects that commercial charter flying will continue to decline as a percentage of consolidated revenues in 2002 and beyond. Military/government charter revenues decreased $21.1 million in 2001, as compared to 2000. The majority of this revenue decline was attributable to changes in teaming arrangements used by both the Company and some of the Company's competitors, which resulted in a decline in fixed-award flying allocated to the Company for the contract year ended September 30, 2001. The Company currently expects its military/government charter revenues to increase slightly in the contract year ending September 30, 2003, as compared to the prior contract year. The Company will continue to use primarily its fleet of five Lockheed L-1011-500 aircraft to support this military business, since this aircraft has competitive operating costs relative to other suppliers of military flying, and has a range and seating configuration preferred by the military. THE COMPANY'S AIRLINE OPERATIONS Services Offered The following table provides a summary of the Company's major revenue sources for the periods indicated:
NINE MONTHS YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30, 1997 1998 1999 2000 2001 2001 2002 ---- ---- ---- ---- ---- ---- ---- (Dollars in millions) Scheduled Service $ 371.8 $ 511.3 $ 624.6 $ 753.3 $ 820.7 $ 656.0 $ 664.4 --------- ---------- ---------- ---------- ---------- ---------- ---------- Commercial Charter 228.1 222.6 263.8 246.7 192.2 170.1 108.1 Military Charter 131.1 121.9 126.2 188.6 167.5 122.5 130.6 --------- ---------- ---------- ---------- ---------- ---------- ---------- Total Charter Service 359.2 344.5 390.0 435.3 359.7 292.6 238.7 Other 52.2 63.6 107.8 103.0 95.1 79.2 63.3 --------- ---------- ---------- ---------- ---------- ---------- ---------- Total $ 783.2 $ 919.4 $ 1,122.4 $ 1,291.6 $ 1,275.5 $ 1,027.8 $ 966.4 ========= ========== ========== ========== ========== ========== ==========
Scheduled Service The Company provides scheduled airline services on selected routes where it believes that it can be one of the leading carriers in those markets, focusing primarily on low-cost, nonstop or direct flights. The Company currently provides scheduled service primarily from its gateway cities of Chicago-Midway and Indianapolis to popular vacation and business destinations. Virtually all of the Company's scheduled service revenue growth has resulted from expanded flying to and from Chicago-Midway. The Company's Chicago-Midway operations include service to a number of mid-western cities, provided by Chicago Express. 106 Included in the Company's jet scheduled service are bulk-seat sales agreements with tour operators. Under these arrangements, which are very similar to charter sales, the tour operator takes up to 87% of an aircraft as a bulk-seat purchase. The seats that the Company retains are sold through its own scheduled service distribution network. Under bulk-seat sales arrangements, the Company is obligated to provide transportation to the tour operators' customers even in the event of non-payment to the Company by tour operators. To reduce its credit exposure under these arrangements, the Company requires bonding or a security deposit for a portion of the contract price. Commercial Charter Commercial charter represented 15.1%, 19.1% and 23.5%, respectively, of the Company's consolidated revenues for 2001, 2000 and 1999. The Company's principal customers for commercial charter are tour operators, sponsors of incentive travel packages and specialty charter customers. Tour Operator Programs. These leisure-market programs are generally contracted for repetitive, round-trip patterns, operating over varying periods of time. In such an arrangement, the tour operator pays a fixed price for use of the aircraft, including the crew and all necessary passenger and aircraft handling services, and assumes responsibility and risk for the actual sale of the available aircraft seats. Under most of its contracts with tour operators, the Company passes through increases in fuel costs from a contracted price. If the fuel price increase causes the tour operator's fuel cost to rise in excess of 10%, the tour operator has the option of canceling the contract. The Company experienced no significant contract cancellations in 2001, 2000 or 1999 as a result of fuel price increases. The Company is required to absorb increases in fuel costs that occur within 14 days of flight time. Incentive Travel Programs. Many corporations offer travel to leisure destinations or special events as incentive awards for their employees. The Company has historically provided air travel for many corporate incentive programs. Incentive travel customers range from national incentive marketing companies who arrange such programs for corporate clients, to large corporations that handle their incentive travel programs on an in-house basis. Specialty Charters. The Company operates a significant number of specialty charter flights. These programs are normally contracted on a single round-trip basis and vary extensively in nature. These flights allow the Company to increase aircraft utilization during off-peak periods. Largest Tour Operator Customers Although the Company serves tour operators on a worldwide basis, its primary customers are U.S.-based. The Company's five largest tour operator customers represented approximately 18.0%, 17.5% and 17.2%, respectively, of the Company's consolidated revenues for 2001, 2000 and 1999. Such tour operator revenues are derived from both scheduled service bulk-seat sales and commercial charter contracts. None of these customers accounts for more than 10% of consolidated revenues. Military/Government Charter In 2001, 2000 and 1999, sales to the U.S. military and other governmental agencies were approximately 13.1%, 14.6% and 11.2%, respectively, of the Company's consolidated revenues. Traditionally, the Company's focus has been on short-term military "contract expansion" business which is routinely awarded by the U.S. Government based on availability of appropriate aircraft. The U.S. Government awards one-year contracts for its military charter business and pre-negotiates 107 contract prices for each type of aircraft a carrier makes available. Such contracts are awarded based upon the participating airlines' average costs. The short-term expansion business is awarded pro rata to those carriers with aircraft availability who have been awarded the most fixed-award business, and then to any additional carrier that has aircraft available. The overall amount of military flying that the Company performs in any one year is dependent upon several factors, including (1) the percentage of mobilization value points represented by the Company's team as compared to total mobilization value points of all providers of military service; (2) the percentage of passenger capacity of the Company with respect to its own team; (3) the amount of fixed-award and expansion flying required by the U.S. military in each contract year; and (4) the availability of the Company's aircraft to accept and fly expansion awards. Under its current teaming arrangement, the Company expects its military/government charter revenues to increase slightly for the contract year ending September 2002, as compared to the contract year ending September 2001. The Company is subject to biennial inspections by the U.S. Department of Defense as a condition of retaining its eligibility to perform military charter flights. The last such inspection was successfully completed in October 2001. AIRCRAFT FLEET As of September 30, 2002, ATA was certified to operate a fleet of 80 aircraft, comprised of 12 Lockheed L-1011s, 25 Boeing 737-800s, 16 Boeing 757-200s and 10 Boeing 757-300s. The Company's commuter affiliate, Chicago Express, was separately certified to operate 17 Saab 340B propeller aircraft. All of these aircraft conform to the FAA's Stage 3 noise regulations. See "Environmental Matters." Lockheed L-1011 Aircraft The Company's 12 Lockheed L-1011 aircraft are wide-body aircraft, four of which have a range of 2,971 nautical miles, three of which have a range of 3,425 nautical miles, and five of which have a range of 5,577 nautical miles. These aircraft have a low ownership cost relative to other wide-body aircraft types. They have an average age of approximately 25 years. As of September 30, 2002, the Company owned 11 of these aircraft and one was under an operating lease that expires in December 2005. All of the Lockheed L-1011 aircraft owned by the Company are subject to mortgages and other security interests granted in favor of the Company's lenders." Boeing 737-800 Aircraft The Company's 25 Boeing 737-800 aircraft are narrow-body aircraft and have a range of 2,500 nautical miles. These aircraft, all of which are leased, are new aircraft delivered in 2001 and 2002. The Company's Boeing 737-800s have higher ownership costs than the Company's Lockheed L-1011 aircraft, but lower operational costs resulting from reduced fuel consumption, lower maintenance and cockpit crew costs, and improved operating reliability. The leases for the Company's Boeing 737-800 aircraft have initial terms that expire on various dates between June 2016 and July 2022. 108 Boeing 757-200 Aircraft The Company's 16 Boeing 757-200 aircraft are narrow-body aircraft, all of which have a range of 3,679 nautical miles. These aircraft, all of which are leased, have an average age of approximately five years. The Company's Boeing 757-200s have higher ownership costs than the Company's Lockheed L-1011 aircraft, but lower operational costs. In addition, the Company's Boeing 757-200s have the capacity to operate on extended flights over water. The leases for the Company's Boeing 757-200 aircraft have initial terms that expire on various dates between January 2003 and May 2022, subject to the Company's right to extend each lease for varying terms. Boeing 757-300 Aircraft The Company's 10 Boeing 757-300 aircraft are narrow-body aircraft and have a range of 2,700 nautical miles. These aircraft, all of which are leased, are new aircraft delivered in 2001 and 2002. The Company's Boeing 757-300s have higher ownership costs than the Company's Lockheed L-1011 aircraft, but lower operational costs. The leases for the Company's Boeing 757-300 aircraft have initial terms that expire on various dates between August 2021 and September 2022. Saab 340B Aircraft The Company's 17 Saab 340B aircraft are commuter aircraft with twin turboprop engines. These 34-seat aircraft have an average age of approximately 11.2 years. As of September 30, 2002, the Company owned two of these aircraft, while leasing the remaining 15 aircraft with initial lease terms that expire between September 2009 and March 2012. FLIGHT OPERATIONS Worldwide flight operations are planned and controlled by the Company's Flight Operations Group based in Indianapolis, Indiana, which is staffed on a 24-hour basis, seven days a week. Logistical support necessary for extended operations away from the Company's fixed bases is coordinated through its global communications network. The Company has the ability to dispatch maintenance and operational personnel and equipment as necessary to support temporary operations around the world. AIRCRAFT MAINTENANCE AND SUPPORT The Company's Maintenance and Engineering Center is located at Indianapolis International Airport. This 150,000 square-foot facility was designed to meet the maintenance needs of the Company's fleet and to provide supervision and control of purchased maintenance services. FUEL PRICE RISK MANAGEMENT The Company has fuel reimbursement clauses and guarantees which applied to approximately 32.0%, 33.5% and 34.8%, respectively, of consolidated revenues in 2001, 2000 and 1999. The Company engaged in a fuel-hedging program from 1998 to mid-1999, which hedged a portion of its scheduled service fuel price risk during that time period. The Company reestablished its fuel-hedging program in the third quarter of 2000 and continued this program in 2001. As of September 30, 2002, the Company has no fuel hedge agreements remaining outstanding. 109 COMPETITION The Company's products and services encounter varying degrees of competition in the markets it serves. Competition for Scheduled Services In scheduled service, the Company competes both against the large U.S. scheduled service airlines and, from time to time, against smaller regional or start-up airlines. Competition is generally on the basis of price, schedule and frequency, quality of service and convenience. Competition for Commercial Charter Services In the commercial charter market, the Company competes both against the major U.S. scheduled airlines and against small U.S. charter airlines. The scheduled carriers compete for leisure travel customers with the Company's commercial charter operations in a variety of ways, including wholesaling discounted seats on scheduled flights to tour operators, promoting packaged tours to travel agents for sale to retail customers and selling discounted, airfare-only products to the public. As a result, all charter airlines, including the Company, generally are required to compete for customers against the lowest revenue-generating seats of the scheduled airlines. The Company also competes against several U.S. and foreign charter airlines. In the United States, these charter airlines are smaller in size than the Company. In Europe, several charter airlines are as large or larger than the Company. Certain European charter airlines are affiliates of large scheduled airlines or tour operators. Competition for Military/Government Charter Services The Company competes for military and other government charters with primarily smaller U.S. airlines. The allocation of U.S. military air transportation contracts is based upon the number and type of aircraft a carrier, alone or through a teaming arrangement, makes available for use to the military, among other factors. INSURANCE The Company carries types and amounts of insurance customary in the airline industry, including coverage for public liability, passenger liability, property damage, aircraft loss or damage, baggage and cargo liability and workers' compensation. Under the Company's current insurance policies, it will not be covered by such insurance were it to fly, without the consent of its insurance provider, to certain high-risk countries. The Company will support certain U.S. Government operations in areas where its insurance policy does not provide coverage when the U.S. Government provides replacement insurance coverage. We currently maintain liability insurance for passengers and third party damages, excluding those caused by an event of terrorism, in the amount of $1.5 billion. In addition, we currently maintain liability insurance for third party damages caused by an event of terrorism in the amount of $100.0 million, of which $50.0 million is provided by the commercial insurance market and $50.0 million is provided by the U.S. Government. The U.S. Government provides indemnification of up to $1.5 billion for third party damages in excess of $100.0 million in the event of terrorism. 110 EMPLOYEES As of December 31, 2001, we had approximately 7,000 full and part-time employees, approximately 2,600 of whom were represented under collective bargaining agreements. Our flight attendants are represented by the Association of Flight Attendants (AFA). Our current collective bargaining agreement with the AFA will become subject to amendment, but will not expire, in October 2004. Our cockpit crews are represented by the Air Line Pilots Association (ALPA). Our current collective bargaining agreement with ALPA will be subject to amendment, but will not expire, in June 2006. Our dispatchers are represented by the Transport Workers Union (TWU). Our current collective bargaining agreement with the TWU will become subject to amendment, but will not expire, in August 2004. Our ramp service agents elected to be represented by the International Association of Machinists (IAM) in February 2001. Negotiations began with IAM in May 2001, but no collective bargaining agreement has been finalized. In February 2002, our aircraft mechanics elected to be represented by the Aircraft Mechanics Fraternal Association (AMFA), and negotiations with them began in October 2002. While we believe our relations with our employees are good, any prolonged dispute with our employees who are represented by any of these unions, or any sizable number of our employees, could have an adverse impact on our operations. REGULATION The Company is subject to a wide range of governmental regulation, including that of the DOT and the FAA. The DOT principally regulates economic matters affecting air service, including: air carrier certification and fitness; insurance; leasing arrangements; allocation of route rights and authorization of proposed scheduled and charter operations; allocation of landing slots and departing slots; consumer protection; and competitive practices. The FAA primarily regulates flight operations, especially matters affecting air safety, including airworthiness requirements for each type of aircraft and crew certification. The FAA requires each carrier to obtain an operating certificate and operations specifications authorizing the carrier to fly to specific airports using specified equipment. Several aspects of airline operations are subject to regulation or oversight by federal agencies other than the DOT and FAA. The United States Postal Service has jurisdiction over certain aspects of the transportation of mail and related services provided by the Company through ATA Cargo. Labor relations in the air transportation industry are generally regulated under the Railway Labor Act, which vests in the National Mediation Board certain regulatory powers with respect to disputes between airlines and labor unions arising under collective bargaining agreements. The Company is subject to the jurisdiction of the Federal Communications Commission regarding the utilization of its radio facilities. In addition, the Immigration and Naturalization Service, the U.S. Customs Service, and the Animal and Plant Health Inspection Service of the Department of Agriculture have jurisdiction over inspection of the Company's aircraft, passengers and cargo to ensure the Company's compliance with U.S. immigration, customs and import laws. Also, while the Company's aircraft are in foreign countries, they must comply with the requirements of similar authorities in those countries. The Commerce Department also regulates the export and re-export of the Company's U.S.-manufactured aircraft and equipment. On November 19, 2001, President Bush signed into law the Aviation and Transportation Security Act ("Aviation Security Act"). This law provides for placing substantially all aspects of civil aviation passenger security and screening under federal control, to be phased in during 2002 and 111 2003, and creates a new Transportation Security Administration under the DOT. The cost of the provisions set forth in the Aviation Security Act will be funded by a new security fee of $2.50 per passenger enplanement, limited to $5 per one-way trip and $10 per round trip. Air carriers, including the Company, began collecting the new fee on ticket sales beginning February 1, 2002. The Aviation Security Act is also funded by financial assessments to each air carrier that began in the second quarter of 2002. The amount of the air carrier assessment is limited to the amount each air carrier spent on aviation security in 2000. In addition to various federal regulations, local governments and authorities in certain markets have adopted regulations governing various aspects of aircraft operations, including noise abatement, curfews and use of airport facilities. Many U.S. airports have adopted or are considering adopting a Passenger Facility Charge of up to $4.50 generally payable by each passenger departing from the airport and remitted by the Company to the applicable airport authority. Based upon bilateral aviation agreements between the U.S. and other nations, and, in the absence of such agreements, comity and reciprocity principles, the Company, as a charter carrier, is generally not restricted as to the frequency of its flights to and from most foreign destinations. However, these agreements generally restrict the Company to the carriage of passengers and cargo on flights which either originate in the U.S. and terminate in a single foreign nation, or which originate in a single foreign nation and terminate in the U.S. The civil aeronautics authorities in the relevant countries must generally specifically approve proposals for any additional charter service. Approval of such requests is typically based on considerations of comity and reciprocity and cannot be guaranteed. The Company believes it is in compliance with all requirements necessary to maintain in good standing its operating authority granted by the DOT and its air carrier-operating certificate issued by the FAA. A modification, suspension or revocation of any of the Company's DOT or FAA authorizations or certificates could have a material adverse effect upon the Company. ENVIRONMENTAL MATTERS Under the Airport Noise and Capacity Act of 1990 and related FAA regulations, the Company's aircraft must comply with certain Stage 3 noise restrictions by certain specified deadlines. In general, the Company is prohibited from operating any Stage 2 aircraft after December 31, 1999. As of December 31, 2001, the Company's entire fleet met Stage 3 requirements. In addition to the aircraft noise regulations administered by the FAA, the Environmental Protection Agency regulates operations, including air carrier operations, which affect the quality of air in the United States. The Company believes it has made all necessary modifications to its operating fleet to meet fuel-venting requirements and smoke-emissions standards. At the Company's aircraft maintenance facilities, materials are used that are regulated as hazardous under federal, state or local laws. The Company is required to maintain programs to protect the safety of the employees who use these materials and to manage and dispose of any waste generated by the use of these materials in compliance with these laws. More generally, the Company is also subject at these facilities to federal, state and local regulations relating to protection of the environment and to discharge of material into the environment. The Company does not expect that the costs associated with ongoing compliance with any of these regulations will have a material impact on the Company's capital expenditures, earnings or competitive position. 112 PROPERTIES The Company leases three adjacent office buildings in Indianapolis consisting of approximately 136,000 square feet. These buildings are located approximately one mile from the Indianapolis International Airport terminal and are used as principal business offices and for the Indianapolis reservations center. The Company's Maintenance and Engineering Center is also located at Indianapolis International Airport. This 150,000-square-foot facility was designed to meet the base maintenance needs of the Company's operations, as well as to provide support services for other maintenance locations. The Indianapolis Maintenance and Engineering Center is an FAA-certificated repair station and has the capability to perform routine and non-routine maintenance on the Company's aircraft. In addition, the Company utilizes a 120,000 square-foot office building immediately adjacent to the Company's Indianapolis Maintenance and Engineering Center which is occupied by its Maintenance and Engineering office staff along with the Company's operations center. In 1995, the Company leased Hangar No. 2 at Chicago's Midway Airport for an initial lease term of ten years, subject to two five-year renewal options. The Company has completed significant improvements to this leased property, which is used to provide line maintenance for the Boeing 757-200, Boeing 757-300 and Boeing 737-800 narrow-body fleets. The Company also leases an 18,700-square-foot reservation facility located near Chicago's O'Hare Airport. The Company routinely leases various properties at airports for use by passenger service, flight operations and maintenance staffs. At September 30, 2002, ATA and Chicago Express were certified to operate a fleet of 80 aircraft. The following table summarizes the ownership characteristics of each aircraft type operated by units of the Company as of September 30, 2002.
OWNED (ENCUMBERED-PLEDGED ON BANK OPERATING-LEASE OWNED FACILITY OR OTHER (FIXED OPERATING-LEASE (UNENCUMBERED) DEBT) BUY-OUT) (NO BUY-OUT) TOTAL --------------- ---------------------- --------------- ---------------- ------------- LOCKHEED L-1011-50/100 - 6 - 1 7 LOCKHEED L-1011-500 - 5 - - 5 BOEING 737-800 - - 13 12 25 BOEING 757-200 - - 14 2 16 BOEING 757-300 - - 10 - 10 SAAB 340B - 2 15 - 17 --------------- ---------------------- --------------- ---------------- ------------- TOTAL - 13 52 15 80 =============== ====================== =============== ================ ===============
LEGAL PROCEEDINGS Various claims, contractual disputes and lawsuits against the Company arise periodically involving complaints which are routine and incidental to the Company's business. The majority of these lawsuits are covered by insurance. To the knowledge of management, none of these claims involve damages in excess of 10 percent of the assets of the Company, nor are any a material proceeding under federal or state environmental laws, nor are any an environmental proceeding brought by a governmental authority involving potential monetary sanctions in excess of $100,000. 113 DESCRIPTION OF PRINCIPAL INDEBTEDNESS FEDERALLY GUARANTEED TERM LOAN On November 20, 2002, ATA borrowed $168.0 million pursuant to a loan agreement among ATA, ATA Holdings, various lenders, and the Air Transportation Stabilization Board ("ATSB"). $148.5 million of the loan is guaranteed by the federal government. The entire loan is also guaranteed by ATA Holdings and certain of its subsidiaries other than ATA. The loan proceeds were used to pay off all outstanding borrowings under an existing credit facility, which was terminated following this repayment, and to support the $47.3 million in letters of credit ATA had outstanding as of the funding of the loan. Net of fees, the remaining proceeds are $104.7 million and are expected to be used for working capital and general corporate purposes. In connection with the loan, ATA issued warrants representing about 12 percent of its common shares to various lenders and to the ATSB. The exercise price for the warrant is $3.53 per share. In the absence of an event of default, the portion of the loan guaranteed by the federal government bears interest equal to: o the lender's average cost of issuing commercial paper plus 0.35%; or, o in the event that this portion of the loan is funded by or assigned to another entity, LIBOR plus 0.40%. The remainder of the loan bears interest at the greater of: o LIBOR plus 5.75%; or o the interest rate for the federally guaranteed portion plus an applicable percentage, ranging from 5.50% to 9.50%. The loan agreement contains covenants that limit the ability of ATA, ATA Holdings and certain of their subsidiaries to, among other things: o grant liens on their property; o make significant investments; o pay dividends or redeem capital stock; o liquidate, wind up or dissolve themselves; o engage in certain sale-leaseback transactions; o engage in mergers and similar business combinations; o dispose of assets by merger or otherwise; o enter new joint ventures or speculative transactions; and o prepay debt. In addition, for a specified period, ATA Holdings must maintain a number of specified ratios between (i) earnings and indebtedness and (ii) earnings and fixed charges. 10 1/2% NOTES In 1997, Amtran issued $100.0 million principal amount of 10 1/2% senior notes due 2004. All of Amtran's obligations under the 10 1/2% notes are guaranteed by all of its operating subsidiaries, including ATA. In December 1999, Amtran sold an additional $75.0 million principal amount of 10 1/2% senior notes due 2004. The terms of the additional notes are identical to those of the original notes. The $75 million principal amount of 10 1/2% senior notes were issued as a private placement under Rule 144A. In 2000, the Company completed an exchange offer in which the new notes were exchanged for registered notes having the same terms. Principal, Maturity and Interest. The 10 1/2% notes are limited in aggregate principal amount to $175.0 million and will mature on August 1, 2004. Interest on the 10 1/2% notes accrues at 10 1/2% per annum and is payable semiannually in cash on February 1 and August 1 of each year. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. Ranking and Guarantee. The 10 1/2% notes are unsecured obligations of Amtran, rank pari passu in right of payment with all existing and future unsecured unsubordinated obligations of Amtran and rank senior in right of payment to all existing and future subordinated obligations of Amtran. The 10 1/2% notes are also effectively subordinated to all existing and future secured indebtedness of Amtran and the guarantors to the extent of the security. Redemption. The 10 1/2% notes redeemable, at Amtran's option, in whole or in part, at any time on or after August 1, 2002, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the 12-month period beginning on August 1 of the year indicated below:
YEAR PERCENTAGE ---- ---------- 2002............................................ 105.250% 2003............................................ 102.625%
Covenants. The indenture governing the 10 1/2% notes limits the ability of Amtran and its subsidiaries to, among other things: o incur debt; o make specified restricted payments; o create restrictions on the ability of some of its subsidiaries to pay dividends and make distributions; o allow some of its subsidiaries to issue or sell capital stock; 114 o all some of its subsidiaries to provide guarantees; o engage in transactions with affiliates; o create liens; o engage in sale/leaseback transactions; and o dispose of assets. Events of Default. The indenture governing the 10 1/2% notes contains various events of default, including: o default in the payment of principal, premium or interest; o default in compliance with some of the covenants contained in indenture; o failure to pay at maturity or upon acceleration of more than $10 million in aggregate of other debt; o failure to pay more than $10 million of judgments that have not been stayed by appeal or otherwise; and o occurrence of specified events, including the bankruptcy of Amtran or some of its subsidiaries. 9 5/8% NOTES In 1998, Amtran issued $125.0 million principal amount of 9 5/8% senior notes due 2005. All of Amtran's obligations under the 9 5/8% notes are guaranteed by all of its operating subsidiaries, including ATA. Principal, Maturity and Interest. The 9 5/8% notes are limited in aggregate principal amount to $125.0 million and will mature on December 15, 2005. Interest on the 9 5/8% notes accrues at 9 5/8% per annum and is payable semiannually in cash on June 15 and December 15 of each year. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. Ranking and Guarantee. The 9 5/8% notes are unsecured obligations of Amtran, rank pari passu in right of payment with all existing and future unsecured unsubordinated obligations of Amtran and rank senior in right of payment to all existing and future subordinated obligations of Amtran. The 9 5/8% notes are also effectively subordinated to all existing and future secured indebtedness of Amtran and the guarantors to the extent of the security. Redemption. The 9 5/8% notes redeemable, at Amtran's option, in whole or in part, at any time on or after June 15, 2003, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the 12-month period beginning on June 15 of the year indicated below: 115
YEAR PERCENTAGE ---- ---------- 2003.................................................. 104.81% 2004.................................................. 102.41%
Covenants. The indenture governing the 9 5/8% notes contains covenants substantially identical to the covenants contained in the indenture governing the 10 1/2% notes. Events of Default. The indenture governing the 9 5/8% notes contains events of default substantially similar to those contained in the indenture governing the 10 1/2% notes. AIRCRAFT PRE-DELIVERY DEPOSIT FINANCE FACILITIES In 2000, we entered into three finance facilities to fund pre-delivery deposits on new Boeing 757-300 and Boeing 737-800 aircraft. These facilities provide for up to $173.2 million in pre-delivery deposit funding. As of September 30, 2002, we had borrowings under these facilities of $65.6 million. SECURED NOTES PAYABLE In 2000, we issued two $11.5 million variable rate five-year notes, each collateralized by one Lockheed L-1011-500 aircraft. As of September 30, 2002, these notes have a combined remaining balance of $15.2 million. MORTGAGES In 1999, we obtained an $8.0 million loan secured by a 15-year mortgage on our Maintenance and Operations Center. In 2000, we obtained a $10.0 million loan secured by a 14-year mortgage on our Indianapolis Maintenance Hangar. As of September 30, 2002, these two mortgages have a combined remaining balance of $16.2 million. 116 DESCRIPTION OF THE CERTIFICATES The following is a summary of the general terms and provisions of the Outstanding Certificates and the Exchange Certificates. The statements under this heading are summaries and do not purport to be complete and are qualified in their entirety by reference to all the provisions of the Pass Through Trust Agreements, copies of which are included as exhibits to this registration statement and are available upon request to the pass through trustee, and to all the provisions of the certificates, the Deposit Agreements, the Escrow Agreements, the Liquidity Facilities and the Intercreditor Agreement. Except as otherwise indicated, the following summary relates to each of the pass through trusts and the certificates issued by each pass through trust. The terms and conditions governing each of the pass through trusts are substantially the same, except as described under "Description of the Intercreditor Agreement - -- Priority of Distributions" below and except that the principal amount and scheduled principal repayments of the secured promissory notes held by each pass through trust and the interest rate and maturity date of the secured promissory notes held by each pass through trust differ. The references to sections in parentheses in the following summary are to the relevant sections of the Pass Through Trust Agreements unless otherwise indicated. GENERAL Each certificate will represent a fractional undivided interest in one of the two American Trans Air, Inc. 2002-1 pass through trusts: the Class A pass through trust and the Class B pass through trust, collectively referred to as the "pass through trusts." The pass through trusts were formed pursuant to the Pass Through Trust Agreements. The property of each pass through trust consists of: o Subject to the Intercreditor Agreement, secured promissory notes acquired under the Note Purchase Agreement and issued, at ATA's election, either (a) on a nonrecourse basis by the Owner Trustees of a separate owner trust for each leveraged lease transaction to finance or refinance a portion of the purchase price of each leased aircraft by the Owner Trustee, in which case the applicable leased aircraft will be leased to ATA, or (b) on a recourse basis by ATA in connection with each secured loan transaction to finance a portion of the purchase price of each aircraft owned by ATA. o The rights of such pass through trust to acquire secured promissory notes under the Note Purchase Agreement. o The rights of such pass through trust under the applicable Escrow Agreement to request the Escrow Agent to withdraw from the Depositary funds sufficient to enable each such pass through trust to purchase secured promissory notes on the delivery of each aircraft during the Delivery Period. o The rights of such pass through trust under the Intercreditor Agreement (including all monies receivable in respect of such rights). o Monies receivable under the Liquidity Facility for such pass through trust. 117 o Funds from time to time deposited with the pass through trustee in accounts relating to such pass through trust. o Subject to the Intercreditor Agreement, the proceeds of sales by the pass through trustee of secured promissory notes in accordance with the terms of the Pass Through Trust Agreements upon an event of default. The certificates of each pass through trust will be issued in fully registered form only and will be subject to the provisions described below under "-- Book-Entry; Delivery and Form." Certificates will be issued only in minimum denominations of $100,000 or integral multiples of $1,000 in excess thereof, except that one certificate of each pass through trust may be issued in a denomination of less than $100,000 (Section 3.01(b)). The certificates will represent interests in the respective pass through trusts, and all payments and distributions on the certificates will be made only from the property of the related pass through trust (Section 3.10). The certificates will not represent an interest in or obligation of ATA, ATA Holdings, the pass through trustees, any of the Loan Trustees or Owner Trustees in their individual capacities, any Owner Participant or any of their affiliates. The existence of the pass through trusts will not limit the liability that holders of the certificates would otherwise incur if they owned the secured promissory notes directly or otherwise directly incurred the obligations of the pass through trusts. Under the Escrow Agreement for each pass through trust, the holder of a certificate of any such pass through trust is also the holder of an Escrow Receipt affixed to the certificate. The holder of an Escrow Receipt is entitled to certain rights with respect to amounts held in certain accounts established under the Escrow Agreement. Those accounts are funded by payments made to the Depositary under the applicable Deposit Agreement. Any transfer of a certificate will have the effect of transferring the corresponding rights with respect to such accounts. Escrow Receipts may not be separately transferred by the holder of a certificate. Rights with respect to the Deposits, payments and withdrawals to be made under the applicable Deposit Agreement and the Escrow Agreement for a pass through trust, except for the right to request withdrawals for the purchase of secured promissory notes, do not constitute property of such pass through trust. SUBORDINATION The subordination terms of the certificates vary depending upon whether a Triggering Event has occurred. See "Description of the Intercreditor Agreement - -- Priority of Distributions." PAYMENTS AND DISTRIBUTIONS The following description of distributions on the certificates should be read together with the description of the Intercreditor Agreement because the Intercreditor Agreement may change the effect of the following provisions in a default situation. See "Description of the Intercreditor Agreement -- Priority of Distributions." Each payment of interest on the Deposits with respect to each pass through trust will be made by the Depositary to the Paying Agent and will be distributed by the Paying Agent to the Receiptholders on the date receipt of such payment is confirmed by the Paying Agent. Each payment of principal, premium, if any, and interest on the secured promissory notes or payments on or with respect to other trust property held in each pass through trust will be 118 distributed by the pass through trustee to certificateholders of such pass through trust on the date receipt of such payment is confirmed by the pass through trustee, except in the case of certain types of Special Payments. The Deposits held with respect to each of the Class A and Class B pass through trusts and the secured promissory notes held in each such pass through trust, in the aggregate, will accrue interest at the applicable annual rate for certificates to be issued by such pass through trust shown on the cover page of this prospectus. Such interest will be payable on February 20, May 20, August 20 and November 20 of each year, commencing on May 20, 2002 (or, in the case of secured promissory notes issued after such date, commencing with the first such date to occur after initial issuance of such secured promissory notes). The interest rate applicable to each class of certificates is referred to as the "Stated Interest Rate" for such pass through trust. All such interest payments will be distributed to certificateholders of such pass through trust on each such date until the final Distribution Date for such pass through trust, subject to the Intercreditor Agreement in the case of payments on the secured promissory notes. Interest is calculated on the basis of a 360-day year consisting of twelve 30-day months. Payments of interest applicable to the certificates issued by each of the Class A and Class B pass through trusts will be supported by a separate Liquidity Facility provided by the Liquidity Provider for the benefit of the holders of such certificates in an aggregate amount sufficient to pay interest on the certificates at the Stated Interest Rate for such pass through trust on the next six successive Regular Distribution Dates (without regard to any future payments of principal on such certificates). The Liquidity Facility with respect to each pass through trust does not cover interest payable by the Depositary on the Deposits relating to such pass through trust. The Liquidity Facility for any class of certificates does not provide for drawings thereunder to pay for principal of or premium on the certificates of such class or any interest on the certificates of such class in excess of the Stated Interest Rate for such class or more than six installments of interest thereon or principal of or interest or premium on the certificates of any other class. Payments of principal of the secured promissory notes are scheduled to be received by the pass through trustee on one or more of February 20, May 20, August 20 and November 20 in certain years, depending upon the terms of the secured promissory notes held in the respective pass through trust. The Paying Agent under each Escrow Agreement will distribute on each Regular Distribution Date to the certificateholders of the pass through trust to which such Escrow Agreement relates all Scheduled Payments received in respect of the related Deposits, the receipt of which is confirmed by the Paying Agent on such Regular Distribution Date. The pass through trustee of each pass through trust will distribute, subject to the Intercreditor Agreement, on each Regular Distribution Date to the certificateholders of such pass through trust all Scheduled Payments received in respect of secured promissory notes held on behalf of such pass through trust, the receipt of which is confirmed by the pass through trustee on such Regular Distribution Date. Each certificateholder of each pass through trust is entitled to receive its proportionate share, based upon its fractional interest in such pass through trust, of any distribution in respect of Scheduled Payments of interest on the Deposits relating to such pass through trust and, subject to the Intercreditor Agreement, of principal or interest on secured promissory notes held by the Subordination Agent on behalf of such pass through trust. Each such distribution of Scheduled Payments will be made by the applicable Paying Agent or pass 119 through trustee to the certificateholders of record of the relevant pass through trust on the record date applicable to such Scheduled Payment subject to certain exceptions (Sections 4.01 and 4.02; Escrow Agreement, Section 2.03). If a Scheduled Payment is not received by the applicable Paying Agent or pass through trustee on a Regular Distribution Date but is received within five days after such Regular Distribution Date, it will be distributed on the date received to such holders of record. If it is received after such five-day period, it will be treated as a Special Payment and distributed as described below. Any payment in respect of, or any proceeds of, any secured promissory note or any Collateral under an indenture, other than a Scheduled Payment, will be distributed on, in the case of an early redemption or a purchase of any secured promissory note, the date of such early redemption or purchase (which is a Business Day), and otherwise on the Business Day specified for distribution of such Special Payment pursuant to a notice delivered by each pass through trustee as soon as practicable after the pass through trustee has received funds for such Special Payment. Any such distribution is subject to the Intercreditor Agreement. Any unused Deposits to be distributed after the Delivery Period Termination Date or the occurrence of a Triggering Event, together with accrued and unpaid interest on the Deposits and any premium payable by ATA, will be distributed on a date 15 days after the Paying Agent has received notice of the event requiring such distribution (also a Special Distribution Date). However, if such date is within ten days before or after a Regular Distribution Date, such Special Payment will be made on a Regular Distribution Date. Payments made on or with respect to the Deposits are not subject to the Intercreditor Agreement. Each Paying Agent, in the case of the Deposits, and each pass through trustee, in the case of trust property or any premium payable by ATA in connection with certain distributions of unused Deposits, will mail a notice to the certificateholders of the applicable pass through trust stating the scheduled Special Distribution Date, the related record date, the amount of the Special Payment and the reason for the Special Payment. In the case of a redemption or purchase of the secured promissory notes held in the related pass through trust or any distribution of unused Deposits related to an unfinanced aircraft under GECC's purchase agreement or after the Delivery Period Termination Date or the occurrence of a Triggering Event, such notice will be mailed not less than 15 days prior to the date such Special Payment is scheduled to be distributed, and in the case of any other Special Payment, such notice will be mailed as soon as practicable after the pass through trustee has confirmed that it has received funds for such Special Payment (Section 4.02(c); Escrow Agreement, Section 2.03). Each distribution of a Special Payment, other than a final distribution, on a Special Distribution Date for any pass through trust will be made by the Paying Agent or the pass through trustee, as applicable, to the certificateholders of record of such pass through trust on the record date applicable to such Special Payment (Section 4.02(b); Escrow Agreement, Section 2.03). See " -- Indenture Defaults and Certain Rights upon an Indenture Default" and "Description of the Secured Promissory Notes -- Redemption." Each Pass Through Trust Agreement requires that the pass through trustee establish and maintain a Certificate Account for the deposit of payments representing Scheduled Payments received by such pass through trustee. Each Pass Through Trust Agreement requires that the pass through trustee establish and maintain a Special Payments Account for the deposit of payments representing Special Payments received by such pass through trustee. A Special Payments Account is non-interest bearing except in certain circumstances where the pass through trustee may invest amounts in such account in certain permitted investments. The terms of each Pass Through Trust 120 Agreement require the pass through trustee to deposit any Scheduled Payments relating to the applicable pass through trust received by it in the Certificate Account of such pass through trust and to deposit any Special Payments so received by it in the Special Payments Account of such pass through trust (Section 4.01). All amounts so deposited will be distributed by the pass through trustee on a Regular Distribution Date or a Special Distribution Date, as appropriate (Section 4.02). Each Escrow Agreement requires that the Paying Agent establish and maintain, for the benefit of the Receiptholders, one or more Paying Agent Accounts, which are to be non-interest bearing. The terms of the Escrow Agreement require the Paying Agent to deposit interest on Deposits relating to such pass through trust and any unused Deposits withdrawn by the Escrow Agent in the Paying Agent Account. All amounts so deposited will be distributed by the Paying Agent on a Regular Distribution Date or Special Distribution Date, as appropriate. The final distribution for each pass through trust will be made only upon presentation and surrender of the certificates issued by such pass through trust at the office or agency of the pass through trustee specified in the notice given by the pass through trustee of such final distribution. The pass through trustee will mail such notice of the final distribution to the certificateholders of such pass through trust, specifying the date set for such final distribution and the amount of such distribution (Section 11.01). See " -- Termination of the Pass Through Trusts" below. Distributions in respect of certificates issued in global form will be made as described in "Book-Entry; Delivery and Form." If any Distribution Date is on a day that is not a Business Day, distributions scheduled to be made on such Regular Distribution Date or Special Distribution Date will be made on the next succeeding Business Day with the same force and effect as if made on such scheduled date and without additional interest. POOL FACTORS The following table sets forth the Assumed Amortization Schedule for the secured promissory notes held in each pass through trust and resulting Pool Factors with respect to such pass through trust. The actual aggregate principal amortization schedule applicable to a pass through trust and the resulting Pool Factors with respect to such pass through trust may differ from those set forth below, because the amortization schedule for the secured promissory notes issued with respect to an aircraft may vary from such illustrative amortization schedule so long as it complies with the Mandatory Economic Terms. In addition, the table set forth below assumes that each aircraft is delivered in the month scheduled for its delivery or financing (see "Description of the Aircraft and the Appraisals -- The Appraisals" for the delivery schedule) and that secured promissory notes in the maximum principal amount in respect of all of the aircraft are purchased by the pass through trust. The scheduled distribution of principal payments for any pass through trust will be affected if any secured promissory notes held in such pass through trust are redeemed or purchased or if a default in payment on such secured promissory notes occurred. As a result, the aggregate principal amortization schedule applicable to a pass through trust and the resulting Pool Factors may differ from those set forth in the following table. 121
CLASS A CLASS A CLASS B CLASS B SECURED PROMISSORY NOTES TRUST SECURED PROMISSORY NOTES TRUST SCHEDULED PAYMENTS EXPECTED SCHEDULED PAYMENTS EXPECTED DATES OF PRINCIPAL POOL FACTOR OF PRINCIPAL POOL FACTOR - ----------------- ------------------------------- ---------------- ----------------------------- ------------------- 20-Feb-03 797,262.60 0.9928635 249,290.61 0.9919922 20-May-03 813,861.61 0.9855784 255,958.51 0.9837702 20-Aug-03 144,563.13 0.9842844 336,071.96 0.9729748 20-Nov-03 0.00 0.9842844 492,633.99 0.9571503 20-Feb-04 3,419,206.66 0.9536781 6,125,149.72 0.7603962 20-Feb-05 3,419,397.00 0.9230702 7,237,877.00 0.5278988 20-Feb-06 3,419,397.00 0.8924622 8,389,428.19 0.2584109 20-Feb-07 5,735,134.56 0.8411255 7,305,552.92 0.0237396 20-Feb-08 13,528,939.00 0.7200243 739,037.10 0.0000000 20-Feb-09 15,540,047.35 0.5809212 0.00 0.0000000 20-Feb-10 16,742,757.16 0.4310523 0.00 0.0000000 20-May-10 55,528.86 0.4305552 0.00 0.0000000 20-Aug-10 56,684.98 0.4300478 0.00 0.0000000 20-Nov-10 57,865.16 0.4295298 0.00 0.0000000 20-Feb-11 17,094,882.41 0.2765089 0.00 0.0000000 20-May-11 414,985.36 0.2727943 0.00 0.0000000 20-Aug-11 423,625.36 0.2690023 0.00 0.0000000 20-Nov-11 432,445.23 0.2651314 0.00 0.0000000 20-Feb-12 17,477,261.25 0.1086877 0.00 0.0000000 20-May-12 805,325.33 0.1014790 0.00 0.0000000 20-Aug-12 822,092.20 0.0941202 0.00 0.0000000 20-Nov-12 839,208.17 0.0866083 0.00 0.0000000 20-Feb-13 9,675,529.62 0.0000000 0.00 0.0000000
The Pool Factor and Pool Balance of each pass through trust will be recomputed if there has been an early redemption, purchase, or default in the payment of principal or interest in respect of one or more of the secured promissory notes held in a pass through trust, as described in " -- Indenture Defaults and Certain Rights Upon an Indenture Default" and "Description of the Secured Promissory Notes -- Redemption," a special distribution attributable to unused Deposits after the Delivery Period Termination Date or the occurrence of a Triggering Event, as described in "Description of the Deposit Agreements." REPORTS TO CERTIFICATEHOLDERS On each Distribution Date, the applicable Paying Agent and pass through trustee will include with each distribution by it of a Scheduled Payment or Special Payment to certificateholders of the related pass through trust a statement setting forth the following information (per $1,000 aggregate principal amount of certificate for such pass through trust, except as to the amounts described in items (1) and (6) below): (1) The aggregate amount of funds distributed on such Distribution Date under the applicable Pass Through Trust Agreement and under the Escrow Agreement, indicating the amount allocable to each source, including the amount which is paid by the Liquidity Provider. (2) The amount of such distribution under the applicable Pass Through Trust Agreement allocable to principal and the amount allocable to premium (including any premium paid by ATA with respect to unused Deposits), if any. (3) The amount of such distribution under the applicable Pass Through Trust Agreement allocable to interest. 122 (4) The amount of such distribution under the Escrow Agreement allocable to interest on the Deposits. (5) The amount of such distribution under the Escrow Agreement allocable to the principal of unused Deposits, if any. (6) The Pool Balance and the Pool Factor for such pass through trust. (Section 4.03). So long as the certificates are registered in the name of DTC, or its nominee, on the record date prior to each Distribution Date, the applicable pass through trustee will request from DTC a securities position listing setting forth the names of all DTC Participants reflected on DTC's books as holding interests in the certificates on such record date. On each Distribution Date, the applicable Paying Agent and pass through trustee will mail to each such DTC Participant the statement described above and will make available additional copies as requested by such DTC Participant for forwarding to certificate owners. In addition, after the end of each calendar year, the applicable pass through trustee and Paying Agent will furnish to each certificateholder of each pass through trust at any time during the preceding calendar year a report containing the sum of the amounts determined pursuant to clauses (1), (2), (3), (4) and (5) above with respect to the pass through trust for such calendar year or, in the event such person was a certificateholder during only a portion of such calendar year, for the applicable portion of such calendar year, and such other items as are readily available to such pass through trustee and which a certificateholder reasonably requests as necessary for the purpose of such certificateholder's preparation of its U.S. federal income tax returns (Section 4.03). Such report and such other items will be prepared on the basis of information supplied to the applicable pass through trustee by the DTC Participants and will be delivered by such pass through trustee to such DTC Participants to be available for forwarding by such DTC Participants to certificate owners in the manner described above. At such time, if any, as the certificates are issued in the form of Definitive Certificates, the applicable Paying Agent and pass through trustee will prepare and deliver the information described above to each certificateholder of record of each pass through trust as the name and period of ownership of such certificateholder appears on the records of the registrar of the certificates. INDENTURE DEFAULTS AND CERTAIN RIGHTS UPON AN INDENTURE DEFAULT An event of default under a leased aircraft indenture will include an event of default under the related lease. We will refer to an event of default under a lease as a "Lease Event of Default." See "Description of the Secured Promissory Notes--Indenture Defaults, Notice and Waiver." Since the secured promissory notes issued under an indenture are held in more than one pass through trust, a continuing Indenture Default under such indenture would affect the secured promissory notes held by each such pass through trust. There are no cross-default provisions in the indentures or in the leases unless otherwise agreed to between an Owner Participant and ATA in respect of the leases relevant to that Owner Participant. This means that events resulting in an Indenture Default under any particular indenture may or may not result in an Indenture Default under any other indenture, and a Lease Event of Default under any particular lease may or may not constitute a Lease Event of Default under any other lease. If an Indenture Default occurs in fewer than all of the indentures, notwithstanding the treatment of secured promissory notes issued under any indenture under which an Indenture Default has occurred, payments of principal and interest on all of the secured promissory notes will continue to be distributed to the holders of the certificates as originally 123 scheduled, subject to the Intercreditor Agreement. See "Description of the Intercreditor Agreement-- Priority of Distributions." Under a leased aircraft indenture, the applicable Owner Trustee and Owner Participant has the right under certain circumstances to cure Indenture Defaults that result from the occurrence of a Lease Event of Default under the related lease. If the Owner Trustee or the Owner Participant exercises any such cure right, the Indenture Default will be deemed to have been cured. If the same institution acts as pass through trustee of multiple pass through trusts, in the absence of instructions from the certificateholders of any such pass through trust, such pass through trustee could be faced with a potential conflict of interest upon an Indenture Default. In such event, the pass through trustee will resign as pass through trustee of one or all such pass through trusts, and a successor trustee will be appointed in accordance with the terms of the applicable pass through trust agreement. Wilmington Trust Company is the initial pass through trustee under each pass through trust. After the occurrence and during the continuation of an Indenture Default, the Controlling Party will direct the Loan Trustee under such indenture in the exercise of remedies under such indenture and may accelerate and sell all (but not less than all) of the secured promissory notes issued under such indenture to any person, subject to certain limitations. See "Description of the Intercreditor Agreement -- Intercreditor Rights -- Sale of Secured Promissory Notes or Aircraft." The proceeds of such sale will be distributed pursuant to the provisions of the Intercreditor Agreement. Any such proceeds so distributed to any pass through trustee upon any such sale will be deposited in the applicable Special Payments Account and will be distributed to the certificateholders of the applicable pass through trust on a Special Distribution Date (Sections 4.01 and 4.02). The market for the secured promissory notes at the time of the existence of an Indenture Default may be very limited and there can be no assurance as to the price at which they can be sold. If any such secured promissory notes are sold for less than their outstanding principal amount, Class A and Class B certificateholders will receive a smaller amount of principal distributions than anticipated and will not have any claim for the shortfall against ATA, ATA Holdings, any Liquidity Provider, any Owner Trustee, any Owner Participant or any pass through trustee. Any Special Payment made to the pass through trustee of any pass through trust by the Subordination Agent following an Indenture Default will be deposited in the Special Payments Account for such pass through trust and will be distributed to the certificateholders of such pass through trust on a Special Distribution Date (Section 4.02). In addition, if, following an Indenture Default under any leased aircraft indenture, the applicable Owner Participant or Owner Trustee exercises its option to redeem or purchase the outstanding secured promissory notes issued under such leased aircraft indenture, the price paid by such Owner Participant or Owner Trustee for the secured promissory notes issued under such leased aircraft indenture and distributed to such pass through trust by the Subordination Agent will be deposited in the Special Payments Account for such pass through trust and will be distributed to the certificateholders of such pass through trust on a Special Distribution Date (Sections 4.01 and 4.02). Any funds representing payments received with respect to any defaulted secured promissory notes, or the proceeds from the sale of any secured promissory notes, held by the pass through trustee in the Special Payments Account for such pass through trust will, to the extent practicable, be invested and reinvested by such pass through trustee in Permitted Investments at ATA's direction pending the distribution of such funds on a Special Distribution Date (Section 4.04). 124 Each Pass Through Trust Agreement provides that the pass through trustee of the related pass through trust will, as promptly as practicable and in any event within 90 days after the occurrence of any default known to the pass through trustee, give to the certificateholders of such pass through trust notice, transmitted by mail, of such uncured or unwaived default with respect to such pass through trust known to it. However, except in the case of default in a payment of principal, premium, if any, or interest on any of the secured promissory notes held in such pass through trust, the applicable pass through trustee will be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interests of such certificateholders (Section 7.01). The term "default" as used in this paragraph only with respect to any pass through trust means the occurrence of an Indenture Default under any indenture pursuant to which secured promissory notes held by such pass through trust were issued, as described above, except that in determining whether any such Indenture Default has occurred, any grace period or notice in connection with such Indenture Default will be disregarded. Each Pass Through Trust Agreement contains a provision entitling the pass through trustee of the related pass through trust, subject to the duty of such pass through trustee during a default to act with the required standard of care, to be offered reasonable security or indemnity by the holders of the certificates of such pass through trust before proceeding to exercise any right or power under such pass through trust agreement at the request of such certificateholders (Section7.02(e)). Subject to certain qualifications set forth in each Pass Through Trust Agreement and to the Intercreditor Agreement, the certificateholders of each pass through trust holding certificates evidencing fractional undivided interests aggregating not less than a majority in interest in such pass through trust have the right to direct the time, method and place of conducting any proceeding for any remedy available to the applicable pass through trustee with respect to such pass through trust or pursuant to the terms of the Intercreditor Agreement, or exercising any trust or power conferred on such pass through trustee under such Pass Through Trust Agreement or the Intercreditor Agreement, including any right of such pass through trustee as Controlling Party under the Intercreditor Agreement or as holder of the secured promissory notes (Section 6.04). In certain cases, the certificateholders of a pass through trust evidencing fractional undivided interests aggregating not less than a majority in interest of such pass through trust may on behalf of the holders of all the certificates of such pass through trust waive any past "event of default" under such pass through trust (i.e., any Indenture Default under any indenture pursuant to which secured promissory notes held by such pass through trust were issued) and its consequences or, if the pass through trustee of such pass through trust is the Controlling Party, may direct the pass through trustee to instruct the applicable Loan Trustee to waive any past Indenture Default and its consequences, except (a) a default in the deposit of any Scheduled Payment or Special Payment or in the distribution of any Scheduled Payment or Special Payment, (b) a default in payment of the principal, premium, if any, or interest with respect to any of the secured promissory notes or (c) a default in respect of any covenant or provision of the pass through trust agreement that cannot be modified or amended without the consent of each certificateholder of such pass through trust affected by such default (Section 6.05). Each indenture provides that, with certain exceptions, the holders of the majority in aggregate unpaid principal amount of the secured promissory notes issued under such indenture may on behalf of all such holders waive any past default or Indenture Default under such indenture. Notwithstanding such provisions of the indentures, under the Intercreditor Agreement only the Controlling Party is entitled to waive any such past default or Indenture Default. 125 PURCHASE RIGHTS OF CERTIFICATEHOLDERS Upon the occurrence and during the continuation of a Triggering Event, with ten days' written notice to the pass through trustee and to each certificateholder of the same class: o the Class B certificateholders will have the right to purchase all, but not less than all, of the Class A certificates; o if the Class C certificates are issued, the Class C certificateholders will have the right to purchase all of the Class A and Class B certificates. In each case, the purchase price will be equal to the Pool Balance of the relevant class or classes of certificates plus accrued and unpaid interest on such Pool Balance to the date of purchase, without premium, but including any other amounts due to the certificateholders of such class or classes. Such purchase right may be exercised by any certificateholder of the class or classes entitled to such right. In each case, if prior to the end of the ten-day period, any other certificateholder of the same class notifies the purchasing certificateholder that the other certificateholder wants to participate in such purchase, then such other certificateholder may join with the purchasing certificateholder to purchase the certificates pro rata based on the interest in the pass through trust held by each certificateholder (Section 6.01(b)). PTC EVENT OF DEFAULT A PTC Event of Default under each pass through trust agreement means the failure to pay: o The outstanding Pool Balance of the applicable class of certificates within ten Business Days of the Final Maturity Date for such class. o Interest due on such class of certificates within ten Business Days of any Distribution Date (unless the Subordination Agent has made Interest Drawings, or withdrawals from the Cash Collateral Account for such class of certificates in an aggregate amount sufficient to pay such interest and has distributed such amount to the relevant pass through trustee). Any failure to make expected principal distributions for any class of certificates on any Regular Distribution Date (other than the Final Maturity Date) does not constitute a PTC Event of Default for such certificates. A PTC Event of Default for the most senior outstanding class of certificates resulting from an Indenture Default under all indentures constitutes a Triggering Event. See "Description of the Intercreditor Agreement -- Priority of Distributions -- After a Triggering Event" for a discussion of the consequences of a Triggering Event. MERGER, CONSOLIDATION AND TRANSFER OF ASSETS ATA is prohibited from consolidating with or merging into any other corporation or transferring substantially all of its assets as an entirety to any other entity unless: o The surviving successor corporation or transferee (a) is a "citizen of the United States" as defined in Section 40102(a)(15) of Title 49 of the United States Code, as amended, relating to aviation and (b) is a United States certificated air carrier. 126 o The surviving successor corporation or transferee expressly assumes all of ATA's obligations contained in the Pass Through Trust Agreements, the Note Purchase Agreement, the indentures, the Participation Agreements, the leases and any other operative documents. o ATA delivers a certificate and an opinion or opinions of counsel indicating that such transaction, in effect, complies with such conditions. In addition, after giving effect to such transaction, no Lease Event of Default, in the case of a leased aircraft, or Indenture Default, in the case of an owned aircraft, will have occurred and be continuing (Section 5.02; Leases, Section 13.2, Owned Aircraft Indenture, Section 4.07). The Pass Through Trust Agreements, the Note Purchase Agreement, the indentures, the Participation Agreements and the leases do not contain any covenants or provisions that would give any pass through trustee or certificateholders protection in the event of a highly leveraged transaction, including transactions effected by management or affiliates, which may or may not result in a change in control of ATA or ATA Holdings. MODIFICATIONS OF THE PASS THROUGH TRUST AGREEMENTS AND CERTAIN OTHER AGREEMENTS Each Pass Through Trust Agreement contains provisions permitting, at ATA's request, the execution of amendments or supplements to such Pass Through Trust Agreement or, if applicable, to the indentures, the leases, the Participation Agreements, the Deposit Agreements, the Escrow Agreements, the Intercreditor Agreement, the Note Purchase Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or any Liquidity Facility, without the consent of the holders of any of the certificates of such pass through trust: o To evidence the succession of another corporation to ATA or ATA Holdings and the assumption by such corporation of ATA's or ATA Holdings's obligations thereunder. o To add to ATA's or ATA Holdings's covenants for the benefit of holders of such certificates or to surrender any right or power conferred upon ATA or ATA Holdings in such Pass Through Trust Agreement, the Intercreditor Agreement, the Note Purchase Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or any Liquidity Facility. o To correct or supplement any provision of such Pass Through Trust Agreement, the Deposit Agreements, the Escrow Agreements, the Intercreditor Agreement, the Note Purchase Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or any Liquidity Facility which may be defective or inconsistent with any other provision in such Pass Through Trust Agreement, the Deposit Agreements, the Escrow Agreements, the Intercreditor Agreement, the Note Purchase Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or any Liquidity Facility, as applicable, or to cure any ambiguity or to modify any other provision with respect to matters or questions arising under such Pass Through Trust Agreement, the Deposit Agreements, the Escrow Agreements, the Intercreditor Agreement, the Note Purchase Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or 127 any Liquidity Facility, provided that such action will not adversely affect the interests of the holders of such certificates. o To correct any mistake in such Pass Through Trust Agreement, the Intercreditor Agreement, the Note Purchase Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or any Liquidity Facility. o To give effect to or provide for a Replacement Facility, as provided in the Intercreditor Agreement. o To comply with any requirement of the Commission, any applicable law, rules or regulations of any exchange or quotation system on which the certificates are listed, any regulatory body or the Registration Rights Agreement to effectuate the exchange offer contemplated by the Registration Rights Agreement, or the "Exchange Offer." o To modify, eliminate or add to the provisions of such Pass Through Trust Agreement as may be necessary to qualify, or continue the qualification of, such Pass Through Trust Agreement under the Trust Indenture Act of 1939, as amended, or to add to such Pass Through Trust Agreement such other provisions as may be expressly permitted by the Trust Indenture Act of 1939, as amended. o To provide for a successor pass through trustee or to add to or change any provision of such Pass Through Trust Agreement as shall be necessary to facilitate the administration of the relevant pass through trust by more than one trustee. o To modify, eliminate or add to the provisions such Pass Through Trust Agreement to the extent necessary to provide for the subordination of any Class C certificates issued by ATA. o To modify or eliminate provisions relating to the transfer or exchange of the certificates upon consummation of the Exchange Offer or effectiveness of the shelf registration statement or the Exchange Offer registration statement contemplated by the Registration Rights Agreement. However, none of these amendments or supplements may be so adopted if they would materially adversely affect the interests of the certificateholders under that Pass Through Trust Agreement (Section 9.01). A majority of the certificateholders of a pass through trust may, with the consent of the applicable Owner Trustee, such consent not to be unreasonably withheld, amend or supplement the provisions of the Pass Through Trust Agreement, the Deposit Agreements, the Escrow Agreements, the Intercreditor Agreement, the Note Purchase Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or any Liquidity Facility to the extent applicable to such certificateholders or of modifying the rights and obligations of such certificateholders under such Pass Through Trust Agreement, the Deposit Agreements, the Escrow Agreements, the Intercreditor Agreement, the Note Purchase Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or any Liquidity Facility. No such amendment or supplement may, without the consent of the holder of each certificate so affected by such amendment or supplement: 128 o Reduce in any manner the amount of, or delay the timing of, any receipt by the pass through trustee (or, with respect to the Deposits, the Receiptholders) of payments with respect to the secured promissory notes held in such pass through trust or distributions in respect of any certificate related to such pass through trust (or, with respect to the Deposits, payments to be made to Receiptholders), or change the date or place of any payment in respect of any certificate, or make distributions payable in coin or currency other than that provided for in such certificates, or impair the right of any certificateholder of such pass through trust to institute suit for the enforcement of any such payment when due. o Permit the disposition of any secured promissory note held in such pass through trust, except as provided in such Pass Through Trust Agreement, or otherwise deprive such certificateholder of the benefit of the ownership of the applicable secured promissory notes. o Alter the priority of distributions specified in the Intercreditor Agreement. o Reduce the percentage of the aggregate fractional undivided interests of the pass through trust provided for in such Pass Through Trust Agreement, the consent of the holders of which is required for any such supplemental trust agreement or for any waiver provided for in such Pass Through Trust Agreement. o Adversely affect the status of the pass through trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Code for U.S. federal income tax purposes. (Section 9.01). OBLIGATION TO PURCHASE SECURED PROMISSORY NOTES Each pass through trustee is obligated to purchase the secured promissory notes issued with respect to the aircraft during the Delivery Period, subject to the terms and conditions of the Note Purchase Agreement and the applicable Participation Agreement. Under the Note Purchase Agreement, ATA agrees to finance each aircraft in the manner provided in the Note Purchase Agreement. ATA has the option of entering into a leveraged lease financing or a secured debt financing with respect to each aircraft. o If ATA chooses to enter into a leveraged lease financing with respect to an aircraft, the Note Purchase Agreement provides for the relevant parties to enter into a Participation Agreement, a lease and a leased aircraft indenture relating to the financing of such leased aircraft. o If ATA chooses to enter into a secured debt financing with respect to an aircraft that ATA owns, the Note Purchase Agreement provides for the relevant parties to enter into a Participation Agreement and an owned aircraft indenture relating to the financing of such owned aircraft. Until July 1, 2004, ATA may convert a secured debt financing of an owned aircraft to a leveraged lease financing of a leased aircraft by entering into a sale-leaseback transaction. To enter into such a transaction, ATA must (a) obtain written confirmation from Moody's that such transaction will not result in a withdrawal, suspension or downgrading of the ratings of any class of certificates, and (b) cause to be delivered to the Loan Trustee an opinion of counsel that the pass 129 through trusts will not be subject to U.S. Federal income tax as a result of such transaction and (c) either (i) cause to be delivered to the Loan Trustee an opinion of counsel that the certificateholders will not recognize income, gain or loss for Federal income tax purposes as a result of such transaction and will be subject to Federal income tax in the same amounts, in the same manner and at the same time as would have been the case if such transaction had not occurred, or (ii) cause to be delivered to the Loan Trustee an opinion of counsel that such certificateholders should not recognize income, gain or loss, and should be subject to Federal income tax, in each case, as referred to in clause (i) and also provide an indemnification in favor of the certificateholders in form and substance reasonably satisfactory to the pass through trustees. See "U.S. Federal Income Tax Consequences -- Taxation of Certificateholders Generally." MANDATORY TERMS The descriptions of the Participation Agreements, the lease, the leased aircraft indentures and the owned aircraft indentures in this prospectus are based on the forms of such agreements to be utilized pursuant to the Note Purchase Agreement. In the case of a leased aircraft, the terms of the agreements actually entered into may differ from the forms of such agreements and, as a result, may differ from the description of such agreements contained in this prospectus. See "Description of the Secured Promissory Notes." However, under the Note Purchase Agreement, the terms of such agreements are required to (a) contain the Mandatory Document Terms (as such Mandatory Document Terms are permitted to vary in accordance with the terms of the Note Purchase Agreement) and (b) not vary the Mandatory Economic Terms. In addition, we must certify to the pass through trustees that any such modifications do not materially and adversely affect the certificateholders, and we must obtain written confirmation from Moody's that the use of versions of such agreements modified in any material respect will not result in a withdrawal, suspension or downgrading of the rating of any class of certificates. Under the Note Purchase Agreement, it is a condition precedent to the obligation of each pass through trustee to purchase the secured promissory notes related to the financing of an aircraft that no Triggering Event has occurred. The pass through trustees have no right or obligation to purchase secured promissory notes after the Delivery Period Termination Date. The "Mandatory Economic Terms," as defined in the Note Purchase Agreement, require, among other things, that: o The maximum principal amount of all the secured promissory notes issued with respect to an aircraft not exceed the maximum principal amount of secured promissory notes indicated for each such aircraft as set forth in "Prospectus Summary -- Secured Promissory Notes and the Aircraft" under the column "Maximum Principal Amount." o The initial loan to aircraft value with respect to an aircraft (with the value of any aircraft for these purposes to equal the Assumed Appraised Value) not exceed 51% in the case of Series A secured promissory notes and 66% in the case of Series B secured promissory notes. o The loan to aircraft value ratio for each series of secured promissory notes for each aircraft (computed (a) after aggregating the principal amount of all series of secured promissory notes that ranks senior to the series of secured promissory notes for which 130 loan to aircraft value is being calculated and (b) as of the date of the issuance of the secured promissory notes on the basis of the Assumed Appraised Value of such aircraft and the Depreciation Assumption) must not exceed as of any Regular Distribution Date after secured promissory notes are issued for that aircraft (assuming no default in the payment of the secured promissory notes) 51% in the case of the Series A secured promissory notes and 66% in the case of the Series B promissory notes. o With respect to each aircraft, the initial average life of the Series A secured promissory notes not extend beyond 8 years and of the Series B secured promissory notes not extend beyond 5 years, in each case from the Issuance Date. o As of the Delivery Period Termination Date (or if earlier, the date of the occurrence of a Triggering Event), the average life of the Class A certificates shall be not less than 7.14 years and not greater than 7.34 years, subject to final reoptimization, and the Class B certificates shall not extend beyond 4.0 years, from the Issuance Date (computed without regard to the acceleration of any secured promissory notes and after giving effect to any special distribution on the certificates thereafter required in respect of unused Deposits). o The final maturity date of each class of certificates is as set forth in "Summary -- Summary of Terms of Certificates." o The original aggregate principal amount of all of the secured promissory notes of each series shall not exceed the original aggregate face amount of the certificates issued by the corresponding Trust. o The interest rate applicable to each series of secured promissory notes must be equal to the rate applicable to the certificates issued by the corresponding pass through trust. o The payment dates for the secured promissory notes and basic rent under the leases must be February 20, May 20, August 20 and November 20. There may be additional lease payment dates (i) January 20, March 20, April 20 and June 20 of 2003 and (ii) the twentieth anniversary of the delivery date under the applicable lease. o The base lease term for each lease must expire by its terms on or after the latest maturity date of the related secured promissory notes. o Basic rent, stipulated loss values and termination values under the leases must be sufficient to pay amounts due with respect to the related secured promissory notes. o The amounts payable under the all-risk aircraft hull insurance maintained with respect to each aircraft must be sufficient to pay the applicable stipulated loss value. o The past-due rate in the indentures and the leases, the Make-Whole Amount payable under the indentures, the provisions relating to the redemption and purchase of secured promissory notes in the indentures, and the minimum liability insurance amount on aircraft in the leases, in each case must be no less favorable to the Loan Trustees, the Subordination Agent, the Liquidity Provider, the pass through trustees 131 and the Note Holders than as set forth in the forms of Aircraft Operative Agreements attached as exhibits to the Note Purchase Agreement. o The indemnification of the Loan Trustees, Subordination Agent, Liquidity Provider, pass through trustees, Escrow Agent, Paying Agent and Note Holders with respect to certain taxes and expenses shall be provided as set forth in the forms of Participation Agreements attached as exhibits to the Note Purchase Agreement. The "Mandatory Document Terms" prohibit modifications in any materially adverse respect as regards the interests of the Loan Trustees, Subordination Agent, Liquidity Provider or the Note Holders, to certain specified provisions of the Aircraft Operative Agreements annexed to the Note Purchase Agreement, as follows: o In the case of the indentures, the following modifications are prohibited: (1) modifications to the granting clause of the indentures so as (A) to deprive the Note Holders of a first priority security interest in (i) the aircraft, (ii) certain of ATA's rights under its aircraft purchase agreement with the aircraft manufacturer and, (iii) in the case of a leased aircraft, the lease or (B) to eliminate the obligations intended to be secured by the indenture; modifications to certain provisions relating to the issuance, redemption, purchase, payments, and ranking of the secured promissory notes (including the obligation to pay the Make-Whole Amount in certain circumstances); (2) modifications to certain provisions regarding Indenture Defaults, remedies relating to Indenture Defaults and rights of the Owner Trustee and Owner Participant in such circumstances; (3) modifications to certain provisions relating to any replaced airframe or engines with respect to an aircraft; and (4) modifications to the provision that New York law will govern the indentures. o In the case of the leases, the following modifications are prohibited: (5) modifications to certain provisions regarding ATA's unconditional obligation to pay basic rent, stipulated loss value and termination value to the Loan Trustee; (6) modification of ATA's obligations to record the leased aircraft indenture with the FAA and to maintain such indenture as a first-priority perfected mortgage on the related aircraft; (7) modification of ATA's obligations to furnish certain opinions with respect to a replacement airframe; and (8) modification of ATA's obligations to consent to the assignment of the lease by the Owner Trustee as collateral under the leased aircraft indenture, as well as modifications which would either alter the provision that New York law will govern the lease or would deprive the Loan Trustee of rights expressly granted to it under the leases. 132 o In the case of the Participation Agreements, the following modifications are prohibited: (9) modifications to certain conditions to the obligations of the pass through trustees to purchase the secured promissory notes issued with respect to an aircraft involving (a) good title to such aircraft, (b) obtaining a certificate of airworthiness with respect to such aircraft, (c) entitlement to the benefits of Section 1110 with respect to such aircraft, (d) the execution and delivery by ATA Holdings of a guarantee of ATA's obligations under the Aircraft Operative Agreements and (e) filings of certain documents with the FAA; (10) to the provisions restricting the Note Holder's ability to transfer such secured promissory notes; (11) modifications to certain provisions requiring the delivery of legal opinions; and (12) modifications to the provision that New York law will govern the Participation Agreement. o In the case of all of the Aircraft Operative Agreements, modifications are prohibited that materially and adversely affect the interests of the Note Holders, the Subordination Agent, the Liquidity Provider or the Loan Trustee in the definition of "Make-Whole Amount." Notwithstanding the foregoing, any such Mandatory Document Term may be modified to correct or supplement any such provision which may be defective or to cure any ambiguity or correct any mistake, provided that any such action does not materially and adversely affect the interests of the Note Holders, the Subordination Agent, the Liquidity Provider, Loan Trustees or the certificateholders. In addition, ATA Holdings guarantees ATA's indemnification obligation under the Note Purchase Agreement. POSSIBLE ISSUANCE OF CLASS C CERTIFICATES ATA may elect to issue Series C secured promissory notes in connection with the financing of owned aircraft. ATA may elect to fund the sale of the Series C secured promissory notes through the sale of Class C certificates. The Note Purchase Agreement provides that ATA's ability to issue any Series C secured promissory notes is contingent upon its obtaining written confirmation from Moody's that the issuance of such Series C secured promissory note will not result in a withdrawal or downgrading of the rating of any class of certificates. If the Class C certificates are issued, the trustee with respect to such certificates will become a party to the Intercreditor Agreement. See "Description of the Intercreditor Agreement." TERMINATION OF THE PASS THROUGH TRUSTS ATA's and ATA Holdings's obligations and those of the applicable pass through trustee with respect to a pass through trust will terminate upon the distribution to certificateholders of such pass through trust of all amounts required to be distributed to them pursuant to the applicable pass through trust agreement and the disposition of all property held in such pass through trust. The applicable pass through trustee will send to each certificateholder of such pass through trust notice of the termination of such pass through trust, the amount of the proposed final payment and the proposed 133 date for the distribution of such final payment for such pass through trust. The final payment to any certificateholder of such pass through trust will be made only upon surrender of such certificateholder's certificates at the office or agency of the applicable pass through trustee specified in such notice of termination (Section 11.01). THE PASS THROUGH TRUSTEES The pass through trustee for each pass through trust is Wilmington Trust Company. With certain exceptions, the trustee makes no representations as to the validity or sufficiency of the Pass Through Trust Agreements, the certificates, the secured promissory notes, the Note Purchase Agreement, the indentures, the leases, the Participation Agreements, the Intercreditor Agreement, the Deposit Agreements, the Escrow Agreements or other related documents (Sections 7.03 and 7.14). The trustee of any pass through trust shall not be liable, with respect to the certificates of such pass through trust, for any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of a majority in principal amount of outstanding certificates of such pass through trust (Section7.02(h)). Subject to certain provisions, the trustee shall be under no obligation to exercise any of its rights or powers under any Pass Through Trust Agreement at the request of any holders of certificates issued thereunder unless there shall have been offered to the trustee reasonable indemnity (Section 7.02(e)). Each Pass Through Trust Agreement provides that the trustee in its individual or any other capacity may acquire and hold certificates issued thereunder and, subject to certain conditions, may otherwise deal with ATA, ATA Holdings, any Owner Trustee or any Loan Trustee with the same rights it would have if it were not the trustee (Section 7.04). 134 DESCRIPTION OF THE DELAYED FUNDING IMPLEMENTATION The initial purchasers of the Class A and Class B Outstanding Certificates or their Affiliates committed to purchase an additional $91,896,000 principal amount of Class A certificates and an additional $26,904,000 principal amount of Class B certificates, respectively, bringing the total aggregate face amount of Class A Outstanding Certificates to $203,612,000 and the total of Class B Outstanding Certificates to $58,035,000. The additional certificates were issued and purchased on October 15, 2002. The proceeds of the purchase of the additional Outstanding Certificates were used to finance the acquisition of four Boeing 737-800 aircraft, bringing the total number of aircraft to be financed with the issuance of the Outstanding Certificates to nine. The additional Outstanding Certificates were of the same series and on the same terms, and subject to the same restrictions, as those initially issued. To effectuate the purchase and sale of the additional certificates, certain terms of the operative documents described in this prospectus were amended simultaneously with the issuance of such additional certificates. Such amendments are set forth in detail in the Delayed Funding Implementation Agreement, dated as of March 28, 2002 and attached as an exhibit to this registration statement. DESCRIPTION OF THE DEPOSIT AGREEMENTS The following is a description of the particular terms of the Deposit Agreements. The statements under this caption are summaries and do not purport to be complete and are qualified in their entirety by reference to all the provisions of the Deposit Agreements, copies of which are included as exhibits to this registration statement and are available upon request to the pass through trustee. The provisions of the Deposit Agreements are substantially identical except as otherwise indicated. GENERAL Under the Escrow Agreements, the Escrow Agent with respect to each pass through trust has entered into a separate Deposit Agreement with the applicable Depositary. Under the Deposit Agreements, the Depositary has established separate deposit accounts in the name of the Escrow Agent. On the Issuance Date, the proceeds relating to the offering of each class of certificates (excluding amounts used to purchase the secured promissory notes related to the aircraft financed on the Issuance Date, if any) were deposited into the applicable Deposit Account by the Purchaser of each class of certificates, in each case, on behalf of such Escrow Agent. On each Regular Distribution Date, the Depositary will pay to the Paying Agent on behalf of the applicable Escrow Agent, for distribution to the holders of Escrow Receipts relating to the applicable pass through trust, an amount equal to interest accrued on the Deposits relating to such pass through trust during the relevant interest period at a rate per annum equal to the interest rate applicable to the certificates issued by such pass through trust. In connection with the financing of each delivered aircraft during the Delivery Period, the pass through trustee for each of the pass through trusts will request that the Escrow Agent relating to the applicable pass through trust withdraw from the Deposits relating to the applicable pass through trust funds sufficient to enable the pass through trustee of such pass through trust to purchase the secured promissory note of the series applicable to such pass through trust issued with respect to such aircraft. Accrued but unpaid interest on all such Deposits withdrawn will be paid on the next Regular 135 Distribution Date. Any portion of any Deposit withdrawn which is not used to purchase such secured promissory note will be re-deposited by each pass through trustee into an account relating to the applicable pass through trust. The Deposits relating to the pass through trusts and interest paid on such Deposits are not subject to the subordination provisions of the Intercreditor Agreement and are not available to pay any other amount in respect of the certificates. UNUSED DEPOSITS The pass through trustees' obligations to purchase the secured promissory notes issued with respect to each aircraft are subject to satisfaction of conditions at the time of delivery, as set forth in the Note Purchase Agreement and the Participation Agreements. See "Description of the Certificates -- Obligation to Purchase Secured Promissory Notes." No assurance can be given that all such conditions will be satisfied at the time of delivery for each aircraft. Moreover, the scheduled delivery date of any new aircraft is subject to delays in the manufacturing process and to the manufacturer's right to postpone deliveries under the purchase agreement with ATA or GE, the actual delivery date of any aircraft may be delayed beyond its currently scheduled delivery date. See "Description of the Aircraft and Appraisals -- Deliveries of Aircraft." Depending on the circumstances of the financing of each aircraft, the maximum aggregate principal amount of secured promissory notes may not be issued. If any funds remain as Deposits with respect to any pass through trust after the Delivery Period Termination Date, such funds will be withdrawn by the Escrow Agent and distributed, with accrued and unpaid interest to the holders of Escrow Receipts relating to the respective pass through trust. Any return of unused Deposits will be made after at least 15 days' prior written notice. In addition, if such remaining Deposits exceed the Par Redemption Amount with respect to all of the pass through trusts, such distribution will include a premium payable by ATA equal to the Deposit Make-Whole Premium with respect to the remaining Deposits applicable to such pass through trust in excess of such pass through trust's proportionate share of the Par Redemption Amount. Since the maximum principal amount of secured promissory notes may not be issued with respect to an aircraft and, in any such case, the Series B secured promissory notes are more likely not to be issued in the maximum principal amount as compared to the other secured promissory notes, it is more likely that a distribution of unused Deposits will be made with respect to the Class B certificates as compared to the other certificates. In addition, notwithstanding the Par Redemption Amount limitation, if any aircraft is not delivered by the manufacturer on or prior to the Delivery Period Termination Date for any reason that is not ATA's fault or caused by ATA's negligence and no substitute aircraft is provided in lieu of such aircraft, no Deposit Make-Whole Premium will be paid with respect to the unused Deposits to be distributed as a result of such failure to deliver in an amount equal to the maximum principal amount of secured promissory notes that could have been issued and acquired by such pass through trust with respect to such aircraft in accordance with the Mandatory Economic Terms and such unused Deposits shall not be included in the calculation of the Par Redemption Amount. In addition, if any aircraft expected to be delivered under an aircraft purchase agreement between GECC and the manufacturer is not leased to or owned by ATA and a substitute aircraft is not substituted therefor, the deposits relating to such aircraft may be withdrawn and distributed. Such withdrawal may occur on or before the date of withdrawal specified in the preceding paragraph. Even if a withdrawal contemplated in this paragraph occurs on the same date as the withdrawal 136 specified in the preceding paragraph, the Deposit Make-Whole Premium for a withdrawal contemplated in this paragraph shall be computed in accordance with clause (ii) of the definition of Deposit Make-Whole Premium. DISTRIBUTION UPON OCCURRENCE OF A TRIGGERING EVENT If a Triggering Event occurs prior to the Delivery Period Termination Date, the Escrow Agent for the pass through trusts will withdraw any funds then held as Deposits with respect to such pass through trusts and cause such funds, with accrued and unpaid interest, but without any premium, to be distributed to the holders of Escrow Receipts relating to such pass through trusts by the Paying Agent on behalf of the Escrow Agent. Any return of unused deposits will be made after at least 15 days' prior written notice. Accordingly, if a Triggering Event occurs prior to the Delivery Period Termination Date, the pass through trusts will not acquire secured promissory notes issued with respect to aircraft delivered after the occurrence of such Triggering Event. DEPOSITARY IntesaBci, acting through its New York branch, acts as Depositary. IntesaBci, acting through its New York branch, has short-term unsecured debt ratings of P-1 from Moody's and A-1 from Standard & Poor's. This information concerning IntesaBci is publicly available. Neither ATA Holdings nor ATA takes any responsibility for the accuracy of the IntesaBci information. The Depositary has not been involved in the preparation of, and does not accept responsibility for, this prospectus. REPLACEMENT OF THE DEPOSITARY If the Depositary's short-term unsecured debt rating falls below A-1 from Standard & Poor's or P-1 from Moody's, then we must, within 15 days of such event occurring, replace the Depositary with a new depositary bank that has short-term unsecured debt ratings of at least A-1 from Standard & Poor's or P-1 from Moody's, and we must obtain a written confirmation from Moody's that such replacement will not result in a withdrawal or downgrading of Moody's rating of any class of certificates. DELAYED DEPOSIT AGREEMENTS On the Issuance Date, in addition to the Deposit Agreements described above, the Escrow Agent entered into a Delayed Deposit Agreement with the Depositary for each class of certificates. The Delayed Deposit Agreements will apply to the proceeds from the issuance of additional certificates as described in "Description of the Delayed Funding Implementation," above, hereto and their terms and conditions will be substantially the same as those of the Deposit Agreements described above, except that deposits under the Delayed Deposit Agreements will be made on the date of the issuance of additional certificates as described in "Description of the Delayed Funding Implementation," above. DESCRIPTION OF THE ESCROW AGREEMENTS The following is a description of the particular terms of the Escrow Agreements. The statements under this caption are summaries only and do not purport to be complete and are qualified 137 in their entirety by reference to all of the provisions of the Escrow Agreements, copies of which are included as exhibits to this registration statement and are available upon request to the pass through trustee. The provisions of the Escrow Agreements are substantially identical except as otherwise indicated. Wells Fargo Bank Northwest, National Association, as escrow agent in respect of the pass through trusts, Wilmington Trust Company, as paying agent on behalf of the Escrow Agent in respect of each such pass through trust, the pass through trustee of each of the pass through trusts and the initial purchaser of the Class A certificates and the Class B certificates, respectively, entered into a separate Escrow Agreement for the benefit of the certificateholders of each such pass through trust as holders of the Escrow Receipts affixed to such certificates. The cash proceeds of the offering of certificates (excluding amounts used to purchase the secured promissory notes related to the aircraft financed on the Issuance Date, if any) were deposited by each respective purchaser on behalf of the Escrow Agent (for the benefit of Receiptholders) with the Depositary as Deposits relating to such pass through trusts. Each Escrow Agent will permit the pass through trustee of the related pass through trust to cause funds to be withdrawn from such Deposits on or prior to the Delivery Period Termination Date so that such pass through trustee may purchase the related secured promissory notes under the Note Purchase Agreement. In addition, the Escrow Agent will direct the Depositary to pay interest on the Deposits accrued in accordance with the Deposit Agreement to the Paying Agent for distribution to the Receiptholders. Each Escrow Agreement requires that the Paying Agent establish and maintain, for the benefit of the related Receiptholders, one or more Paying Agent Account(s), which are non-interest bearing. The Paying Agent will deposit interest on Deposits and any unused Deposits withdrawn by the Escrow Agent in the related Paying Agent Account. The Paying Agent will distribute these amounts on a Regular Distribution Date or Special Distribution Date, as appropriate. Each Receiptholder, by its acceptance of an Escrow Receipt, is deemed to agree that it will look solely to funds deposited in the Paying Agent Account for any payment or distribution due to such Receiptholder under the Escrow Agreement and the Escrow Receipt and that it will have no recourse against ATA, ATA Holdings, the pass through trustee that issued the certificate to which the Escrow Receipt is attached, the Paying Agent or the Escrow Agent, except as provided in the Escrow Agreement and the pass through trust agreement pursuant to which the certificate to which the Escrow Receipt is attached was issued. Upon receipt by the Depositary of the cash proceeds from the offering of certificates (excluding amounts used to purchase the secured promissory notes related to the aircraft financed on the Issuance Date, if any), the Escrow Agent issued Escrow Receipts. An Escrow Receipt was affixed by the relevant pass through trustee to each certificate. Each Escrow Receipt evidences a fractional undivided interest in amounts from time to time deposited into the Paying Agent Account and is limited in recourse to amounts deposited into such account. An Escrow Receipt may not be assigned or transferred except in connection with the assignment or transfer of the certificate to which it is affixed. Each Escrow Receipt was registered by the Escrow Agent in the same name and manner as the certificate to which it is affixed. 138 DESCRIPTION OF THE LIQUIDITY FACILITIES The following is a description of the particular terms of the Liquidity Facilities and certain provisions of the Intercreditor Agreement. The statements under this caption are summaries and do not purport to be complete and are qualified in their entirety by reference to all of the provisions of the Liquidity Facilities and the Intercreditor Agreement, copies of which are included as exhibits to this registration statement and are available upon request to the pass through trustee. The provisions of the Liquidity Facilities are substantially identical except as otherwise indicated. GENERAL The Liquidity Provider will enter into a separate revolving credit agreement with the Subordination Agent (each, a "Liquidity Facility") with respect to the certificates of each pass through trust pursuant to which the Liquidity Provider will, if necessary, make one or more advances to the Subordination Agent that will be used solely to pay interest on such certificates when due, subject to certain limitations. The Liquidity Facility for each pass through trust is intended to enhance the likelihood of timely receipt by the certificateholders of such pass through trust of the interest passed through to them at the Stated Interest Rate for such certificates on up to six consecutive quarterly Regular Distribution Dates. If interest payment defaults occur that exceed the amount covered by or available under the Liquidity Facility for a pass through trust, the certificateholders of such pass through trust will bear their allocable share of the deficiencies to the extent that there are no other sources of funds. Although AIG Matched Funding Corp. is the initial Liquidity Provider for each pass through trust, AIG Matched Funding Corp. may be replaced by one or more other entities with respect to the pass through trusts under certain circumstances. Therefore, the Liquidity Provider for the pass through trusts may differ. DRAWINGS The aggregate amount available under the Liquidity Facility for each pass through trust at August 20, 2002 was as follows:
AVAILABLE PASS THROUGH TRUST AMOUNT ------------------ ------ Class A $ 14,793,433 Class B $ 5,229,541
Except as otherwise provided below, the Liquidity Facility for each pass through trust will enable the Subordination Agent to make Interest Drawings under the Liquidity Facility on any Distribution Date to pay interest then due and payable on the certificates of such pass through trust at the Stated Interest Rate for such pass through trust to the extent that the amount, if any, available to the Subordination Agent on such Distribution Date is not sufficient to pay such interest. The maximum amount available to be drawn under a Liquidity Facility with respect to any pass through trust on any Distribution Date to fund any shortfall of interest on certificates of such pass through trust will not exceed the Required Amount for such certificates. The Liquidity Facility for any class of certificates does not provide for drawings: o to pay for principal of or premium on the certificates of such class; 139 o to pay for any interest on the certificates of such class in excess of the Stated Interest Rate for such class; o to pay for principal of or interest or premium on the certificates of any other class; or o to pay for amounts payable with respect to the Deposits relating to such pass through trust. (Liquidity Facilities, Section 2.2; Intercreditor Agreement, Section 3.6). Each payment by the Liquidity Provider will reduce by the same amount the Maximum Available Commitment under such Liquidity Facility, subject to reinstatement as described below. With respect to any Interest Drawings under a Liquidity Facility, upon reimbursement of the Liquidity Provider of all or any part of the amount of such Interest Drawings plus interest thereon, the Maximum Available Commitment under such Liquidity Facility will be reinstated by the amount of such repaid Interest Drawing to an amount not to exceed the then Required Amount of such Liquidity Facility; provided, however, that such Liquidity Facility will not be so reinstated at any time if (a) a Liquidity Event of Default has occurred and is continuing and (b) less than 65% of the then aggregate outstanding principal amount of all secured promissory notes are Performing Secured Promissory Notes. With respect to any other drawings under such Liquidity Facility, amounts available to be drawn thereunder are not subject to reinstatement. The stated amount of the Liquidity Facility for any pass through trust will be automatically reduced from time to time to an amount equal to the next six successive interest payments due on the certificates of that pass through trust (without regard to expected future payment of principal of such certificates) at the Stated Interest Rate for that pass through trust. The Liquidity Provider will be paid a fee on the average amount available to be drawn under the initial Liquidity Facility until the earlier of the date when the commitment under the Liquidity Facility terminates and the date when a Downgrade Drawing or a Non-Extension Drawing, if any, is made, in an amount and on the dates specified in the Liquidity Facilities. (Liquidity Facilities, Sections 2.3 and 2.4(a); Intercreditor Agreement, Section 3.6(h)). If at any time (i) the short-term unsecured debt rating of the Liquidity Provider for any pass through trust or, if applicable, of any guarantor of the obligations of a Liquidity Provider, then issued by the Rating Agency or Standard & Poor's, as applicable, is lower than the Threshold Rating or (ii) any guarantee of a Liquidity Provider's obligations under its Liquidity Facility becomes invalid or unenforceable or (iii) the guarantor denies its liability thereunder (any such occurrence referred to in clause (i) or (ii) above, a "Guarantee Event"), then the Liquidity Provider for such pass through trust or the Subordination Agent (in consultation with ATA) may arrange for a Replacement Facility (Intercreditor Agreement, Section 3.6(c)). If such Liquidity Facility is not replaced with a Replacement Facility within 10 days after such downgrading or such Guarantee Event (but no later than the expiration date of such Liquidity Facility) and as otherwise provided in the Intercreditor Agreement, the Subordination Agent will make a Downgrade Drawing in an amount equal to the then Maximum Available Commitment under such Liquidity Facility. The Subordination Agent will deposit the proceeds of any Downgrade Drawing in a Cash Collateral Account for the related class of certificates and will use these proceeds for the same purposes and under the same circumstances and subject to the same conditions as cash payments of Interest Drawings under such Liquidity Facility would be used (Liquidity Facilities, Section 2.6(a); Intercreditor Agreement, Section 3.6(c)). 140 The provider of any Replacement Facility has the same rights (including, without limitation, priority distribution rights and rights as Controlling Party) under the Intercreditor Agreement as the replaced Liquidity Provider (Intercreditor Agreement, Section 3.6(c)). The Liquidity Facility for each pass through trust provides that the relevant Liquidity Provider's obligations under such Liquidity Facility will expire on the earliest of: o 15 days after the final legal distribution date for the certificates issued by such pass through trust. o The date on which the Subordination Agent delivers to such Liquidity Provider a certification that all of the certificates of such pass through trust have been paid in full. o The date on which the Subordination Agent delivers to such Liquidity Provider a certification that a Replacement Facility has been substituted for such Liquidity Facility. o The fifth Business Day following receipt by the Subordination Agent of a termination notice from such Liquidity Provider (see " -- Liquidity Events of Default"). o The date on which the Liquidity Provider honors a Final Drawing. o The date on which no amount is or may (by reason of reinstatement) become available for drawing under such Liquidity Facility (Liquidity Facilities, Sections 1.1(a), 2.4(b) and 6.1). Each Liquidity Facility provides that at any time after the second anniversary of the Issuance Date, such Liquidity Facility may be terminated upon notice by the Liquidity Provider given not less than 40 days prior to the proposed date of termination (Liquidity Facilities, Section 2.10). The Intercreditor Agreement provides for the replacement of any Liquidity Facility, if any, for any pass through trust if the Liquidity Provider has notified its intention to terminate such Liquidity Facility. If such Liquidity Facility is not so replaced by the 15th day prior to the proposed termination date, the Subordination Agent will make a Non-Extension Drawing in an amount equal to the then Maximum Available Commitment. The Subordination Agent will deposit the proceeds of the Non-Extension Drawing in the Cash Collateral Account for the related class of certificates as cash collateral to be used for the same purposes and under the same circumstances, and subject to the same conditions, as cash payments of Interest Drawings under such Liquidity Facility would be used (Intercreditor Agreement, Section 3.6(d)). The Subordination Agent, in consultation with ATA (whose recommendations the Subordination Agent will accept in the absence of a good faith reason not to), may, under certain circumstances, arrange for a Replacement Facility to replace the Liquidity Facility for any pass through trust. If a Replacement Facility is provided at any time after the Downgrade Drawing or Non-Extension Drawing under such Liquidity Facility, all funds on deposit in the relevant Cash Collateral Account will be returned to the Liquidity Provider being replaced (Intercreditor Agreement, Section 3.6(e)). 141 In addition, the initial Liquidity Provider may, at its option, arrange for a Replacement Facility to replace its Liquidity Facility provided that such replacement will not result in any increased costs payable by the related pass-through trust and as otherwise provided in the Intercreditor Agreement (Intercreditor Agreement, Section 3.6(e)). The Intercreditor Agreement provides that the Subordination Agent will hold the proceeds of a Final Drawing made in accordance with the provisions set forth under " -- Liquidity Events of Default" below in the Cash Collateral Account for the related pass through trust as cash collateral to be used for the same purposes and under the same circumstances, and subject to the same conditions, as cash payments of Interest Drawings under such Liquidity Facility would be used. The Intercreditor Agreement further provides that the Subordination Agent must make a Final Drawing under a Liquidity Facility in accordance with and to the extent permitted by the terms of such Liquidity Facility (Intercreditor Agreement, Section 3.6(i)). Drawings (other than a Final Drawing) under any Liquidity Facility will be made by delivery by the Subordination Agent of a certificate in the form required by that Liquidity Facility. Upon receipt of a certificate, the Liquidity Provider is obligated to make payment of the drawing requested in immediately available funds. Upon payment by the Liquidity Provider of the amount specified in any drawing under any Liquidity Facility, the Liquidity Provider will be fully discharged of its obligations under that Liquidity Facility with respect to such drawing and from then on will not be obligated to make any further payments under that Liquidity Facility in respect of such drawing to the Subordination Agent or any other person or entity who makes a demand for payment in respect of interest on the related certificates. REIMBURSEMENT OF DRAWINGS The Subordination Agent must reimburse amounts drawn under any Liquidity Facility by reason of an Interest Drawing, Final Drawing, Downgrade Drawing or Non-Extension Drawing and interest on such drawings, but only to the extent that the Subordination Agent has funds available to make such payments. INTEREST DRAWINGS AND FINAL DRAWINGS Amounts drawn by reason of an Interest Drawing or Final Drawing will be immediately due and payable, together with interest on the amount of such drawing. From the date of each such drawing to (but excluding) the third business day thereafter, interest will accrue at the Base Rate plus 2.25% per annum. Thereafter, interest will accrue at LIBOR for the applicable interest period plus 2.25% per annum. DOWNGRADE DRAWINGS AND NON-EXTENSION DRAWINGS The amount drawn under any Liquidity Facility by reason of a Downgrade Drawing or a Non-Extension Drawing will be treated as follows: o Such amount will be released on any Distribution Date to the applicable Liquidity Provider to the extent that such amount exceeds the Required Amount. o Any portion of such amount withdrawn from the Cash Collateral Account for such certificates to pay interest on such certificates will be treated in the same way as Interest Drawings. 142 o The balance of such amount will be invested in certain specified eligible investments. (Liquidity Facilities, Section 2.6) The Downgrade Drawing or Non-Extension Drawing under any Liquidity Facility will bear interest at Base Rate plus 2.25% per annum with respect to the period from the date of such drawing to (but excluding) the third business day after the applicable Liquidity Provider's receipt of the notice of such drawing and thereafter, at a rate equal to LIBOR for the applicable interest period plus 0.65% per annum. (Liquidity Facilities, Sections 2.6 and 3.7) LIQUIDITY EVENTS OF DEFAULT Events of default under each Liquidity Facility (known as a Liquidity Event of Default) consist of: (i) the acceleration of all the secured promissory notes; or (ii) certain bankruptcy or similar events involving ATA. (Liquidity Facilities, Section 1.1). If (i) a Liquidity Event of Default shall have occurred and be continuing and (ii) less than 65% of the then aggregate outstanding principal amount of all secured promissory notes are Performing Secured Promissory Notes, the Liquidity Provider may, in its discretion, deliver a notice of termination of the related Liquidity Facility, the effect of which will be to cause: (i) such Liquidity Facility to expire on the fifth Business Day after the date on which such termination notice is received by the Subordination Agent, (ii) the Subordination Agent to promptly request, and the Liquidity Provider to make, a Final Drawing thereunder, (iii) any Drawing remaining unreimbursed as of the date of termination to be automatically converted into a Final Drawing under such Liquidity Facility, and (iv) all amounts owing to the Liquidity Provider shall automatically become accelerated. (Liquidity Facilities, Section 6.1). Notwithstanding the foregoing, the Subordination Agent will be obligated to pay amounts owing to the Liquidity Provider only to the extent of funds available therefor after giving effect to the payments in accordance with the provisions described under "Description of the Intercreditor Agreement -- Priority of Distributions" (Liquidity Facilities, Section 2.9). Upon the circumstances described below under "Description of the Intercreditor Agreement -- Intercreditor Rights -- Controlling Party", a Liquidity Provider may become the Controlling Party with respect to the exercise of remedies under the indentures (Intercreditor Agreement, Section 2.6(c)). LIQUIDITY PROVIDER The initial Liquidity Provider is AIG Matched Funding Corp. ("AIG-MF"); a corporation organized under the laws of Delaware. 143 American International Group, Inc. ("AIG") is the guarantor of the payment obligations of its subsidiary, AIG-MF, with respect to the Liquidity Facilities. AIG, a Delaware corporation, is a holding company which through its subsidiaries is primarily engaged in a broad range of insurance and insurance-related activities and financial services in the United States and abroad. Reports, proxy statements and other information filed by AIG with the Commission pursuant to the informational requirements of the Exchange Act can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional offices of the Commission: Pacific Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036-3648; and Midwest Regional Office, Citicorp Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies of such material can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. The Commission also maintains a web site at http://www.sec.gov which contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. AIG's common stock is listed on the New York Stock Exchange and reports, proxy statements and other information can be also inspected at the Information Center of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. Except for the information contained in the preceding two paragraphs, AIG and AIG-MF have not been involved in the preparation of, and do not accept responsibility for, this prospectus as a whole. 144 DESCRIPTION OF THE INTERCREDITOR AGREEMENT The following is a description of the particular terms of the Intercreditor Agreement. The statements made under this caption are summaries and do not purport to be complete and are qualified in their entirety by reference to all of the provisions of the Intercreditor Agreement, a copy of which is included as an exhibit to this registration statement and is available upon request to the pass through trustee. INTERCREDITOR RIGHTS General The Intercreditor Agreement is among each pass through trustee, the Liquidity Provider and the Subordination Agent. The secured promissory notes are registered in the name of the Subordination Agent or its nominee as agent and trustee for the applicable pass through trustee solely for the purpose of facilitating the enforcement of the other provisions of the Intercreditor Agreement. Controlling Party With respect to any indenture at any given time, the Loan Trustee under such indenture will be directed in taking, or refraining from taking, any action thereunder or with respect to the secured promissory notes issued under such indenture by the holders of at least a majority of the outstanding principal amount of the secured promissory notes issued under such indenture, so long as no Indenture Default shall have occurred and be continuing thereunder. For so long as the Subordination Agent is the registered holder of the secured promissory notes, the Subordination Agent will act with respect to the preceding sentence in accordance with the directions of the trustees of the pass through trusts in the trust property of which are secured promissory notes constituting, in the aggregate, the required principal amount of secured promissory notes (Intercreditor Agreement, Section 2.6). At any time after an Indenture Default has occurred and is continuing under an indenture, the Loan Trustee under such indenture will be directed in taking, or refraining from taking, any remedial action under such indenture or with respect to the secured promissory notes issued under such indenture, subject to certain limitations, by the Controlling Party including acceleration of such secured promissory notes or foreclosing the lien on the related aircraft. See "Description of the Certificates -- Indenture Defaults and Certain Rights Upon an Indenture Default" for a description of the rights of the certificateholders of each pass through trust to direct the respective pass through trustees. The Controlling Party is: o the Class A pass through trustee, until final distributions on the Class A certificates are made, and o the Class B trustee, upon payment of final distributions of the aggregate outstanding balance of the Class A certificates, together with accrued interest to the holders of the Class A certificates. (Intercreditor Agreement, Section 2.6(b)). The Liquidity Provider with the greater outstanding amount of unreimbursed Liquidity Obligations and not then in default in its obligations to make any advance under any Liquidity Facility will have the right to become the Controlling Party with respect to any indenture at any time 145 after 18 months from the earliest to occur of (x) the date on which the entire available amount under any Liquidity Facility has been drawn (for any reason other than a Downgrade Drawing or a Non-Extension Drawing) and remains unreimbursed, (y) the date on which the entire amount of any Downgrade Drawing or Non-Extension Drawing under any Liquidity Facility has been withdrawn from the relevant Cash Collateral Account to pay interest on the relevant class of certificates and remains unreimbursed and (z) the date on which all secured promissory notes have been accelerated (Intercreditor Agreement, Section 2.6(c)). For purposes of giving effect to the rights of the Controlling Party, the pass through trustees (other than the Controlling Party) irrevocably agree, and the certificateholders (other than the certificateholders represented by the Controlling Party) are deemed to agree by virtue of their purchase of certificates, that the Subordination Agent, as record holder of the secured promissory notes, will exercise its voting rights in respect of the secured promissory notes as directed by the Controlling Party and any vote so exercised will be binding upon the pass through trustees and all certificateholders (Intercreditor Agreement, Section 2.6(b)). For a description of certain limitations on the Controlling Party's rights to exercise remedies, see "Description of the Secured Promissory Notes -- Remedies." Sale of Secured Promissory Notes or Aircraft Upon the occurrence and during the continuation of any Indenture Default under any indenture, the Controlling Party will be entitled to accelerate and, subject to the provisions of the immediately following sentence, direct the Subordination Agent to sell all (but not less than all) of the secured promissory notes issued under such indenture to any person. So long as any certificates are outstanding, during nine months after the earlier of (x) the acceleration of the secured promissory notes under any indenture or (y) the bankruptcy or insolvency of ATA, without the consent of each pass through trustee, no aircraft subject to the lien of such indenture or such secured promissory notes may be sold, if the net proceeds from such sale would be less than the Minimum Sale Price for such aircraft or such secured promissory notes. In addition, with respect to any leased aircraft, the amount and payment dates of rentals payable by ATA under the lease for such leased aircraft may not be adjusted, if, as a result of such adjustment, the discounted present value of all such rentals would be less than 75% of the discounted present value of the rentals payable by ATA under such lease before giving effect to such adjustment, in each case, using the weighted average interest rate of the secured promissory notes outstanding under such indenture as the discount rate (Intercreditor Agreement, Section 4.1). After a Triggering Event occurs and any secured promissory note becomes a Non-Performing Secured Promissory Note, the Subordination Agent will be required to obtain the LTV Appraisals for the aircraft as soon as practicable and additional LTV Appraisals on or prior to each anniversary of the date of such initial LTV Appraisals; provided that, if the Controlling Party reasonably objects to the appraised value of any aircraft shown in any LTV Appraisal, the Controlling Party will have the right to obtain or cause to be obtained substitute LTV Appraisals (including any LTV Appraisals based upon physical inspection of the aircraft) (Intercreditor Agreement, Section 4.1). 146 PRIORITY OF DISTRIBUTIONS Before a Triggering Event So long as no Triggering Event has occurred, payments in respect of the secured promissory notes and certain other payments received on any Distribution Date will be promptly distributed by the Subordination Agent on such Distribution Date in the following order of priority: o to the Liquidity Provider to the extent required to pay the Liquidity Expenses; o to the Liquidity Provider to the extent required to pay interest accrued on the Liquidity Obligations; o to the Liquidity Provider to the extent required to pay or reimburse the Liquidity Provider for the Liquidity Obligations (other than amounts payable pursuant to the two preceding clauses) and/or, if applicable, to replenish each Cash Collateral Account up to the Required Amount; o to the Class A pass through trustee to the extent required to pay Expected Distributions on the Class A certificates; o to the Class B pass through trustee to the extent required to pay Expected Distributions on the Class B certificates; o if Class C certificates or Series C secured promissory notes have been issued, to the Class C pass through trustee or note holder, as the case may be, to the extent required to pay "Expected Distributions" (to be defined in a manner equivalent to the definition for the other classes of certificates) on the Class C certificates or principal and accrued interest on the Series C notes, as the case may be; and o to the Subordination Agent and each pass through trustee for the payment of certain fees and expenses. After a Triggering Event Subject to the terms of the Intercreditor Agreement, upon the occurrence of a Triggering Event and at all times after such Triggering Event, all funds received by the Subordination Agent in respect of the secured promissory notes and certain other payments will be promptly distributed by the Subordination Agent in the following order of priority: o to the Subordination Agent, each pass through trustee, any certificateholder or the Liquidity Provider to the extent required to pay certain out-of-pocket costs and expenses actually incurred by the Subordination Agent, each pass through trustee or the Liquidity Provider or to reimburse any certificateholder or the Liquidity Provider in respect of payments made to the Subordination Agent or each pass through trustee in connection with the protection or realization of the value of the secured promissory notes or any property held in any Trust Indenture Estate or any Collateral, pro rata; o to the Liquidity Provider to the extent required to pay the Liquidity Expenses; 147 o to the Liquidity Provider to the extent required to pay interest accrued on the Liquidity Obligations; o to the Liquidity Provider to the extent required to pay the outstanding amount of all Liquidity Obligations and/or, if applicable, with respect to any particular Liquidity Facility, unless (x) less than 65% of the aggregate outstanding principal amount of all secured promissory notes are Performing Secured Promissory Notes and a Liquidity Event of Default has occurred and is continuing under such Liquidity Facility or (y) a Final Drawing has occurred under such Liquidity Facility, to replenish the Cash Collateral Account with respect to such Liquidity Facility up to the Required Amount for the related class of certificates (less the amount of any repayments of Interest Drawings under such Liquidity Facility while sub-clause (x) of this clause is applicable); o to the Subordination Agent, each pass through trustee and each certificateholder to the extent required to pay certain fees, taxes, charges and other amounts payable; o to the Class A pass through trustee to the extent required to pay in full Adjusted Expected Distributions on the Class A certificates; o to the Class B pass through trustee to the extent required to pay in full Adjusted Expected Distributions on the Class B certificates; o if Class C certificates have been issued, to the Class C pass through trustee to the extent required to pay in full "Adjusted Expected Distributions" (to be defined in a manner equivalent to the definition for the other classes of certificates) on the Class C certificates; o the balance shall be held in the Collection Account until the next Distribution Date; and o if all classes of certificates have been paid in full, the balance, if any, shall be distributed to the certificateholders of the related pass through trust. For purposes of calculating Expected Distributions or Adjusted Expected Distributions with respect to the certificates of any pass through trust, any premium paid on the secured promissory notes held in that pass through trust that has not been distributed to the certificateholders of that pass through trust (other than such premium or a portion thereof applied to the payment of interest on the certificates of that pass through trust or the reduction of the Pool Balance of that pass through trust) will be added to the amount of Expected Distributions or Adjusted Expected Distributions. Interest Drawings under the Liquidity Facility and withdrawals from the Cash Collateral Account, in each case in respect of interest on the certificates of any pass through trust, will be distributed to the pass through trustee for such pass through trust, notwithstanding the priority of distributions set forth in the Intercreditor Agreement and otherwise described in this prospectus. All amounts on deposit in the Cash Collateral Account for any pass through trust which are in excess of the Required Amount for such pass through trust will be paid to the Liquidity Provider to the extent of Liquidity Obligations owed to the Liquidity Provider. 148 VOTING OF SECURED PROMISSORY NOTES In the event that the Subordination Agent, as the registered holder of any secured promissory note, receives a request for its consent to any amendment, modification or waiver under that secured promissory note, the related indenture, or the related lease, Participation Agreement or other related document, if no Indenture Default with respect thereto shall have occurred and be continuing, the Subordination Agent shall request directions from the trustee of the pass through trust which holds each series of secured promissory notes and shall vote or consent in accordance with the directions from such trustee. If any Indenture Default shall have occurred and be continuing with respect to any such indenture, the Subordination Agent will exercise its voting rights as directed by the Controlling Party, subject to certain limitations, provided that, no such amendment, modification or waiver shall, without the consent of the Liquidity Provider, reduce the amount of rent, supplemental rent or stipulated loss values payable by ATA under any lease or reduce the amount of principal or interest payable by ATA under any secured promissory note issued under any owned aircraft indenture (Intercreditor Agreement, Section 2.6 and 9.1(c)). ADDITION OF PASS THROUGH TRUSTEE FOR CLASS C CERTIFICATES If the Class C certificates are issued, the Class C pass through trustee will become a party to the Intercreditor Agreement. THE SUBORDINATION AGENT Wilmington Trust Company is the Subordination Agent under the Intercreditor Agreement. ATA and its affiliates may from time to time enter into banking and trustee relationships with the Subordination Agent and its affiliates. The Subordination Agent's address is Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration. The Subordination Agent may resign at any time, in which event a successor Subordination Agent will be appointed as provided in the Intercreditor Agreement. The Controlling Party may remove the Subordination Agent for cause as provided in the Intercreditor Agreement. In such circumstances, a successor Subordination Agent will be appointed as provided in the Intercreditor Agreement. Any resignation or removal of the Subordination Agent and appointment of a successor Subordination Agent does not become effective until the appointment by the successor Subordination Agent. No appointment of a successor Subordination Agent shall be effective unless the Rating Agency shall have delivered a rating confirmation. 149 DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS THE AIRCRAFT The aircraft consist of nine Boeing 737-800 aircraft. The aircraft comply with Stage 3 noise level standards, which constitute the most restrictive regulatory standards currently in effect in the United States for aircraft noise abatement. The tables below sets forth certain additional information for the aircraft.
AIRCRAFT EXPECTED APPRAISED BASE VALUE REGISTRATION MANUFACTURER'S DELIVERY -------------------- AIRCRAFT TYPE NUMBER ENGINE TYPE SERIAL NO. MONTH AISI MBA SH&E - ------------------------------------------------------------------------------------------------------------------------- Boeing 737-800 N316TZ CFM56-7B27 32609 Jan-02 $49,540,000 $44,370,000 $42,900,000 Boeing 737-800 N320TZ CFM56-7B27 32610 Apr-02 49,720,000 44,640,000 43,550,000 Boeing 737-800 N322TZ CFM56-7B27 32611 May-02 49,870,000 44,730,000 43,770,000 Boeing 737-800 N324TZ CFM56-7B27 32882 Jun-02 50,010,000 44,830,000 43,980,000 Boeing 737-800 N325TZ CFM56-7B27 32884 Jul-02 50,150,000 44,920,000 44,200,000 Boeing 737-800 N326TZ CFM56-7B27 32612 Oct-02 50,590,000 45,190,000 44,850,000 Boeing 737-800 N327TZ CFM56-7B27 32613 Nov-02 50,740,000 45,280,000 45,070,000 Boeing 737-800 N328TZ CFM56-7B27 32614 Nov-02 50,740,000 45,280,000 45,070,000 Boeing 737-800 N329TZ CFM56-7B27 32615 Dec-02 50,880,000 45,380,000 45,280,000 Total $452,240,000 $404,620,000 $398,670,000 ===== ============ ============ ============
APPRAISED VALUE The appraised values in the chart above were determined by the following three independent aircraft appraisal and consulting firms as of the dates indicated: AISI as of January 15, 2002, MBA as of January 15, 2002, and SH&E as of February 12, 2002. Each appraiser was asked to provide its opinion as to the fair market value of each aircraft. As part of this process, all three appraisers performed "desk-top" appraisals without any physical inspection of the aircraft. The appraisals are based on various assumptions and methodologies, which vary among the appraisals. The appraisers have delivered letters summarizing their respective appraisals, copies of which are annexed to this prospectus as Appendix AII. For a discussion of the assumptions and methodologies used in each of the appraisals, reference is hereby made to such summaries. An appraisal is only an estimate of value, is not indicative of the price at which an aircraft may be purchased from the manufacturer, and should not be relied upon as a measure of realizable value. In addition, the proceeds realized upon a sale of any aircraft may be less than the appraised value thereof. The value of the aircraft in the event of the exercise of remedies under the applicable indenture will depend on market and economic conditions, the availability of buyers, the condition of the aircraft, whether the aircraft are sold separately or together and other similar factors. Accordingly, there can be no assurance that the proceeds realized upon any such exercise with respect to the secured promissory notes and the aircraft pursuant to the applicable indenture would be as appraised or sufficient to satisfy in full payments due on the secured promissory notes issued thereunder or the certificates. 150 DELIVERIES OF AIRCRAFT Under the purchase agreements with Boeing, the aircraft are scheduled to be delivered between January 2002 and December 2002. Under such purchase agreements, delivery of an aircraft may be delayed due to "Excusable Delay," which is defined to include, among other things, acts of God, governmental acts or failures to act, strikes or other labor troubles, inability to procure materials, or any other cause beyond Boeing's control or not occasioned by Boeing's fault or negligence. If delivery of any aircraft is delayed by more than 30 days after the month scheduled for delivery or beyond September 29, 2002, ATA has the right to replace such aircraft with a substitute aircraft, subject to certain conditions. See " -- Substitute Aircraft." If delivery of any aircraft is delayed beyond the Delivery Period Termination Date and ATA does not exercise its right to replace that aircraft with a substitute aircraft, there will be unused Deposits that will be distributed to certificateholders together with accrued and unpaid interest thereon and, if applicable, a premium. See "Description of the Deposit Agreements -- Unused Deposits." In addition, if any aircraft expected to be delivered under an aircraft purchase agreement between GECC and the manufacturer is not leased to or owned by ATA and a substitute aircraft is not substituted therefor, the deposits relating to such aircraft may be withdrawn and distributed, together with accrued and unpaid interest thereon and a deposit make-whole premium payable by ATA. See "Description of the Deposit Agreements--Unused Deposits." SUBSTITUTE AIRCRAFT If the delivery date for any aircraft is delayed (i) more than 30 days after the month scheduled for delivery or (ii) beyond September 29, 2002 or if an aircraft expected to be delivered under GECC's purchase agreement is not leased to or owned by ATA, ATA may identify for delivery a substitute aircraft meeting the following conditions: o a substitute aircraft must be an aircraft of the same model as the delayed aircraft, which shall have the same specification and same or higher appraised value as the delayed aircraft, and manufactured after the Issuance Date, and o ATA will be obligated to obtain written confirmation from Moody's that substituting such substitute aircraft for the replaced aircraft will not result in a withdrawal, suspension or downgrading of the ratings of any class of certificates. 151 DESCRIPTION OF THE SECURED PROMISSORY NOTES The following is a description of the terms of the secured promissory notes. The summaries make use of terms defined in and are qualified in their entirety by reference to all of the provisions of the secured promissory notes, the indentures, the leases, the Participation Agreements, the Leased Aircraft Trust Agreements, the Guarantees and the Note Purchase Agreement, forms of which are available upon request to either pass through trustee. Except as otherwise indicated, the following summaries relate to the secured promissory notes, the indenture, the lease, the Participation Agreement, the Guarantee and the Leased Aircraft Trust Agreement that may be applicable to each aircraft. Under the Note Purchase Agreement, ATA has the option of entering into a leveraged lease financing or a debt financing with respect to each aircraft. The Note Purchase Agreement provides for the relevant parties to enter into either (i) with respect to each leased aircraft, a Participation Agreement, a lease, the Guarantee and a leased aircraft indenture (among other documents) and (ii) with respect to each owned aircraft, a Participation Agreement, the Guarantee and an owned aircraft indenture. The description of such agreements in this prospectus is based on the forms of such agreements annexed to the Note Purchase Agreement. ATA has obtained the commitments of GECC to act as the Owner Participant in leveraged leases for all of the aircraft. The commitments are subject to satisfaction of certain conditions and the execution of definitive agreements, and ATA could elect to terminate such commitments. Accordingly, ATA may select one or more other Owner Participants for some or all of the aircraft or finance such aircraft as owned aircraft rather than leased aircraft. A different Owner Participant may request revisions to the forms of the Participation Agreement, the lease and the leased aircraft indenture that are contemplated by the Note Purchase Agreement, so that the terms of such agreements for any particular leased aircraft may differ from the description of such agreements in this prospectus. See "Description of the Certificates -- Obligation to Purchase Secured Promissory Notes." Each Owner Participant will be required to satisfy certain requirements, including having a minimum combined capital and surplus or net worth. GENERAL The secured promissory notes were issued for each aircraft in two series: the Series A secured promissory notes and the Series B secured promissory notes, collectively referred to as the "secured promissory notes." However, ATA may elect to issue a third series with respect to owned aircraft. See "Description of the Certificates -- Possible Issuance of Class C Certificates." The secured promissory notes with respect to each leased aircraft were issued under a separate leased aircraft indenture between Wells Fargo Bank Northwest, National Association, as Owner Trustee of a trust for the benefit of the Owner Participant who will be the beneficial owner of that aircraft, and Wilmington Trust Company, as Loan Trustee. The secured promissory notes with respect to each owned aircraft were issued under a separate owned aircraft indenture between ATA and Wilmington Trust Company, as Loan Trustee. The secured promissory notes are secured obligations of ATA. The indentures do not provide for defeasance or discharge upon deposit of cash or certain obligations of the United States. 152 ATA will lease each leased aircraft from the related Owner Trustee under a separate lease. Under each lease and the related Aircraft Operative Agreements, ATA will, in general, be obligated to make rental and other payments or advances to the related Loan Trustee on behalf of the related Owner Trustee. Such rental and other payments or advances will be at least sufficient to pay in full when due all payments required to be made on the related secured promissory notes. The secured promissory notes issued with respect to the leased aircraft are not ATA's or ATA Holdings's direct obligations, and neither ATA nor ATA Holdings guarantees payment or performance of the leased aircraft notes. ATA's obligations under each lease and the related Aircraft Operative Agreements are general unsecured obligations. Amounts payable by ATA under each lease and each owned aircraft indenture will be unconditionally guaranteed by ATA Holdings. Each Owner Participant has the right to sell, assign or otherwise transfer its interests as Owner Participant in any of such leveraged leases, subject to the terms and conditions of the relevant Participation Agreement and related documents. SUBORDINATION Series B secured promissory notes issued in respect of an aircraft are subordinated in right of payment to Series A secured promissory notes issued in respect of such aircraft; and, if ATA elects to issue Series C secured promissory notes with respect to an owned aircraft, such Series C secured promissory notes will be subordinated in right of payment to the Series B secured promissory notes. On each scheduled payment date, (a) payments of interest and principal due on Series A secured promissory notes issued in respect to an aircraft will be made prior to payments of interest and principal due on Series B secured promissory notes issued in respect of such aircraft; and (b) if ATA elects to issue Series C secured promissory notes with respect to an owned aircraft, payments of interest and principal due on Series B secured promissory notes will be made prior to payments of interest and principal due on such Series C secured promissory notes issued in respect of such aircraft. PRINCIPAL AND INTEREST PAYMENTS Subject to the provisions of the Intercreditor Agreement, interest paid on the secured promissory notes held in each pass through trust will be passed through to the certificateholders of each such pass through trust on the dates and at the rate per annum set forth on the cover page of this prospectus until the final expected Regular Distribution Date (subject to change as provided in the Registration Rights Agreement) for such pass through trust. Subject to the provisions of the Intercreditor Agreement, principal paid on the secured promissory notes held in each pass through trust will be passed through to the certificateholders of such pass through trust in scheduled amounts on the dates set forth in this prospectus until the final expected Regular Distribution Date for such pass through trust. Interest will be payable on the unpaid principal amount of each secured promissory note at the rate applicable to such secured promissory note on February 20, May 20, August 20 and November 20 of each year, commencing on May 20, 2002. Such interest will be computed on the basis of a 360-day year of twelve 30-day months. Overdue amounts of principal, Make-Whole Amount and interest on such series of secured promissory notes will bear interest at a rate equal to 1.00% per annum over the applicable rate on such series of secured promissory notes. Under certain circumstances described in "Exchange Offer; Registration Rights," the interest rates for the 153 Equipment Notes will be increased (or following any such increase, decreased) to the extent described in the Registration Rights Agreement. Scheduled principal payments on the secured promissory notes will be made on one or more of February 20, May 20, August 20 and November 20 in certain years, commencing on February 20, 2003. See "Description of the Certificates -- Pool Factors" for a discussion of the scheduled payments of principal of the secured promissory notes and possible revisions to such scheduled payments. The final payment made under each secured promissory note will be an amount sufficient to discharge in full the unpaid principal amount, Make-Whole Amount (if any) and to the extent permitted by law, interest and any other amounts payable but unpaid with respect to such secured promissory note. If any date scheduled for a payment of principal, premium or interest with respect to the secured promissory notes is not a Business Day, such payment will be made on the following Business Day with the same effect as if made on such scheduled payment date and without any additional interest. REDEMPTION If an Event of Loss occurs with respect to an aircraft and we do not replace such aircraft under the related lease or under the related owned aircraft indenture, the secured promissory notes issued with respect to such aircraft will be redeemed, in whole, in each case at a price equal to the aggregate unpaid principal amount thereof, together with accrued interest thereon, to the date of redemption and other amounts payable to the holders of the secured promissory notes under the applicable indenture and Participation Agreement, but without Make-Whole Amount. Such redemption will be on a Special Distribution Date (Indentures, Section 2.10). If ATA terminates a lease under its voluntary termination, early buyout or burdensome buyout options under such lease, the secured promissory notes relating to the applicable leased aircraft will be redeemed (unless ATA elects to assume the secured promissory notes on a full recourse basis), in whole, on a Special Distribution Date at a price equal to the aggregate unpaid principal amount thereof, together with accrued interest thereon to but excluding the redemption date, plus a Make-Whole Amount. If ATA assumes the Owner Trustee's obligations in respect of the secured promissory notes, ATA will enter into a supplemental indenture satisfactory to the relevant Loan Trustee which contains provisions regarding permitted liens, registration, maintenance, subleases, replacement of parts, alteration and modification to the aircraft, events of loss and insurance which are substantially similar to the provisions contained in the related lease. In addition, in connection with any such assumption, ATA Holdings shall deliver a guaranty of the secured promissory notes substantially in the form of the Guarantee and ATA shall deliver an opinion of counsel that such assumption has been duly and validly effected. Upon the effectiveness of such assumption, the Owner Trustee and the Owner Participant will be released from further obligations under the related indenture and the related Participation Agreement (Leased Aircraft Indentures, Sections 2.10(b) and 2.11). See " -- The Leases -- Lease Termination." All of the secured promissory notes issued with respect to a leased aircraft may be redeemed prior to maturity as part of a refunding or refinancing thereof under the applicable Participation Agreement, and all of the secured promissory notes issued with respect to the owned aircraft may be redeemed prior to maturity at any time at the option of ATA, upon at least 30 days' revocable prior 154 written notice to the related Loan Trustee and the holders of the secured promissory notes, at a price equal to the aggregate unpaid principal amount thereof, together with accrued interest to, but not including, the date of redemption, plus a Make-Whole Amount, if any (Leased Aircraft Indentures, Section 2.12 and Owned Aircraft Indentures, Section 2.11). If notice of such redemption is given in connection with a termination of the lease, such notice is revocable and is deemed revoked in the event that the lease does not in fact terminate on the specified termination date. If notice of such redemption is given in connection with a refinancing, it is revocable not later than three days prior to the redemption date (Indentures, Section 2.13(b)). With respect to a leased aircraft, either the Owner Trustee or the Owner Participant may purchase all of the outstanding secured promissory notes issued under the related leased aircraft indentures for the aggregate unpaid principal amount, plus accrued and unpaid interest to the date of purchase. This option may be exercised upon: (i) the declaration by the Loan Trustee that the secured promissory notes have become due and payable following an Indenture Default or notification by the Loan Trustee to the Owner Trustee that it intends to take action to foreclose the lien or otherwise commence the exercise of any significant remedy under the indenture or lease; or (ii) a continuing Lease Event of Default. If the option is exercised in connection with a Lease Event of Default continuing for less than 120 days, then the Make-Whole Amount will be added to the purchase price (Leased Aircraft Indentures, Section 2.14). If (a) one or more Lease Events of Default exist and are continuing or (b) the secured promissory notes with respect to a leased aircraft have been accelerated or the Loan Trustee with respect to such secured promissory notes takes action or notifies the applicable Owner Trustee that it intends to take action to foreclose the lien of the related leased aircraft indenture or otherwise commence the exercise of any significant remedy under such indenture or the related lease or if certain events occur in a bankruptcy proceeding involving us, then in each case the related Owner Trustee or Owner Participant may buy all, but not less than all, of the secured promissory notes issued with respect to such leased aircraft at a price equal to the aggregate unpaid principal thereof, together with accrued and unpaid interest thereon to but excluding, the purchase date but without any premium (provided that a Make-Whole Amount is payable if such secured promissory notes are to be purchased pursuant to clause (a) when a Lease Event of Default has been continuing for less than 120 days) (Leased Aircraft Indentures, Section 2.14). We as owner of the owned aircraft have no comparable right under the owned aircraft indentures to purchase the secured promissory notes under such circumstances. SECURITY The secured promissory notes issued with respect to each leased aircraft are secured by a first priority security interest in that aircraft, the related lease and all rent thereunder, the related Guarantee, the aircraft purchase agreement (to the extent related to the leased aircraft), all rents, profits and other income of such leased aircraft, all insurance and similar proceeds covering loss of or damage to such leased aircraft, all rights of the related Owner Trustee to amounts paid or payable by ATA under the related Participation Agreement, all monies and securities deposited with the related Loan Trustee, and all proceeds of the foregoing. Unless an Indenture Default with respect to a leased 155 aircraft has occurred and is continuing, the related Loan Trustee may not exercise the Owner Trustee's rights under the related lease except such Owner Trustee's right to receive rent. The Owner Trustee's assignment to the Loan Trustee of the Owner Trustee's rights under the related lease excludes the rights of the Owner Trustee and the Owner Participant to indemnification for certain matters, liability insurance proceeds payable to the Owner Trustee in its individual capacity and to the Owner Participant, insurance proceeds payable to the Owner Trustee in its individual capacity or to such Owner Participant, under certain casualty insurance maintained by the Owner Trustee or the Owner Participant, and certain reimbursement payments made by ATA to the Owner Trustee. (Leased Aircraft Indenture, Granting Clause) The secured promissory notes are not cross-collateralized. This means that the secured promissory notes issued in respect of any one aircraft are not secured by any of the other aircraft or replacement aircraft (as described in " -- The Leases -- Events of Loss") or the leases related thereto. The secured promissory notes issued with respect to each owned aircraft are secured by: o a mortgage to the Loan Trustee of such aircraft and o an assignment to the Loan Trustee of certain of ATA's rights under its purchase agreement with the aircraft manufacturer. Funds, if any, held from time to time by the Loan Trustee with respect to any aircraft, including funds held as the result of an Event of Loss to such aircraft or, in the case of a leased aircraft, termination of the related lease, are invested and reinvested by such Loan Trustee, at the direction of the related Owner Trustee in the case of the leased aircraft or ATA in the case of the owned aircraft (except in the case of certain Indenture Defaults), in investments described in the related indenture. For owned aircraft, the applicable Participation Agreement provides that ATA may convert such owned aircraft to leased aircraft at any time prior to July 1, 2004. LOAN TO VALUE RATIOS OF SECURED PROMISSORY NOTES The following table sets forth illustrative loan to aircraft value ratios for the secured promissory notes issued in respect of each aircraft as of the dates specified assuming that the secured promissory notes in the maximum principal amount are issued in respect of each such aircraft. ATA used these examples in preparing the Assumed Amortization Schedule, although the amortization schedule for the secured promissory notes issued with respect to an aircraft may vary from such assumed schedule so long as it complies with the Mandatory Economic Terms. Accordingly, the schedule below may not apply to any particular aircraft. See "Description of the Certificates -- Pool Factors." The loan to aircraft value ratios were obtained by dividing (a) the expected outstanding balance (assuming no payment default) of such secured promissory notes, determined immediately after giving effect to the payments scheduled to be made on each such date, by (b) the assumed value, or the "Assumed Aircraft Value," of the aircraft securing such secured promissory notes. The following tables are based on the Depreciation Assumptions. Other rates or methods of depreciation would result in different loan-to-value ratios, and no assurance can be given (a) that the depreciation rates and method assumed for the purposes of the table are the ones most likely to occur or (b) as to the actual value of any aircraft. Thus the table should be considered not as a forecast or prediction of expected or likely loan to aircraft value ratios, but simply as a mathematical calculation based on one set of assumptions. 156 PPM - p60 N316TZ ------------------------------------- NOTE ASSUMED LOAN OUTSTANDING AIRCRAFT TO BALANCE VALUE VALUE DATE (MILLIONS) (MILLIONS) RATIO - ----------------------- ----------- ---------- --------- 20-Feb-03 $28.32 $43.04 65.8% 20-Feb-04 26.15 41.71 62.7 20-Feb-05 23.95 40.38 59.3 20-Feb-06 21.50 39.05 55.1 20-Feb-07 18.80 37.71 49.9 20-Feb-08 15.85 36.38 43.6 20-Feb-09 12.63 35.05 36.0 20-Feb-10 9.19 33.72 27.2 20-Feb-11 5.61 32.39 17.3 20-Feb-12 1.73 31.06 5.6 20-Feb-13 0.00 0.00 NA PPM - p60 (2) N320TZ ------------------------------------- NOTE ASSUMED LOAN OUTSTANDING AIRCRAFT TO BALANCE VALUE VALUE DATE (MILLIONS) (MILLIONS) RATIO - ----------------------- ----------- ---------- --------- 20-Feb-03 $28.34 $44.64 63.5% 20-Feb-04 26.12 43.30 60.3 20-Feb-05 24.02 41.96 57.3 20-Feb-06 21.70 40.62 53.4 20-Feb-07 19.12 39.28 48.7 20-Feb-08 16.31 37.94 43.0 20-Feb-09 13.24 36.60 36.2 20-Feb-10 9.92 35.27 28.1 20-Feb-11 6.51 33.93 19.2 20-Feb-12 2.81 32.59 8.6 20-Feb-13 0.00 0.00 NA PPM - p60 (3) N322TZ ------------------------------------- NOTE ASSUMED LOAN OUTSTANDING AIRCRAFT TO BALANCE VALUE VALUE DATE (MILLIONS) (MILLIONS) RATIO - ----------------------- ----------- ---------- --------- 20-Feb-03 $28.37 $44.73 63.4% 20-Feb-04 26.06 43.39 60.1 20-Feb-05 23.95 42.05 57.0 20-Feb-06 21.62 40.70 53.1 20-Feb-07 19.04 39.36 48.4 20-Feb-08 16.21 38.02 42.6 20-Feb-09 13.14 36.68 35.8 20-Feb-10 9.82 35.34 27.8 20-Feb-11 6.40 33.99 18.8 20-Feb-12 2.69 32.65 8.2 20-Feb-13 0.00 0.00 NA PPM - p60 (4) N324TZ ------------------------------------- NOTE ASSUMED LOAN OUTSTANDING AIRCRAFT TO BALANCE VALUE VALUE DATE (MILLIONS) (MILLIONS) RATIO - ----------------------- ----------- ---------- --------- 20-Feb-03 $28.37 $44.83 63.3% 20-Feb-04 26.22 43.49 60.3 20-Feb-05 24.06 42.14 57.1 20-Feb-06 21.68 40.80 53.1 20-Feb-07 19.03 39.45 48.2 20-Feb-08 16.14 38.11 42.4 20-Feb-09 13.00 36.76 35.4 20-Feb-10 9.57 35.42 27.0 20-Feb-11 5.85 34.07 17.2 20-Feb-12 1.98 32.73 6.1 20-Feb-13 0.00 0.00 NA PPM - p60 (5) N325TZ ------------------------------------- NOTE ASSUMED LOAN OUTSTANDING AIRCRAFT TO BALANCE VALUE VALUE DATE (MILLIONS) (MILLIONS) RATIO - ----------------------- ----------- ---------- --------- 20-Feb-03 $27.67 $44.92 61.6% 20-Feb-04 25.61 43.57 58.8 20-Feb-05 23.59 42.22 55.9 20-Feb-06 21.37 40.88 52.3 20-Feb-07 18.93 39.53 47.9 20-Feb-08 16.25 38.18 42.6 20-Feb-09 13.32 36.83 36.2 20-Feb-10 10.13 35.49 28.5 20-Feb-11 6.85 34.14 20.1 20-Feb-12 3.31 32.79 10.1 20-Feb-13 0.00 0.00 NA PPM - p60 (6) N326TZ ------------------------------------- NOTE ASSUMED LOAN OUTSTANDING AIRCRAFT TO BALANCE VALUE VALUE DATE (MILLIONS) (MILLIONS) RATIO - ----------------------- ----------- ---------- --------- 20-Feb-03 $29.08 $45.19 64.4% 20-Feb-04 26.20 43.83 59.8 20-Feb-05 23.62 42.48 55.6 20-Feb-06 20.75 41.12 50.5 20-Feb-07 17.60 39.77 44.3 20-Feb-08 14.17 38.41 36.9 20-Feb-09 10.44 37.06 28.2 20-Feb-10 6.62 35.70 18.6 20-Feb-11 2.48 34.34 7.2 20-Feb-12 0.00 0.00 NA 20-Feb-13 0.00 0.00 NA PPM - p60 (7) N327TZ ------------------------------------- NOTE ASSUMED LOAN OUTSTANDING AIRCRAFT TO BALANCE VALUE VALUE DATE (MILLIONS) (MILLIONS) RATIO - ----------------------- ----------- ---------- --------- 20-Feb-03 $29.26 $45.28 64.6% 20-Feb-04 25.80 43.92 58.7 20-Feb-05 23.44 42.56 55.1 20-Feb-06 20.85 41.20 50.6 20-Feb-07 18.04 39.85 45.3 20-Feb-08 14.92 38.49 38.8 20-Feb-09 11.50 37.13 31.0 20-Feb-10 7.95 35.77 22.2 20-Feb-11 4.16 34.41 12.1 20-Feb-12 0.05 33.05 0.1 20-Feb-13 0.00 0.00 NA PPM - p60 (8) N328TZ ------------------------------------- NOTE ASSUMED LOAN OUTSTANDING AIRCRAFT TO BALANCE VALUE VALUE DATE (MILLIONS) (MILLIONS) RATIO - ----------------------- ----------- ---------- --------- 20-Feb-03 $29.26 $45.28 64.6% 20-Feb-04 25.79 43.92 58.7 20-Feb-05 23.42 42.56 55.0 20-Feb-06 20.83 41.20 50.6 20-Feb-07 18.01 39.85 45.2 20-Feb-08 14.89 38.49 38.7 20-Feb-09 11.47 37.13 30.9 20-Feb-10 7.92 35.77 22.1 20-Feb-11 4.13 34.41 12.0 20-Feb-12 0.01 33.05 0.0 20-Feb-13 0.00 0.00 NA PPM - p60 (9) N329TZ ------------------------------------- NOTE ASSUMED LOAN OUTSTANDING AIRCRAFT TO BALANCE VALUE VALUE DATE (MILLIONS) (MILLIONS) RATIO - ----------------------- ----------- ---------- --------- 20-Feb-03 $29.26 $45.38 64.5% 20-Feb-04 25.71 44.02 58.4 20-Feb-05 23.44 42.66 55.0 20-Feb-06 20.97 41.30 50.8 20-Feb-07 18.27 39.93 45.8 20-Feb-08 15.29 38.57 39.6 20-Feb-09 12.02 37.21 32.3 20-Feb-10 8.59 35.85 24.0 20-Feb-11 4.96 34.49 14.4 20-Feb-12 1.03 33.13 3.1 20-Feb-13 0.00 0.00 NA LIMITATION OF LIABILITY The secured promissory notes with respect to the leased aircraft are not obligations of, or guaranteed by, ATA, ATA Holdings, the Loan Trustees, the Owner Participants or the Owner Trustees in their individual capacities. None of the Owner Trustees, the Owner Participants or the Loan Trustees, or any affiliates thereof, is personally liable to any holder of a secured promissory note or, in the case of the Owner Trustees and the Owner Participants, to the Loan Trustees for any amounts payable under the secured promissory notes or, except as provided in each leased aircraft indenture, for any other liability under such leased aircraft indenture. All payments of principal of, Make-Whole Amount, if any, and interest on the secured promissory notes issued with respect to any leased aircraft (other than payments made in connection with an optional redemption or purchase of secured promissory notes by the related Owner Trustee or the related Owner Participant) will be made only from the assets subject to the lien of the indenture with respect to such leased aircraft or the income and proceeds received by the related Loan Trustee therefrom (including rent payable by ATA under the lease with respect to such leased aircraft or the related Guarantee). The secured promissory notes issued with respect to the owned aircraft are direct obligations of ATA, and are fully and unconditionally guaranteed by ATA Holdings. Except as otherwise provided in the indentures, each Owner Trustee in its individual capacity is not answerable or accountable under the indentures or under the secured promissory notes under any circumstances except for its own willful misconduct, gross negligence, negligence with respect to the distribution of funds, or the falsity when made of a representation or warranty made in its individual capacity. None of the Owner Participants has any duty or responsibility under any of the leased aircraft indentures or the secured promissory notes to the Loan Trustees or to any holder of any secured promissory note, nor does any Owner Participant have any duty or responsibility to the Loan Trustees respecting the return or repossession of the leased aircraft under any circumstances or respecting the condition of the leased aircraft upon any return or repossession. INDENTURE DEFAULTS, NOTICE AND WAIVER Indenture Defaults under each indenture include: o in the case of a leased aircraft indenture, the existence of any Lease Event of Default under the related lease (other than the failure to make certain indemnity payments and other payments to the related Owner Trustee or Owner Participant unless such Owner 157 Trustee or Owner Participant gives notice that such failure will constitute an Indenture Default); o the failure by the related Owner Trustee (other than as a result of a Lease Default or Lease Event of Default) in the case of a leased aircraft indenture, or ATA in the case of an owned aircraft indenture, to pay any interest, or principal, or Make-Whole Amount, when due, under such indenture or under any secured promissory note issued thereunder, continued for more than ten business days after notice; o the failure by the Owner Participant or the Owner Trustee in the case of a leased aircraft indenture, or ATA in the case of an owned aircraft indenture, to discharge certain liens, continued after notice and specified cure periods; o any representation or warranty made by the related Owner Trustee or Owner Participant in such indenture, the related Participation Agreement or certain related documents furnished to the Loan Trustee pursuant thereto being false or incorrect when made and continuing to be material and remaining unremedied after notice and specified cure periods; o failure by ATA, the related Owner Trustee or Owner Participant to perform or observe any covenant or obligation for the benefit of the Loan Trustee or holders of secured promissory notes under such indenture or certain related documents, continued after notice and specified cure periods; o the registration of the related aircraft ceasing to be effective as a result of the Owner Participant (in the case of a leased aircraft) or ATA (in the case of an owned aircraft) not being a citizen of the United States and such circumstances continue for 60 days; o with respect to the owned aircraft, the lapse or cancellation of insurance required under the owned aircraft indenture; or o the occurrence of certain events of bankruptcy, reorganization or insolvency of the related Owner Trustee or Owner Participant (in the case of a leased aircraft) or ATA (in the case of the owned aircraft). (Leased Aircraft Indentures, Section 4.02; Owned Aircraft Indentures, Section 5.01). There are no cross-default provisions in the indentures or the leases (unless otherwise agreed between an Owner Participant and ATA). This means that events resulting in an Indenture Default under any particular indenture may or may not result in an Indenture Default occurring under any other indenture, and a Lease Event of Default under any particular lease may or may not constitute a Lease Event of Default under any other lease (Leased Aircraft Indenture, Section 4.02; Owned Aircraft Indentures, Section 5.01). With respect to a leased aircraft, the Loan Trustee will give the holders of the secured promissory notes, the Owner Trustee and the Owner Participant prompt written notice of any Indenture Default of which the Loan Trustee has actual knowledge and, if the Indenture Default results from a Lease Event of Default, it will give the holders of the secured promissory notes, the Owner Trustee and the Owner Participant not less than ten business days' prior written notice of the date on or after which the Loan Trustee may commence the exercise of any remedy described in " -- Remedies" below. 158 If ATA fails to make any quarterly basic rental payment due under any lease, within a specified period after notice from the Loan Trustee of such failure, the applicable Owner Trustee or Owner Participant may furnish to the Loan Trustee the amount due on the secured promissory notes, together with any interest thereon on account of the delayed payment. In that case, the Loan Trustee and the holders of outstanding secured promissory notes issued under such indenture may not exercise any remedies otherwise available under such indenture or such lease as the result of such failure to make such rental payment, unless the relevant Owner Trustee or Owner Participant has previously cured the preceding six consecutive payment defaults or twelve total payment defaults with respect to Basic Rent (Leased Aircraft Indentures, Section 4.03). The Owner Trustee and/or the Owner Participant also have certain rights, but not obligations, to cure Leased Aircraft Indenture Defaults not resulting from the nonpayment of Basic Rent. If an Owner Trustee or Owner Participant pays the amount due on the related secured promissory notes to the Loan Trustee or cures the Indenture Default, the Owner Trustee or Owner Participant will be subrogated to the rights of the Loan Trustee and the holders of the secured promissory notes to the related Rent which was overdue at the time of such payment, as well as interest payable by ATA on account of its being overdue, and thereafter will be entitled to receive such overdue Rent and interest thereon upon receipt by the Loan Trustee. However, if the principal amount and interest on the secured promissory notes is due and payable following an Indenture Default, such subrogation will, until the principal amount of, interest on, Make-Whole Amount, if any, and all other amounts due with respect to all secured promissory notes has been paid in full: o such subrogation will be subordinate to the rights of the Loan Trustee and the holders of the secured promissory notes in respect of such payment of overdue Rent and interest; and o the Owner Trustee will not be entitled to recover any such payment except pursuant to the foregoing right of subrogation, by demand or suit for damages. The holders of a majority in principal amount of the outstanding secured promissory notes issued with respect to any aircraft may, on behalf of all the holders, waive any existing default and its consequences under the related indenture, except a default in the payment of the principal of, interest on, or Make-Whole Amount, if any, on any such secured promissory notes or a default in respect of any covenant or provision of such indenture that cannot be modified or amended without the consent of each holder of secured promissory notes (Leased Aircraft Indentures, Section 4.08; Owned Aircraft Indentures, Section 5.06). REMEDIES If an Indenture Default exists under an indenture the related Loan Trustee may, and upon receipt of written demand from the holders of a majority in principal amount of the secured promissory notes outstanding under such indenture shall, subject to the applicable Owner Participant's or Owner Trustee's right to cure, declare the principal of all outstanding secured promissory notes issued under such indenture immediately due and payable, together with all accrued but unpaid interest thereon (without the Make-Whole Amount). The holders of a majority in principal amount of secured promissory notes outstanding under such indenture may rescind any such declaration at any time before the judgment or decree for the payment of the money so due shall be entered if (a) there has been paid to the related Loan Trustee an amount sufficient to pay all principal 159 and interest on any such secured promissory notes, to the extent such amounts have become due otherwise than by such declaration of acceleration and (b) all other Indenture Defaults and potential Indenture Defaults under such indenture have been cured or waived (Leased Aircraft Indentures, Section 4.04(b); Owned Aircraft Indentures, Section 5.03(b)). If an Indenture Default exists under an indenture, the related Loan Trustee may exercise the rights or remedies available to it under such indenture or under applicable law, including (if, in the case of a leased aircraft, the corresponding lease has been declared in default) one or more of the remedies under such indenture or, in the case of a leased aircraft, such lease with respect to the aircraft subject to such lease. If an Indenture Default arises solely by reason of one or more events or circumstances which constitute a Lease Event of Default, the related Loan Trustee's right to exercise remedies under such leased aircraft indenture is subject, with certain exceptions, to its having proceeded to exercise one or more of the remedies under the lease to terminate the lease or take possession of and/or sell the aircraft. However, the requirement to exercise such remedies under such lease shall not apply if such exercise has been involuntarily stayed or prohibited by applicable law or court order for a continuous period in excess of 60 days or such other period as may be specified in Section 1110(a)(2) of the Bankruptcy Code (plus an additional period, if any, resulting from (a) ATA or its trustee in such proceeding assuming, or agreeing to perform its obligations under, such lease with the approval of the applicable court, (b) such Loan Trustee's consent to an extension of such 60-day period or (c) such Loan Trustee's failure to give any requisite notice). See " -- The Leases -- Lease Events of Default." Such remedies may be exercised by the related Loan Trustee to the exclusion of the related Owner Trustee, subject to certain conditions specified in such indenture, and to the exclusion of ATA, subject to the terms of such lease. Any aircraft sold in the exercise of such remedies will be free and clear of any rights of those parties, including the rights of ATA under the lease with respect to such aircraft; provided that no exercise of any remedies by the related Loan Trustee may affect the rights of ATA under any lease unless a Lease Event of Default exists or the lease has been canceled because of a Lease Event of Default (Leased Aircraft Indentures, Section 4.04; Leases, Section 15). The owned aircraft indentures will not contain such limitations on the Loan Trustee's ability to exercise remedies upon an Indenture Default under an owned aircraft indenture. If the secured promissory notes issued in respect of one aircraft are in default, the secured promissory notes issued in respect of the other aircraft may not be in default, and, if not, no remedies are exercisable under the applicable indentures with respect to such other aircraft. Section 1110 of the Bankruptcy Code provides in relevant part that the right of a lessor or holder of a security interest with respect to "equipment" (as defined in Section 1110 of the Bankruptcy Code) to take possession of such equipment in compliance with the underlying lease or security agreement, and to enforce its other rights and remedies thereunder, is not affected by any other provision of the Bankruptcy Code, including: o the automatic stay provision of the Bankruptcy Code, which provision enjoins repossessions by creditors for the duration of the reorganization period; o the provision of the Bankruptcy Code allowing the "debtor in possession" (such as a reorganizing airline) to use property of the debtor during the reorganization period; o Section 1129 of the Bankruptcy Code (which governs the confirmation of plans of reorganization in Chapter 11 cases); and 160 o any power of the bankruptcy court to enjoin a repossession. However, the lessor's or secured party's rights described in the previous paragraph are limited as follows. Section 1110 of the Bankruptcy Code provides that the right to take possession of an aircraft or other "equipment" may not be exercised for 60 days following the date that the Chapter 11 reorganization proceedings began, and may not be exercised at all after such 60-day period if, within such 60-day period (or such longer period consented to by the lessor or the secured party), the debtor in possession agrees to perform the debtor's obligations under the lease or security agreement and cures all existing defaults (other than defaults resulting solely from the financial condition, bankruptcy, insolvency or reorganization of the debtor). "Equipment" is defined in Section 1110 of the Bankruptcy Code, in part, as "an aircraft, aircraft engine, propeller, appliance, or spare part (as defined in section 40102 of title 49) that is subject to a security interest granted by, leased to, or conditionally sold to a debtor that, at the time such transaction is entered into, holds an air carrier operating certificate issued pursuant to chapter 447 of title 49 for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo." It is a condition to the pass through trustee's obligation to purchase secured promissory notes with respect to each aircraft that Troutman Sanders LLP, special leveraged lease counsel to ATA, provide its opinion to the pass through trustees that, if ATA were to become a debtor under Chapter 11 of the Bankruptcy Code (a) if such aircraft is a leased aircraft, the Owner Trustee, as lessor under the lease for such aircraft, and the related Loan Trustee, as assignee of such Owner Trustee's rights under such lease pursuant to the related indenture, or (b) if such aircraft is an owned aircraft, the related Loan Trustee, in either case, would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to the airframe and engines comprising the related aircraft. This opinion is subject to certain qualifications and assumptions including the assumptions that ATA holds (and will continue to hold) an air carrier operating certificate issued pursuant to chapter 447 of Title 49 of the United States Code for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo. See " -- The Leases -- Events of Loss." Such opinion will not address any possible change in law that results in Section 1110 not being available. Such counsel's opinion also will not address the availability of Section 1110 of the Bankruptcy Code with respect to the bankruptcy proceedings of any possible sublessee of a leased aircraft if it is subleased by ATA, or to any possible lessee of an owned aircraft if it is leased by ATA. For a description of certain limitations on the Loan Trustee's exercise of rights contained in the indenture, see " -- Indenture Defaults, Notice and Waiver." In a bankruptcy, insolvency, receivership or like proceedings involving an Owner Participant, it is possible that, even though that the applicable leased aircraft is owned by the related Owner Trustee in trust, such leased aircraft and the related lease and secured promissory notes might become part of such proceeding. In such event, payments under such lease or on such secured promissory notes may be interrupted and the ability of the related Loan Trustee to exercise its remedies under the related indenture might be restricted, though such Loan Trustee would retain its status as a secured creditor in respect of the related lease and the related leased aircraft. MODIFICATION OF INDENTURES AND LEASES Without the consent of holders of a majority in principal amount of the secured promissory notes outstanding under any indenture, the provisions of such indenture and any related lease, Participation Agreement, or the Leased Aircraft Trust Agreement may not be amended or modified, except to the extent indicated below. 161 Certain provisions of any leased aircraft indenture, and of the lease, the Participation Agreement, and the Leased Aircraft Trust Agreement, may be amended or modified by the parties to those agreements without the consent of the relevant Loan Trustee or any holders of the secured promissory notes outstanding under such indenture, subject to certain conditions. In the case of each lease, such provisions include, among others, provisions relating to (a) the return to the related Owner Trustee of the related aircraft at the end of the term of such lease and (b) the renewal of such lease and the option of ATA at the end of the term of such lease to purchase the related aircraft (Leased Aircraft Indentures, Section 9.01; Owned Aircraft Indentures, Section 10.01). Without the consent of the holder of each secured promissory note outstanding under any indenture affected thereby, no amendment of or supplement to such indenture may, among other things, (a) reduce the principal amount of, or Make-Whole Amount if any, or interest payable on, any secured promissory notes issued under such indenture or change the date on which any principal or Make-Whole Amount, if any, or interest is due and payable, (b) create any security interest with respect to the property subject to the lien of such indenture, except as provided in such indenture, or deprive any holder of a secured promissory note issued under such indenture of the benefit of the lien of such indenture upon the property subject to such indenture or (c) reduce the percentage in principal amount of outstanding secured promissory notes issued under such indenture necessary to modify or amend any provision of such indenture or to waive compliance with such indenture (Leased Aircraft Indentures, Section 9.01(b); Owned Aircraft Indentures, Section 10.01(a)). INDEMNIFICATION ATA is required to indemnify each Loan Trustee, each Owner Participant, each Owner Trustee, the Liquidity Provider, the Subordination Agent, the Escrow Agent and each pass through trustee, but not the certificateholders, for certain losses, claims and other matters. ATA is required under certain circumstances to indemnify each Owner Participant against the loss of depreciation deductions and certain other benefits allowable for certain income tax purposes with respect to the related leased aircraft. Prior to seeking indemnification from the indenture Estate, the Loan Trustee will demand and take necessary action to pursue indemnification under the Participation Agreement. Each Owner Trustee indemnifies the Loan Trustee to the extent not reimbursed by ATA. If necessary, the Loan Trustee is entitled to indemnification from the Indenture Estate for any liability, obligation, loss, damage, penalty, claim or action to the extent not reimbursed by ATA. The Loan Trustee is not indemnified, however, for actions arising from its gross negligence, willful misconduct or, in the case of handling funds, negligence, or for the inaccuracy of any representation or warranty made in its individual capacity under the indenture. Each Owner Participant is required to indemnify the related Loan Trustee and the holders of the secured promissory notes issued with respect to the leased aircraft in which such Owner Participant has an interest for certain losses that may be suffered as a result of the failure of such Owner Participant to discharge certain liens or claims on or against the assets subject to the lien of the related indenture. The Loan Trustee is not under any obligation to take any action, risk liability or expend its own funds under the indenture if it has reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it. THE ATA HOLDINGS GUARANTEE ATA Holdings irrevocably, fully and unconditionally guarantees the payment and performance of all obligations of ATA as lessee under each lease and as obligor under the secured 162 promissory notes relating to the owned aircraft and as mortgagor under the owned aircraft indenture. If ATA fails to make a payment or perform a nonfinancial obligation when due for any reason, including liquidation, bankruptcy or reorganization, ATA Holdings will make the payment and perform any nonfinancial obligations. The Guarantee is an absolute, present and continuing guarantee of performance and payment rather than mere collectability, and it is not contingent upon any attempt to collect payment from or file suit against ATA. THE LEASES AND CERTAIN PROVISIONS OF THE OWNED AIRCRAFT INDENTURES Each leased aircraft is or will be leased by an Owner Trustee to ATA under the relevant lease. Each owned aircraft will be owned by ATA. Lease Terms and Rentals ATA leases each leased aircraft from an Owner Trustee for a term commencing on the date that the related Owner Trustee acquires it and expiring not earlier than the latest maturity date of the secured promissory notes issued pursuant to the related indenture. Basic Rent payments for each aircraft are payable quarterly on each Lease Payment Date. Such payments, together with certain other payments that ATA is obligated to make or cause to be made under the related lease, have been assigned by the Owner Trustee under the related indenture to provide the funds necessary to make payments of principal and interest due or expected to be due from the Owner Trustee on the secured promissory notes issued under such indenture and Liquidity Obligations under the related Liquidity Facility. In certain cases, the Basic Rent payments under the leases may be adjusted, but each lease provides that under no circumstances will rent payments by ATA be less than the scheduled payments on the related secured promissory notes (Leases, Section 3.2.1). The balance of any such quarterly Basic Rent payment and such other payments, after payment of amounts due or expected to be due on the related secured promissory notes and certain other amounts, including certain amounts owing to the Liquidity Provider, will be paid over to the related Owner Trustee (Leased Aircraft Indentures, Section 3.01). ATA's obligations to pay rent and to make other payments under each lease are general unsecured obligations. Net Lease; Maintenance ATA's obligations in respect of each of the leased aircraft are those of a lessee under a "net lease." Accordingly, ATA is obligated to cause the leased aircraft under each lease to be duly registered in the name of the Owner Trustee, to pay all costs of operating the leased aircraft at the expense of ATA and to the extent set forth in such lease, to maintain, service, repair and overhaul the leased aircraft in accordance with maintenance standards required by, or substantially equivalent to those required by, the FAA or the central civil aviation authority of Canada or Japan or the Joint Aviation Authority (whose rules govern the central civil aviation authorities of France, Germany, the Netherlands, and the United Kingdom, among others) for the aircraft, so as to keep the leased aircraft in as good operating condition as delivered to ATA, ordinary wear and tear excepted, and, in such condition as may be necessary to enable the airworthiness certification of such leased aircraft to be maintained at all times, except during temporary periods of storage in accordance with applicable regulations during the conduct of maintenance and modification procedures, or during periods when the airworthiness certificates for other similar aircraft have been revoked or suspended. Except when a sublease is in effect ATA agrees to use the same standards of maintenance, service, repair or 163 overhaul used by ATA with respect to similar aircraft operated by ATA in similar circumstances, and, during any period that a sublease is in effect, cause the sublessee thereunder to agree to utilize the same standards of maintenance, service, repair or overhaul as used by the sublessee with respect to similar aircraft operated by the sublessee in similar circumstances (Lease, Annex C, Section A). The owned aircraft indenture imposes comparable maintenance, service and repair obligations on ATA with respect to the Owned Aircraft (Owned Aircraft Indentures, Sections 4.02 and 4.04). ATA will also maintain, use, service, repair, overhaul and inspect any leased aircraft in compliance with applicable laws with respect to the maintenance of the aircraft and in compliance with each applicable airworthiness certificate, license, and registration relating to the aircraft issued by a relevant aviation authority, other than minor or nonrecurring violations with respect to which corrective measures are taken upon discovery of the violation and, except to the extent ATA (or any sublessee) is in good faith contesting the validity or application of any requirements, in any reasonable manner which, among other things specified in each lease, does not materially adversely affect the Owner Trustee or the interests of the relevant Owner Participant, the relevant Loan Trustee, or any Trustee or certificateholder (Leases, Annex C, Section A). ATA must make (or cause to be made) all alterations and modifications in and additions to each airframe and engine necessary to meet the applicable requirements of the FAA or any other applicable aviation authority having jurisdiction over the operation of the aircraft, except that ATA (or any sublessee) may contest the validity or application of any such requirements in any reasonable manner which does not adversely affect the Owner Trustee or the relevant Loan Trustee. ATA (or any sublessee) may add further parts and make other alterations, modifications and additions to any airframe or any engine as ATA (or any sublessee) may deem desirable, including removal of parts determined by ATA (or any sublessee) to be obsolete or no longer suitable or appropriate for use, so long as such alterations, modifications or additions, do not materially diminish the fair market value, utility or useful life of such airframe or engine below its fair market value, utility or remaining useful life immediately prior to such alteration, modification, addition or removal (assuming such airframe or engine was in the condition required by the lease). Title to parts incorporated or installed in or added to such airframe or engine as a result of such alterations, modifications or additions vest in the Owner Trustee subject to certain exceptions. In certain circumstances, ATA (or any sublessee) is permitted to remove parts which were added by ATA (or any sublessee) (without replacement) from an airframe or engine so long as certain conditions are met and any such removal does not materially diminish the fair market value, utility, or remaining useful life which such airframe or engine would have had at such time had such addition, alteration or modification not occurred (Leases, Annex C, Section D). Except as set forth above, ATA is obligated to replace or cause to be replaced all parts (other than severable parts added at the option of ATA or unsuitable parts that ATA is permitted to remove) that are incorporated or installed in or attached to any airframe or any engine and become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use. Any such replacement parts become subject to the related lease and the lien of the related leased aircraft indenture in lieu of the part replaced (Leases, Annex C, Section B). Registration, Subleasing and Possession Although ATA has no current intention to do so, ATA may, under certain circumstances, register an aircraft in certain jurisdictions outside the United States, subject to, among other 164 conditions and limitations specified in each lease or owned aircraft indenture, the lien of the related indenture continuing as a first priority security interest in the related aircraft and lease. ATA is also permitted, subject to certain limitations, to sublease (or, in the case of owned aircraft, lease) any aircraft to any United States certificated air carrier or to certain foreign entities, and to certain airframe and engine manufacturers or their affiliates, so long as the term of any such sublease does not extend beyond the term of any lease applicable to such aircraft, subject to certain exceptions. In addition, subject to certain limitations, ATA is permitted to transfer possession of any airframe or any engine other than by lease or sublease, including transfers of possession by ATA or any lessee or sublessee in connection with certain interchange and pooling arrangements, transfers to the United States government and any instrumentality or agency thereof, and transfers in connection with maintenance or modifications (Lease, Section 7). There are no general geographical restrictions on ATA's (or any lessee's or sublessee's) ability to operate the aircraft. The extent to which the relevant Loan Trustee's lien would be recognized in an aircraft if such aircraft were located in certain countries is uncertain. In addition, any exercise of the right to repossess an aircraft may be difficult, expensive and time-consuming, particularly when such aircraft is located outside the United States and has been registered in a foreign jurisdiction or subleased to a foreign operator, and may be subject to the limitations and requirements of applicable law, including the need to obtain consents or approvals for deregistration or re-export of the aircraft, which may be subject to delays and political risk. When a defaulting lessee or sublessee or other permitted transferee is the subject of a bankruptcy, insolvency or similar event such as protective administration, additional limitations may apply. At the time of obtaining repossession of the aircraft under the related lease or foreclosing on the lien on the aircraft under the related indenture, an airframe subject to such lease or indenture may not be equipped with engines subject to the same lease or indenture and, in such case, ATA is required to deliver engines attached to such airframe which have not less than equivalent value, utility and remaining useful life (without regard to overhaul status) as the engines subject to such lease or indenture. Notwithstanding ATA's agreement in each lease or owned aircraft indenture, in the event ATA fails to transfer title to engines not owned by the Owner Trustee, or fails to subject engines to the owned aircraft indenture, that are attached on repossessed aircraft, it could be difficult, expensive and time-consuming to assemble an aircraft consisting of an airframe and engines subject to the lease or owned aircraft indenture. Liens ATA is required to maintain each aircraft free of any liens, other than the respective rights of any Owner Trustee, as owner of the aircraft, and ATA, as provided in the lease, the lien of the indenture, and any other rights existing pursuant to the Operative Documents related thereto, the rights of others in possession of the aircraft in accordance with the terms of the lease (including subleases) or owned aircraft indenture (including lessees), and other than certain other customary liens permitted under such documents, including liens for taxes either not yet due or being contested in good faith, materialmen's, mechanics', and other similar liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 60 days, or are being contested in good faith by appropriate proceedings; judgment liens discharged, vacated, stayed pending appeal or reversed within a period of 60 days as specified in each lease or owned aircraft indenture, and any other lien with respect to which ATA (or any sublessee or lessee) has provided a bond, cash collateral or other security adequate in the reasonable opinion of the relevant Owner 165 Trustee or Loan Trustee under an owned aircraft indenture (Leases, Section 6; Owned Aircraft Indentures, Section 4.01). Insurance Subject to certain exceptions, ATA is obligated, at its expense (or at the expense of a permitted lessee, in the case of the owned aircraft, or a permitted sublessee, in the case of a leased aircraft), to maintain or cause to be maintained on each aircraft, with insurers of recognized responsibility, passenger liability, property damage and contractual liability insurance and all-risk aircraft hull insurance, in such amounts, covering such risks and in such form as ATA customarily maintains with respect to other aircraft owned or operated by ATA, in each case similar to such aircraft; provided, however, that, except to the extent of any self-insurance, the all-risk hull insurance shall be at least in an amount equal to the Stipulated Loss Value (as defined in each lease) of such aircraft (Leases, Annex D). Subject to certain exceptions, the policies covering loss of or damage to an aircraft shall be made payable, up to the Stipulated Loss Value for such aircraft, to the related Loan Trustee for any loss involving proceeds in excess of $5,000,000 and the entire amount of any loss involving proceeds of $5,000,000 (or such lower amount as may be specified under the relevant lease) or less shall be paid to ATA, except that in the event an Owned Aircraft Indenture Event of Default or a Lease Event of Default exists, all insurance proceeds will be paid to the relevant Loan Trustee (Leases, Annex D, Section B; Owned Aircraft Indentures, Section 4.06). With respect to required insurance, ATA (and any lessee or sublessee) may self-insure (a) to the extent that its self-insurance does not exceed, during any policy year, with respect to all of the aircraft in ATA's fleet, the lesser of (1) 50% of the largest replacement value of any single aircraft in ATA's fleet, and (2) 1 1/2% of the average aggregate insurable value of all aircraft on which ATA then carries insurance, or (b) if higher, to the extent of any applicable deductible per aircraft that does not exceed industry standards for major U.S. airlines (Lease, Annex D, Section G). In respect of each aircraft, ATA is required to cause the relevant Owner Trustee and Loan Trustee and certain other persons to be included as additional injured as their respective interests may appear under all insurance policies required by the terms of each lease with respect to such aircraft (Leases, Annex D, Section D). Subject to certain customary exceptions, ATA may not operate (or permit any lessee or sublessee to operate) any aircraft in any area that is excluded from coverage by any insurance policy in effect with respect to such aircraft and required by the lease (Leases, Section 7.1.5). ATA's obligation to provide for any insurance required by each lease or owned aircraft indenture shall be satisfied if indemnification from, or insurance provided by, the United States government or one of certain other permitted foreign governments or any agency or instrumentality thereof, against the risks requiring such insurance under such lease is at least equal, when added to the amount of insurance against such risks otherwise maintained by ATA (or any lessee or sublessee), to the amount of insurance against such risks otherwise required by such lease (Leases, Section 11.3). 166 Lease Termination ATA may terminate any lease on any Lease Payment Date occurring on or after the fifth anniversary of the delivery date, if it determines that such leased aircraft is obsolete or surplus to its needs and subject to certain other limitations specified in such leases. Upon payment of the termination value for such leased aircraft, which will be an amount at least equal to the outstanding principal amount of the related secured promissory notes and an amount equal to the Make-Whole Amount, if any, payable on such date of payment, together with certain additional amounts and together with all accrued and unpaid interest thereon, the lien of the relevant indenture shall be released, the relevant lease shall terminate, and the obligation of ATA thereafter to make scheduled rent payments under such lease shall cease (Leases, Section 9; Leased Aircraft Indentures, Sections 2.10(b), 2.12 and 2.13). Renewal and Purchase Options At the end of the term of each lease after final maturity of the related secured promissory notes and subject to certain conditions, ATA may have certain options to renew such lease for additional limited periods. In addition, ATA may have the right at the end of the term of each lease to purchase the leased aircraft subject thereto for an amount to be calculated in accordance with the terms of such lease (Leases, Section 17). ATA may also have the option to purchase the leased aircraft subject to each lease on certain Rent Payment Dates for a purchase price calculated in accordance with the provisions of the related lease, but which must be sufficient to pay all principal of, Make-Whole Amount, if any, on and interest on the related secured promissory notes in full and, upon payment thereof, ATA shall acquire such aircraft free of the lien of the related indenture. If ATA buys the aircraft during the term pursuant to such a purchase option, ATA may have the right to elect to assume the related secured promissory notes on a fully-recourse basis, and thereby convert the leased aircraft to an owned aircraft and the leveraged lease financing to a secured loan financing. To do such an assumption transaction, ATA must (a) cause to be delivered to the Loan Trustee an opinion of counsel that the pass through trusts will not be subject to U.S. Federal income tax as a result of such transaction, and (b) either (i) cause to be delivered to the Loan Trustee an opinion of counsel that the certificateholders will not recognize income, gain or loss for Federal income tax purposes as a result of such transaction and will be subject to Federal income tax in the same amounts, in the same manner and at the same time as would have been the case if such transaction had not occurred, or (ii) cause to be delivered to the Loan Trustee an opinion of counsel that such certificateholders should not recognize income, gain or loss, and should be subject to Federal income tax, in each case, as referred to in clause (i) and also provide an indemnification in favor of the certificateholders in form and substance reasonably satisfactory to the pass through trustees. See "Certain U.S. Federal Income Tax Consequences -- Taxation of Certificateholders Generally" for a discussion of certain tax consequences of such purchase and assumption under current regulations (Leases, Section 19; Indentures, Sections 2.10(b) and 2.11; Participation Agreements, Section 8(x)). See " -- Description of the Secured Promissory Notes -- Redemption." Events of Loss If an Event of Loss occurs with respect to any aircraft, ATA is obligated either (i) to replace such aircraft or (ii) to pay the applicable Stipulated Loss Value to the related Owner Trustee (in the case of a leased aircraft) or the outstanding principal and accrued interest on the secured promissory 167 notes to the Loan Trustee (in the case of the owned aircraft), together with certain additional amounts. If ATA elects to replace such aircraft, it must do so no later than 180 days after the related Event of Loss, with an airframe or airframe and engines of the same or improved make and model free and clear of all liens (other than certain permitted liens) and having a value, utility and remaining useful life at least equal to such aircraft immediately prior to the Event of Loss, assuming maintenance thereof in accordance with the relevant lease or owned aircraft indenture. If ATA elects to pay the Stipulated Loss Value for such aircraft or (except if otherwise provided in the relevant lease) elects to replace such aircraft but fails to do so within the time periods specified therefor, ATA must make such payment not later than the 180th day after the related Event of Loss. In the case of a leased aircraft, upon making such payment, together with all other amounts then due under the related lease with respect to such aircraft, which in all circumstances will be at least sufficient to pay in full as of the date of payment the principal amount of the related secured promissory notes and all accrued and unpaid interest due thereon (but without any Make-Whole Amount), the lease for such aircraft shall terminate and the obligation of ATA to make the scheduled Basic Rent payments with respect thereto shall cease (Leases, Sections 10; Indentures, Section 5.06). If an Event of Loss occurs with respect to an engine alone, ATA is required to replace such engine within 60 days from the date of such Event of Loss with another engine, free and clear of all liens (other than permitted liens), of the same or improved make and model (subject to certain exceptions) and having a value, utility and remaining useful life at least equal to the engine being replaced (assuming that such engine had been maintained in accordance with the lease) (Leases, Section 10.2; Indentures, Section 5.06). Lease Events of Default Although there may be differences among the leases, Lease Events of Default generally include: o failure by ATA or ATA Holdings to pay any payment of Basic Rent or Stipulated Loss Value under such lease within ten business days after it becomes due; o failure by ATA or ATA Holdings to pay Supplemental Rent (other than Stipulated Loss Value) within ten business days after ATA's receipt of written demand therefor, o failure by ATA to perform any other covenant or agreement to be performed by it under the leases for 30 days after ATA or ATA Holdings receives written notice of such failure; provided, that no such failure with respect to covenants in such lease that are curable shall constitute a Lease Event of Default so long as ATA is diligently proceeding to remedy such failure, and such failure is remedied within 270 days of receipt of such notice; o any representation or warranty (other than tax representations and warranties) made by ATA or ATA Holdings under the Operative Documents or the Guarantee is incorrect in any material respect when made and remains unremedied for 30 days after notice to ATA or ATA Holdings; o the occurrence of certain events of bankruptcy, reorganization or insolvency of ATA or ATA Holdings; 168 o failure by ATA to carry and maintain (or cause to be carried and maintained) insurance on or in respect of any aircraft in accordance with the provisions of such lease; o the Guarantee shall cease to be in full force and effect; and o the registration of the aircraft is cancelled for more than 30 consecutive days, subject to certain exceptions. If a Lease Event of Default exists and the lease has been declared to be in default, the Owner Trustee may, subject to certain limitations relating to aircraft subject to the Civil Reserve Air Fleet Program, exercise one or more of the remedies provided in the related lease, to the extent permitted by applicable law. The listed remedies include the right to repossess and use or operate such leased aircraft, to sell or re-lease such leased aircraft free and clear of ATA's rights and retain the proceeds and to require ATA to pay as liquidated damages any accrued and unpaid Basic Rent plus an amount equal to the excess of the Stipulated Loss Value of such leased aircraft over either (a) the fair market sales value or fair market rental value of such leased aircraft (as determined by independent appraisal) or (b) if such leased aircraft has been sold, the net sale proceeds thereof (Leases, Section 15). THE PARTICIPATION AGREEMENT Indemnification Subject to certain exceptions, ATA has agreed to indemnify each Owner Participant, each Owner Trustee, each Liquidity Provider, the Subordination Agent, the Escrow Agent, each of the pass through trustees and each of the Loan Trustees, but not the holders of the certificates, for certain liabilities, losses, fees and expenses and for certain other matters arising out of the transactions described herein or relating to the aircraft. In addition, under certain circumstances ATA is required to indemnify certain persons, but not the holders of the certificates, against certain taxes, levies, duties, withholdings and for certain other matters (but excluding, among other things, income and capital gains taxes) relating to such transactions or the aircraft. Transfer of Owner Participant Interests Subject to certain restrictions, each Owner Participant may transfer its interest in the related leased aircraft. 169 EXCHANGE OFFER; REGISTRATION RIGHTS ATA Holdings, ATA and each pass through trustee agreed pursuant to a registration rights agreement (the "Registration Rights Agreement"), with the purchasers of the Outstanding Certificates, that ATA Holdings and ATA would, at their cost, (a) not later than 240 days after the date of the original issuance of the Outstanding Certificates, use their reasonable best efforts to file this registration statement (the "Exchange Offer Registration Statement") with the Commission with respect to a registered offer to exchange each class of Outstanding Certificates for new certificates issued by the same pass through trust (the "Exchange Certificates") having terms identical in all material respects to the certificates (except that the Exchange Certificates will not contain terms with respect to transfer restrictions or interest rate increases as described below and the Exchange Certificates will be available only in book-entry form) and (b) use their reasonable best efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act not later than 300 days after the date of the original issuance of the Outstanding Certificates. Upon the effectiveness of the Exchange Offer Registration Statement, ATA Holdings and ATA will offer the Exchange Certificates in exchange for surrender of the certificates (the "Registered Exchange Offer"). ATA Holdings and ATA will keep the Registered Exchange Offer open for not less than 20 business days (or longer if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the holders of the Outstanding Certificates. For each Outstanding Certificate surrendered to ATA pursuant to the Registered Exchange Offer, the holder of such certificate will receive an Exchange Certificate representing an ownership interest in the property held by the trust equal to that of the surrendered certificate. The pass through trustee issuing each Exchange Certificate will pass through interest on the secured promissory notes held by that trustee, such interest will have accrued from the last Regular Distribution Date on which interest was paid on the secured promissory notes or, if no interest has been paid on such secured promissory notes, from the date of its original issue. We believe, based on existing Commission interpretations, that the Exchange Certificates would be freely transferable by holders of the certificates other than affiliates of ATA Holdings or ATA after the Registered Exchange Offer without further registration under the Securities Act if the holder of the Exchange Certificates represents: o that it is acquiring the Exchange Certificates in the ordinary course of business, o that it has no arrangement or understanding with any person to participate in the distribution of the Exchange Certificates, and o that it is not an affiliate of ATA Holdings or ATA, as such terms are interpreted by the Commission, provided that broker-dealers ("Participating Broker-Dealers") receiving Exchange Certificates in the Registered Exchange Offer will have a prospectus delivery requirement with respect to resales of such Exchange Certificates. The Commission has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to Exchange Certificates (other than a resale of an unsold allotment from the original sale of the Outstanding Certificates) with the prospectus contained in the Exchange Offer Registration Statement. Under the Registration Rights Agreement, ATA Holdings and ATA are required to allow Participating Broker-Dealers and 170 other persons, if any, with similar prospectus delivery requirements to use the prospectus contained in the Exchange Offer Registration Statement in connection with the resale of such Exchange Certificates. A holder of Outstanding Certificates (other than certain specified holders) who wishes to exchange such certificates for Exchange Certificates in the Registered Exchange Offer will be required to represent: o that any Exchange Certificates to be received by it will be acquired in the ordinary course of its business; o that at the time of the commencement of the Registered Exchange Offer it has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Certificates; and o that it is not an "affiliate", as defined in Rule 405 of the Securities Act, of ATA Holdings, ATA or the pass through trustee or a broker-dealer tendering certificates acquired directly from ATA or ATA Holdings for its own account, or if it is an affiliate, that is will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. In the event that (a) applicable interpretations of the staff of the Commission do not permit ATA Holdings or ATA to effect such a Registered Exchange Offer, (b) for any other reason the Exchange Offer Registration Statement is not declared effective within 300 days after the date of the original issuance of the Outstanding Certificates or the Registered Exchange Offer is not consummated within 330 days after the original issuance of the Outstanding Certificates or (c) any holder of Outstanding Certificates is not eligible to participate in the Registered Exchange Offer, ATA Holdings and ATA will, at their cost: o use their reasonable best efforts to file, as promptly as practicable, a shelf registration statement ("Shelf Registration Statement") covering resales of the Outstanding Certificates or the Exchange Certificates, as the case may be; o use their reasonable best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act; o use their reasonable best efforts to keep the Shelf Registration Statement continuously effective until the expiration of the period referred to in Rule 144(k) with respect to the certificates, such period to commence on the date of issuance of the last Outstanding Certificate to be issued or such shorter period ending when all of the Outstanding Certificates have been sold or cease to be outstanding. ATA Holdings and ATA will, in the event the Shelf Registration Statement is filed, among other things, provide to each holder for whom such Shelf Registration Statement was filed copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resales of the Outstanding Certificates or the Exchange Certificates, as the case may be. A holder selling such Outstanding Certificates or Exchange Certificates pursuant to the Shelf Registration Statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil 171 liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such holder (including certain indemnification obligations). In addition, each holder of such Outstanding Certificates or Exchange Certificates will be required to deliver information to be used in connection with the Shelf Registration Statement in order to have their Outstanding Certificates or Exchange Certificates included in the Self Registration Statement. In the event that neither a Registered Exchange Offer has been consummated nor a Shelf Registration Statement has been declared effective by the Commission (each, a "Registration Event") on or prior to the 330th day after the date of the original issuance of the certificates, the interest rate per annum borne by the secured Equipment Notes and the Deposits shall be increased by 0.50% from and including such 330th day to but excluding the earlier of (i) the date on which the Registration Event occurs and (ii) the date on which there cease to be any registrable certificates. In the event that the Shelf Registration Statement ceases to be effective at any time during the period specified by the Registration Rights Agreement or the filing of an Exchange Offer Registration Statement or Shelf Registration Statement is postponed or, at the request of ATA Holdings or ATA, the effectiveness of a filed Exchange Offer Registration Statement or Shelf Registration Statement is postponed for more than 60 days in the aggregate, whether or not consecutive, during any 12-month period, the interest rate per annum borne by the Equipment Notes and the Deposits shall be increased by 0.50% from the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective until such time as the Shelf Registration Statement again becomes effective (or, if earlier, the end of such period specified by the Registration Rights Agreement). The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Registration Rights Agreement, a copy of which is filed as an exhibit to this registration statement and is available upon request to the pass through trustee. BOOK-ENTRY; DELIVERY AND FORM GENERAL Except as provided below, each class of certificates is represented by one or more fully registered global certificates. This means that one or more certificates representing all of the certificates is registered with the DTC. Each global certificate is deposited with, or on behalf of, DTC and registered in the name of Cede & Co., or "Cede," the nominee of DTC. Unless and until physical certificates in definitive, fully registered form, or the "Definitive Certificates" are issued under the limited circumstances described below, all references in this prospectus to actions by certificateholders will refer to actions taken by DTC upon instructions from DTC participants, and all references to distributions, notices, reports and statements to certificateholders will refer, as the case may be, to distributions, notices, reports and statements to DTC or Cede, as the registered holder of the certificates, or to DTC participants for distribution to certificateholders in accordance with DTC procedures. The certificates of each pass through trust sold in offshore transactions in reliance on Regulation S (if any) will be represented by a single, permanent global certificate of such class, in definitive, fully registered form without interest coupons, which we will refer to as the "Regulation S 172 Global Certificate," and will be deposited with the trustee of such pass through trust as custodian for DTC and registered in the name of a nominee of DTC for the accounts of Euroclear and Cede. The certificates of each pass through trust (other than the certificates sold in reliance on Regulation S) will be represented by a single, permanent global certificate in definitive, fully registered form without interest coupons, which we will refer to as the "Global Certificate," and will be deposited with the trustee as custodian for DTC and registered in the name of a nominee of DTC. Beneficial interests in the Global Certificate or in the Definitive Certificates may be transferred to a person who takes delivery in the form of an interest in the Regulation S Global Certificate only upon receipt by the trustee of a written certification (in the form provided in the applicable Pass Through Trust Agreement) to the effect that such transfer is being made in accordance with Regulation S under the Securities Act. Any beneficial interest in one of the global certificates that is transferred to a person who takes delivery in the form of an interest in the other global certificate will, upon transfer, cease to be an interest in such global certificate and become an interest in the other global certificate and, accordingly, will from then on be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other global certificate for so long as it remains such an interest. Except in the limited circumstances described below, owners of beneficial interests in Global Certificates will not be entitled to receive physical delivery of Definitive Certificates. The certificates will not be issuable in bearer form. DTC has advised us that DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and "clearing agency" registered pursuant to Section 17A of the Exchange Act. Under the New York Uniform Commercial Code, a "clearing corporation" is defined as: o a person that is registered as a "clearing agency" under the federal securities laws; o a federal reserve bank; or o any other person that provides clearance or settlement services with respect to financial assets that would require it to register as a clearing agency under the federal securities laws but for an exclusion or exemption from the registration requirement, if its activities as a clearing corporation, including promulgation of rules, are subject to regulation by a federal or state governmental authority. A "clearing agency" is an organization established for the execution of trades by transferring funds, assigning deliveries and guaranteeing the performance of the obligations of parties to trades. DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between DTC participants through electronic book-entry changes in the accounts of DTC participants. The ability to execute transactions through book-entry changes in accounts eliminates the need for transfer of physical certificates. DTC participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC is owned by a number of DTC participants and by the New York Stock Exchange, the American Stock Exchange, and the National Association of Securities Dealers. Banks, brokers, dealers, trust companies and other entities that clear through or maintain a custodial 173 relationship with a DTC participant either directly or indirectly have indirect access to the DTC system. Under the rules, regulations and procedures creating and affecting DTC and its operations, DTC is required to make book-entry transfers of the certificates among DTC participants on whose behalf it acts with respect to the certificates and to receive and transmit distributions of principal, premium, if any, and interest with respect to the certificates. DTC participants and indirect DTC participants with which certificateholders have accounts similarly are required to make book-entry transfers and receive and transmit such payments on behalf of their respective customers. Certificateholders that are not DTC participants or indirect DTC participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, the certificates may do so only through DTC participants and indirect DTC participants. In addition, certificateholders will receive all distributions of principal, premium, if any, and interest from the pass through trustee through DTC participants or indirect DTC participants, as the case may be. Under a book-entry format, certificateholders may experience some delay in their receipt of payments because payments with respect to the certificates will be forwarded by the pass through trustee to Cede, as nominee for DTC. We expect DTC to forward payments in same-day funds to each DTC participant who is credited with ownership of the certificates in an amount proportionate to the principal amount of that DTC participant's holdings of beneficial interests in the certificates, as shown on the records of DTC or its nominee. We also expect that DTC participants will forward payments to indirect DTC participants or certificateholders, as the case may be, in accordance with standing instructions and customary industry practices. DTC participants will be responsible for forwarding distributions to certificateholders. Accordingly, although certificateholders will not possess physical certificates, DTC's rules provide a mechanism by which certificateholders will receive payments on the certificates and will be able to transfer their interests. Unless and until Definitive Certificates are issued under the limited circumstances described below, the only physical certificateholder will be Cede, as nominee of DTC. Certificateholders will not be recognized by the pass through trustee as registered owners of certificates under the pass through trust agreement. Certificateholders will be permitted to exercise the rights under the pass through trust agreement only indirectly through DTC and DTC participants. DTC has advised us that it will take any action permitted to be taken by a certificateholder under the pass through trust agreement only at the direction of one or more DTC participants to whose accounts with DTC the certificates are credited. Additionally, DTC has advised us that in the event any action requires approval by certificateholders of a certain percentage of the beneficial interests in a pass through trust, DTC will take such action only at the direction of and on behalf of DTC participants whose holdings include undivided interests that satisfy any such percentage. DTC may take conflicting actions with respect to other undivided interests to the extent that such actions are taken on behalf of DTC participants whose holdings include those undivided interests. DTC will convey notices and other communications to DTC participants, and DTC participants will convey notices and other communications to indirect DTC participants and to certificateholders in accordance with arrangements among them. Arrangements among DTC and its direct and indirect participants are subject to any statutory or regulatory requirements as may be in effect from time to time. DTC's rules applicable to itself and DTC participants are on file with the Commission. The laws of some states require that certain purchasers of securities take physical delivery of such securities. Such limits and such laws may limit the market for beneficial interests in the Global Certificates. Qualified institutional buyers may hold their interests in the Global Certificates directly 174 through DTC if they are participants in such system, or indirectly through organizations which are participants in such system. A certificateholder's ability to pledge the certificates to persons or entities that do not participate in the DTC system, or otherwise to act with respect to such certificates may be limited due to the lack of a physical certificate to evidence ownership of the certificates and because DTC can only act on behalf of DTC participants, who in turn act on behalf of indirect DTC participants. None of us, our parent or the pass through trustees will have any liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the certificates held by Cede, as nominee for DTC, for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for the performance by DTC, any DTC participant or any indirect DTC participant of their respective obligations under the rules and procedures governing their obligations. DEFINITIVE CERTIFICATES Definitive Certificates will be issued in paper form to certificateholders or their nominees, rather than to DTC or its nominee, only if: o we advise a pass through trustee in writing that DTC is no longer willing or able to discharge properly its responsibilities as depository with respect to the certificates and we or the pass through trustee is unable to locate a qualified successor within 90 days of receipt of such notice; or o after the occurrence of certain events of default or other events specified in the Pass Through Trust Agreement, certificateholders owning at least a majority in interest in a pass through trust advise the applicable pass through trustee, us and DTC (or a successor to DTC) through DTC (or a successor to DTC) participants that the continuation of a book-entry system through DTC (or a successor to DTC) participants is no longer in the certificateholders' best interest. If Definitive Certificates are to be issued by a pass through trust under either of the two paragraphs immediately above, the applicable pass through trustee will notify all certificateholders through DTC of the availability of Definitive Certificates. Upon surrender by DTC of the Global Certificates and receipt of instructions for re-registration, the pass through trustee will reissue the certificates as Definitive Certificates to certificateholders. After Definitive Certificates are issued, the pass through trustee or a paying agent will make distributions of principal, premium, if any, and interest with respect to certificates directly to holders in whose names the Definitive Certificates were registered at the close of business on the applicable record date. Except for the final payment to be made with respect to a certificate, the pass through trustee or a paying agent will make distributions by check mailed to the addresses of the registered holders as they appear on the register maintained by the pass through trustee. The pass through trustee or a paying agent will make the final payment with respect to any pass through certificate only upon presentation and surrender of the applicable pass through certificate at the office or agency specified in the notice of final distribution to certificateholders. Definitive Certificates issued in exchange will bear the legend referred to under the heading "Transfer Restrictions" and will be transferable and exchangeable at the office of the pass through 175 trustee upon compliance with the requirements set forth in the Pass Through Trust Agreement. No service charge will be imposed for any registration of transfer or exchange, but payment of a sum sufficient to cover any tax or other governmental charge will be required. 176 U.S. FEDERAL INCOME TAX CONSEQUENCES GENERAL The following summary describes the principal U.S. federal income tax consequences to certificateholders of the purchase, ownership and disposition of the certificates offered hereby. Except as otherwise specified, the summary is addressed to beneficial owners of certificates ("U.S. Certificateholders") that are individual citizens or residents of the United States or political subdivison thereof, corporations, or other entities taxable as corporations created or organized in or under the laws of the United States or any State, estates the income of which is subject to U.S. federal income taxation regardless of its source or trusts if U.S. courts are able to exercise primary supervision over the Administration of such trusts ("U.S. Persons") that will hold the certificates as capital assets. If a partnership holds certificates, the U.S. federal income tax treatment of a partner generally will depend upon the status of the partner and upon the activities of the partnership. A partner of a partnership holding certificates should consult its tax advisor. This summary does not address the U.S. federal income tax treatment of U.S. Certificateholders that may be subject to special U.S. federal income tax rules, such as banks, insurance companies, dealers in securities or commodities, tax-exempt entities, holders that will hold certificates as part of a straddle or holders that have a "functional currency" other than the U.S. Dollar, nor (except as expressly provided herein) does it address the tax treatment of U.S. Certificateholders that do not acquire certificates as part of the initial offering. The summary does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase certificates. This summary does not describe any tax consequences arising under the laws of any State, locality or taxing jurisdiction other than the United States. The summary is based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations, administrative rulings and practice of the Internal Revenue Service (the "IRS") as in effect on the date of this prospectus, as well as judicial decisions in effect as of the date of this prospectus. All of the foregoing are subject to change, which change could apply retroactively. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CERTIFICATES. TAX STATUS OF THE EXCHANGE OFFER The exchange of an Outstanding Certificate by a U.S. Certificateholder for an Exchange Certificate (as described above under "Exchange Offer; Registration Rights") will not constitute a taxable exchange. As a result, a U.S. Certificateholder will not recognize taxable gain or loss upon receipt of an Exchange Certificate. A U.S. Certificateholder's tax basis and holding period for the related Deposits, secured promissory notes and any other assets held by the corresponding trust will be the same as the tax basis and holding period for such assets immediately prior to the exchange. TAX STATUS OF THE TRUSTS In the opinion of Cravath, Swaine & Moore, special tax counsel ("Tax Counsel") to ATA, for U.S. federal income tax purposes, the arrangement represented by the pass through trusts will be classified as one or more grantor trusts (or as a partnership) and will not be classified as an association or publicly traded partnership taxable as a corporation. The pass through trusts will take the position for all tax purposes that the pass through trusts will be classified as one or more grantor 177 trusts and that the Deposits are not assets of the respective pass through trusts. Except as expressly provided otherwise, the following discussion assumes this position is correct. TAXATION OF CERTIFICATEHOLDERS GENERALLY A U.S. Certificateholder will be treated as owning its pro rata undivided interest in the relevant Deposits and each of the secured promissory notes, the pass through trust's contractual rights and obligations under the Note Purchase Agreement, and any other property held by the pass through trust. Accordingly, each U.S. Certificateholder's share of interest paid on secured promissory notes will be taxable as ordinary income, as it is paid or accrued, in accordance with such U.S. Certificateholder's method of accounting for U.S. federal income tax purposes, and a U.S. Certificateholder's share of premium, if any, paid on redemption of a secured promissory note will be treated as capital gain. Any amounts received by a pass through trust under a Liquidity Facility in order to make interest or principal payments will be treated for U.S. federal income tax purposes as having the same characteristics as the payments they replace. Any Deposit Make-Whole Premium should be ordinary income. The Deposits may be subject to the original issue discount rules. As a result, a U.S. Certificateholder may be required to include interest income from a Deposit using the accrual method of accounting regardless of its normal method. Upon the sale, exchange or other disposition of a certificate or of a certificate and an Escrow Receipt, a U.S. Certificateholder generally will recognize capital gain or loss equal to the difference between the amount realized on the disposition (other than any amount attributable to accrued interest or market discount which will be taxable as ordinary income) and the U.S. Certificateholder's adjusted tax basis in the related Deposits, secured promissory notes and any other assets held by the corresponding pass through trust. A U.S. Certificateholder's adjusted tax basis will generally equal the holder's cost for its certificate or certificate and Escrow Receipt. Any gain or loss will be capital gain or loss if the certificate or the certificate and Escrow Receipt was held as a capital asset. Any Special Interest that becomes payable on the secured promissory notes (as described above under "Exchange Offer; Registration Rights") should be treated in the same manner as regular interest payments on the secured promissory notes. An Owner Participant's conveyance of its interest in an Owner Trust should not constitute a taxable event to U.S. Certificateholders. However, if ATA were to assume an Owner Trust's obligations under the related secured promissory notes upon a purchase of a leased aircraft by ATA, such assumption may be treated for U.S. federal income tax purposes as a taxable exchange by U.S. Certificateholders of the secured promissory notes for "new" secured promissory notes. A taxable exchange would result in the recognition of taxable gain (but possibly not loss) equal to the difference between the U.S. Certificateholder's adjusted basis in its interest in the secured promissory note and the amount realized on such exchange (except to the extent attributable to accrued interest, which would be taxable as interest income if not previously included in income). For this purpose the amount realized (and the issue price of the "new" secured promissory note) would be equal to the U.S. Certificateholder's pro rata share of either (i) the fair market value of the respective secured promissory note at such time (if certain conditions are at that time satisfied concerning the availability of price quotes or sales data in respect of the secured promissory notes) or (ii) the principal amount of the respective secured promissory note (if such conditions are not satisfied). If, 178 in a sale-leaseback transaction, an Owner Trust assumes ATA's obligations under secured promissory notes issued for an owned aircraft, such assumption could also be treated for U.S. federal income tax purposes as a taxable exchange by U.S. Certificateholders of those notes for "new" secured promissory notes as described above. In the case of a subsequent purchaser of a certificate or a certificate and Escrow Receipt, the purchase price should be allocated among the relevant Deposits and the assets held by the relevant pass through trust (including the secured promissory notes and the rights and obligations under the Note Purchase Agreement with respect to secured promissory notes not theretofore issued) in accordance with their relative fair market values at the time of purchase. Any portion of the purchase price allocable to the right and obligation under the Note Purchase Agreement to acquire a secured promissory note should be included in the purchaser's basis in its share of the secured promissory note when issued. Although the matter is not entirely clear, in the case of a purchaser after initial issuance of the certificates but prior to the Delivery Period Termination Date, if the purchase price reflects a "negative value" associated with the obligation to acquire a secured promissory note pursuant to the Note Purchase Agreement being burdensome under conditions existing at the time of purchase (e.g., as a result of the interest rate on the unissued secured promissory notes being below market at the time of purchase of a certificate), such negative value probably would be added to such purchaser's basis in its interest in the Deposits and the remaining assets of the pass through trust and reduce such purchaser's basis in its share of the secured promissory notes when issued. The preceding two sentences do not apply to purchases of certificates following the Delivery Period Termination Date. A U.S. Certificateholder who is treated as purchasing an interest in a Deposit or an secured promissory note at a market discount (generally, at a cost less than its remaining principal amount) that exceeds a statutorily defined de minimis amount will be subject to the "market discount" rules of the Code. These rules provide, in part, that gain on the sale or other disposition (including principal payments and partial redemption) of a debt instrument with a term of more than one year is treated as ordinary income to the extent of accrued but unrecognized market discount. The market discount rules also provide for deferral of interest deductions with respect to debt incurred to purchase or carry a debt instrument that has market discount. A U.S. Certificateholder who is treated as purchasing an interest in a Deposit or a secured promissory note at a premium may elect to amortize the premium as an offset to interest income on the Deposit or secured promissory note under rules prescribed by the Code and Treasury regulations promulgated under the Code. Each U.S. Certificateholder will be entitled to deduct, consistent with its method of accounting, its pro rata share of fees and expenses paid or incurred by the corresponding pass through trust as provided in Section 162 or 212 of the Code. Certain fees and expenses, including fees paid to the Trustee and the Liquidity Provider, will be borne by parties other than the certificateholders. It is possible that such fees and expenses will be treated as constructively received by the pass through trust, in which event a U.S. Certificateholder will be required to include in income and will be entitled to deduct its pro rata share of such fees and expenses. If a U.S. Certificateholder is an individual, estate or trust, the deduction for such certificateholder's share of such fees or expenses will be allowed only to the extent that all of such holder's miscellaneous itemized deductions, including such holder's share of such fees and expenses, exceed 2% of such certificateholder's adjusted gross income. U.S. Certificateholders may recognize taxable gain or loss as a result of the delayed funding arrangement (as described above in "Description of the Delayed Funding Implementation". In 179 particular, if at the time of the delayed funding, not all the certificates are held by U.S. Certificateholders who purchased their certificates in the original offering, then some or all of the U.S. Certificateholders may be deemed to have sold a pro rata portion of the pass through trust's assets to the U.S. Certificateholders buying their certificates pursuant to the delayed funding arrangement. If a pass through trust is classified as a partnership (and not as a publicly traded partnership taxable as a corporation) for U.S. federal income tax purposes, income or loss with respect to the assets held by the pass through trust will be calculated at the pass through trust level but the pass through trust itself will not be subject to U.S. federal income tax. A U.S. Certificateholder would be required to report its share of the pass through trust's items of income and deduction on its tax return for its taxable year within which the pass through trust's taxable year (which should be a calendar year) ends, as well as income from such U.S. Certificateholder's interest in the relevant Deposits. A U.S. Certificateholder's basis in its interest in the pass through trust would be equal to its purchase price therefor (including its share of any funds withdrawn from the Depositary and used to purchase secured promissory notes), plus its share of the pass through trust's net income, minus its share of any net losses of the pass through trust, and minus the amount of any distributions from the pass through trust. In the case of an original purchaser of a certificate that is a calendar year taxpayer, income or loss generally should be the same as it would be if the pass through trust were classified as a grantor trust, except that income or loss would be reported on an accrual basis even if the U.S. Certificateholder otherwise uses the cash method of accounting. A subsequent purchaser generally would be subject to tax on the same basis as an original holder with respect to its interest in the pass through trust, but would not be subject to the market discount rules or the bond premium rules during the duration of the pass through trust. DISSOLUTION OF ORIGINAL PASS THROUGH TRUSTS AND FORMATION OF NEW PASS THROUGH TRUSTS The dissolution of an original pass through trust and distribution of interests in the related successor pass through trust will not be a taxable event to U.S. Certificateholders, who will continue to be treated as owing their shares of the property transferred from the original pass through trust to the successor pass through trust. The same result would apply if the original pass through trust, the successor pass through trust, or both, were treated as partnerships for U.S. federal income tax purposes. SALE OR OTHER DISPOSITION OF THE CERTIFICATES Upon the sale, exchange or other disposition of a certificate or of a certificate and an Escrow Receipt, a U.S. Certificateholder generally will recognize capital gain or loss equal to the difference between the amount realized on the disposition (other than any amount attributable to accrued interest or market discount which will be taxable as ordinary income) and the U.S. Certificateholder's adjusted tax basis in the related Deposits, secured promissory notes and any other assets held by the corresponding Trust. A U.S. Certificateholder's adjusted tax basis will equal the holder's cost for its certificate and Escrow Receipt. Any gain or loss will be capital gain or loss if the certificate (or the certificate and Escrow Receipt) was held as a capital asset. EFFECT OF SUBORDINATION OF CLASS B CERTIFICATEHOLDERS If the Class B pass through trust (such pass through trust being the "Subordinated Trust" and the related certificates being the "Subordinated Certificates") receives less than the full amount of the 180 receipts of principal or interest paid with respect to the secured promissory notes held by it (any shortfall in such receipts being the "Shortfall Amounts") because of the subordination of the secured promissory notes held by such pass through trust under the Intercreditor Agreement, the corresponding owners of beneficial interests in the Subordinated Certificates (the "Subordinated Certificateholders") would probably be treated for U.S. federal income tax purposes as if they had (1) received as distributions their full share of such receipts, (2) paid over to the relevant preferred class of certificateholders an amount equal to their share of such Shortfall Amount, and (3) retained the right to reimbursement of such amounts to the extent of future amounts payable to such Subordinated Certificateholders with respect to such Shortfall Amount. Under this analysis, (1) Subordinated Certificateholders incurring a Shortfall Amount would be required to include as current income any interest or other income of the corresponding Subordinated Trust that was a component of the Shortfall Amount, even though such amount was in fact paid to the relevant preferred class of certificateholders, (2) a loss would only be allowed to such Subordinated Certificateholders when their right to receive reimbursement of such Shortfall Amount became worthless (i.e., when it became clear that funds will not be available from any source to reimburse such loss), and (3) reimbursement of such Shortfall Amount prior to such a claim of worthlessness would not be taxable income to Subordinated Certificateholders because such amount was previously included in income. These results should not significantly affect the inclusion of income for Subordinated Certificateholders on the accrual method of accounting, but could accelerate inclusion of income to Subordinated Certificateholders on the cash method of accounting by, in effect, placing them on the accrual method. NON-U.S. CERTIFICATEHOLDERS Subject to the discussion of backup withholding below, payments of principal and interest on the Deposits and secured promissory notes that are not effectively connected to a U.S. trade or business made to, or on behalf of, any beneficial owner of a certificate that is not a U.S. Person (a "Non-U.S. Certificateholder") will not be subject to U.S. federal withholding tax; provided, in the case of interest on the secured promissory notes, that (i) such Non-U.S. Certificateholder does not actually or constructively own 10% or more of the total combined voting power of all classes of the stock of ATA Holdings, any Owner Participant or any transferee of any Owner Participant's interest, (ii) such Non-U.S. Certificateholder is not a controlled foreign corporation for U.S. tax purposes that is related to ATA Holdings, an Owner Participant or any transferee of any Owner Participant's interest and (iii) either (A) the Non-U.S. Certificateholder certifies, under penalties of perjury, that it is not a U.S. Person and provides its name and address, (B) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution") and holds the certificate certifies, under penalties of perjury, that such statement has been received from the Non-U.S. Certificateholder by it or by another financial institution and furnishes the payor with a copy thereof or (C) the Non-U.S. Certificateholder holds its notes through a "qualified intermediary", and the qualified intermediary has sufficient information in its files indicating that such Non-U.S. Certificateholder is not a U.S. Person. A qualified intermediary is a bank, broker or other intermediary that (1) is either a U.S. or non-U.S. entity, (2) is acting out of a non-U.S. branch or office and (3) has signed an agreement with the IRS providing that it will administer all or part of the United Sates tax withholding rules under specified procedures. While Tax Counsel believes that the Deposit Make-Whole Premium should not be subject to U.S. withholding tax, it is possible that such withholding tax would apply at a rate of 30% or such lower rate as provided by an applicable tax treaty. 181 Except to the extent that an applicable treaty otherwise provides, a Non-U.S. Certificateholder generally will be taxed with respect to interest in the same manner as a U.S. Certificateholder that is a United States person if the interest is effectively connected with a United States trade or business of such Non-U.S. Certificateholder. Effectively connected interest income received or accrued by a corporate Non-U.S. Certificateholder may also, under certain circumstances, be subject to an additional "branch profits" tax at a 30% rate (or, if applicable, at a lower tax rate specified by a treaty). Even though such effectively connected income is subject to U.S. federal income tax, and may be subject to the branch profits tax, it is not subject to withholding tax if the Non-U.S. Certificateholder provides a properly executed IRS Form W-8ECI (or successor form). Any capital gain realized upon the sale, exchange, retirement or other disposition of a certificate or a certificate and an Escrow Receipt or upon receipt of premium paid on an secured promissory note by a Non-U.S. Certificateholder will not be subject to U.S. federal income or withholding taxes if (i) such gain is not effectively connected with a U.S. trade or business of the holder and (ii) in the case of an individual, such holder is not present in the United States for 183 days or more in the taxable year of the sale, exchange, retirement or other disposition or receipt. If the certificateholders were treated as members of a partnership, Tax Counsel believes that the partnership would not be engaged in a U.S. trade or business for U.S. federal income tax purposes. As a result, interest payable to Non-U.S. Certificateholders would be eligible for the exemption from U.S. federal withholding tax discussed above. However, if the partnership were considered engaged in a U.S. trade or business, interest and premium payable to Non-U.S. Certificateholders would be subject to U.S. federal income tax on a net income basis, which would be collected through withholding. BACKUP WITHHOLDING Payments made on the certificates and proceeds from the sale of certificates will not be subject to a backup withholding tax at a maximum rate of 31% unless, in general, the certificateholder fails to comply with certain reporting procedures or otherwise fails to establish an exemption from such tax under applicable provisions of the Code. 182 DELAWARE TAXES The pass through trustee is a Delaware banking corporation with its corporate trust office in Delaware. In the opinion of Richards, Layton & Finger, counsel to the pass through trustee, under currently applicable law, assuming that the pass through trusts will not be taxable as corporations, but, rather, will be classified as grantor trusts under subpart E, Part I of Subchapter J, Chapter 1, Subtitle A of, or as partnerships under, the Code, (i) the pass through trusts will not be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), fee or other governmental charge under the laws of the State of Delaware or any political subdivision thereof and (ii) certificateholders that are not residents of or otherwise subject to tax in Delaware will not be subject to any tax (including, without limitation, net or gross income, tangible or intangible property, net worth, capital, franchise or doing business tax), fee or other governmental charge under the laws of the State of Delaware or any political subdivision thereof as a result of purchasing, holding (including receiving payments with respect to) or selling a certificate. Neither the trusts nor the certificateholders will be indemnified for any state or local taxes imposed on them. The imposition of any such taxes on a trust could result in a reduction in the amounts available for distribution to the certificateholders of such trust. 183 ERISA CONSIDERATIONS IN GENERAL Title I of the Employee Retirement Income Security Act of 1974, as amended, which we will refer to as "ERISA", imposes certain requirements on employee benefit plans subject to ERISA ("ERISA Plans") and on those persons who are fiduciaries with respect to ERISA Plans. Investments by ERISA Plans are subject to ERISA's general fiduciary requirements, including the requirement of investment prudence and diversification and the requirement that an ERISA Plan's investment be made in accordance with the documents governing the ERISA Plan. Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets of an ERISA Plan (as well as those plans and other arrangements that are not subject to ERISA but which are subject to Section 4975 of the Code, such as individual retirement accounts (together with ERISA Plans, the "Plans") and certain persons, referred to as "parties in interest" or "disqualified persons", having certain relationships to such Plans, unless a statutory, class or individual prohibited transaction exemption is applicable to the transaction. A party in interest or disqualified person who engages in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. The Department of Labor has promulgated a regulation, 29 CFR Section 2510.3-101, which we will refer to as the "Plan Asset Regulation", describing what constitutes the assets of a Plan as a result of the Plan's investment in an entity for purposes of ERISA and Section 4975 of the Code. Under the Plan Asset Regulation, if a Plan invests in a certificate, the Plan's assets would include both the certificate and an undivided interest in each of the underlying assets of the corresponding pass through trust, including the secured promissory notes held by such pass through trust, unless it is established that equity participation in the pass through trust by benefit plan investors (including Plans, certain plans not subject to ERISA or the Code ("Non-ERISA Plans") and entities whose underlying assets include plan assets by reason of an employee benefit plan's investment in the entity) is not "significant" within the meaning of the Plan Asset Regulation. In that regard, the extent to which there is equity participation in a particular pass through trust on the part of benefit plan investors will not be monitored. If the assets of a pass through trust were deemed to constitute the assets of a Plan, transactions involving the assets of such pass through trust could be subject to the prohibited transaction provisions of ERISA and Section 4975 of the Code unless a statutory, class or individual prohibited transaction exemption were applicable to the transaction. In addition, the pass through trustee could become a fiduciary of a Plan that has invested in the certificates and there may be an improper delegation by such Plan to the pass through trustee of the responsibility to manage Plan assets. However, the duties of the pass through trustee under the pass through trust are essentially custodial and ministerial in nature and it is not expected that the pass through trustee will be required to exercise discretion in the discharge of its responsibilities under the pass through trust other than in limited circumstances such as upon a default on the secured promissory notes. The fiduciary of a Plan that proposes to purchase and hold any certificates should consider whether, among other things, such purchase and holding may involve the indirect extension of credit to a party in interest or a disqualified person. Such a result could arise, for example, if an equity holder in an Owner Trust (including an equity holder acquiring its interest after the initial offering of certificates) were a party in interest or disqualified person with respect to a Plan holding any certificates. In addition, whether or not the assets of a pass through trust are deemed to be Plan Assets under the Plan Asset Regulation, if certificates are purchased by a Plan and certificates of a 184 subordinate class are held by a party in interest or a disqualified person with respect to such Plan, the exercise by the holder of the subordinate class of certificates of its right to purchase the senior classes of certificates upon the occurrence and during the continuation of a Triggering Event could be considered to constitute a prohibited transaction unless a statutory, class or individual prohibited transaction exemption were applicable. Depending on the identity of the Plan fiduciary making the decision to acquire or hold certificates on behalf of a Plan, Prohibited Transaction Class Exemption, or the "PTCE", 91-38 (relating to investments by a bank collective investment fund), PTCE 84-14 (relating to transactions effected by a "qualified professional asset manager", or a "QPAM"), PTCE 95-60 (relating to investments by an insurance company general account), PTCE 96-23 (relating to transactions directed by an in-house asset manager, or an "INHAM") or PTCE 90-1 (relating to investments by an insurance company pooled separate account) (collectively, the "Class Exemptions") could provide an exemption from the prohibited transaction provisions of ERISA and Section 4975 of the Code. There can be no assurance that any of these Class Exemptions or any other exemption will be available with respect to any particular transaction involving the certificates, and the conditions of each potentially applicable Class Exemption must be reviewed by the fiduciary of a Plan in the context of a proposed investment in a certificate. For example, fiduciaries of Plans intending to rely upon PTCE 84-14 or PTCE 96-23 should note that these exemptions may not be available if the person having discretion to appoint the QPAM or INHAM (for example, the Plan Sponsor or one of its "affiliates", as defined in PTCE 84-14 or PTCE 96-23, as applicable) is also (a) an owner of equity in an Owner Trust (including an equity holder acquiring such equity after the initial offering of Certificates) or (b) a provider of services described in this prospectus. Non-ERISA Plans, including governmental plans (as defined in section 3(32) of ERISA), certain church plans (as defined in section 3(33) of ERISA), and foreign plans, while not subject to the fiduciary responsibility provisions of ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to state, federal, foreign or other laws, rules or regulations that contain provisions which are substantially similar to the foregoing provisions of ERISA and the Code ("Similar Laws"). Fiduciaries of any such plans should consult with their counsel before purchasing any certificates. Any Plan fiduciary that proposes to cause a Plan to purchase any certificates should consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and the prohibited transaction provisions of Section 4975 of the Code to such an investment, and to confirm that such purchase and holding will not constitute or result in a non-exempt prohibited transaction or any other violation of an applicable requirement of ERISA. REQUIRED REPRESENTATION Each person who acquires or accepts a certificate or an interest therein will be deemed by such acquisition or acceptance to have represented and warranted that either: (i) no Plan assets and no Non-ERISA Plan assets have been used to purchase such certificate or an interest therein or (ii) the purchase and holding of such certificate or interest therein by (or directly or indirectly on behalf of) the particular Plan or Non-ERISA Plan will not result in a non-exempt prohibited transaction under ERISA or the Code and will be permissible under all applicable Similar Laws. In addition, each fiduciary of a Plan purchasing or holding a certificate, or an interest therein, will be deemed, by virtue of such purchase or holding, to have appointed each person providing services described 185 herein to their respective positions and to have authorized and approved each of the transactions described herein. EACH PLAN FIDUCIARY (AND EACH FIDUCIARY FOR A NON-ERISA PLAN SUBJECT TO SIMILAR LAWS) SHOULD CONSULT WITH ITS LEGAL ADVISOR CONCERNING AN INVESTMENT IN ANY OF THE CERTIFICATES. 186 LEGAL MATTERS The validity of the certificates offered hereby will be passed upon for ATA and ATA Holdings by Troutman Sanders LLP, Atlanta, Georgia. Certain federal income tax matters with respect to the pass through trusts and certificateholders were passed upon by Cravath, Swaine & Moore, special tax counsel to ATA and ATA Holdings. William P. Rogers, Jr., a partner at Cravath, Swaine & Moore, beneficially owns 5,000 shares of common stock of ATA Holdings. The respective counsel for ATA Holdings and the Purchasers may rely upon Richards, Layton & Finger, counsel to Wilmington Trust Company, as to certain matters relating to the authorization, execution and delivery of the Pass Through Trust Agreements and the issuance of the certificates. 187 EXPERTS The consolidated financial statements of Amtran, Inc. at December 31, 2001 and 2000, and for each of the three years in the period ended December 31, 2001, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. The references to AISI, MBA and SH&E, and to their respective appraisal reports, dated as of January 15, 2002 in the case of AISI, January 15, 2002 in the case of MBA and February 12, 2002 in the case of SH&E, are included herein in reliance upon the authority of each such firm as an expert with respect to the matters contained in its appraisal report. 188 SUBSIDIARIES OF ATA HOLDINGS CORP. ATA Holdings owns all of the outstanding stock of the following corporations: American Trans Air, Inc. Ambassadair Travel Club, Inc. ATA Leisure Corp. (formerly ATA Vacations, Inc.; formerly Amber Tours, Inc.) Amber Travel, Inc. American Trans Air Training Corporation American Trans Air ExecuJet, Inc ATA Cargo, Inc. Amber Holdings, Inc. Chicago Express Airlines, Inc. Kodiak Call Centre, Ltd. AATC Holding, Inc. KeyTours, Inc. Travel Charter International, LLC Key Tours of Las Vegas, Inc. Consultrav, Inc. 189 DIRECTORS AND EXECUTIVE OFFICERS J. GEORGE MIKELSONS Director since 1993 J. George Mikelsons, age 65, is the founder, Chairman of the Board and Chief Executive Officer and, prior to the Company's initial public offering in May 1993, was the sole shareholder of the Company. Mr. Mikelsons founded American Trans Air, Inc. and Ambassadair Travel Club, Inc. in 1973. Mr. Mikelsons currently serves on several boards of directors, including The Indianapolis Zoo; the Indianapolis Convention and Visitors Association, where he is a member of the Executive Committee; and the Indianapolis Symphony Orchestra. Mr. Mikelsons has been an airline Captain since 1966 and remains current on several jet aircraft. Mr. Mikelsons is a citizen of the United States. JAMES W. HLAVACEK Director since 1993 James W. Hlavacek, age 66, was appointed Chief Operating Officer of the Company in 1995. He continues to serve as Executive Vice President of the Company and President of ATA Training Corporation. From 1986 to 1989, he was the Company's Vice President of Operations. Mr. Hlavacek has been a commercial airline pilot for 35 years and has held the rank of Captain for over 30 years. He was ATA's Chief Pilot from 1985 to 1986. Mr. Hlavacek serves on the Board of Directors of the National Air Carrier Association. Mr. Hlavacek is a graduate of the University of Illinois. Mr. Hlavacek's principal business address is ATA Holdings' executive offices. Mr. Hlavacek is a citizen of the United States of America. KENNETH K. WOLFF Director since 1993 Kenneth K. Wolff, age 56, was appointed Executive Vice President and Chief Financial Officer of the Company in 1991. From 1990 to 1991, he was the Company's Senior Vice President and Chief Financial Officer. From 1989 to 1990, he was President and Chief Executive Officer of First of America Bank - Indianapolis. From 1988 to 1989, he was President and Chief Operating Officer of this bank. Prior to his appointment as President of that bank, he held various positions at the bank since 1968. Mr. Wolff is a graduate of Purdue University and also holds a Masters in Business Administration from Indiana University and was a member of the faculty there for five years. Mr. Wolff's principal business address is ATA Holdings' executive offices. Mr. Wolff is a citizen of the United States of America. ROBERT A. ABEL Director since 1993 Robert A. Abel, age 49, is a director in the public accounting firm of Blue & Co., LLC. Mr. Abel is a magna cum laude graduate of Indiana State University with a B.S. Degree in Accounting. He is a certified public accountant with over 20 years of public accounting experience in the areas of auditing and corporate tax. He has been involved with aviation accounting and finance since 1976. Blue & Co., LLC provides tax and accounting services to the Company in connection with selected matters. Mr. Abel's principal business address is 11460 N. Meridian Street, Carmel, Indiana 46032. Mr. Abel is a citizen of the United States of America. ANDREJS P. STIPNIEKS Director since 1993 Andrejs P. Stipnieks, age 60, is an international aviation consultant. He graduated from the University of Adelaide, South Australia, and is a Barrister and Solicitor of the Supreme Courts of South Australia, the Australian Capital Territory and of the High Court of Australia. Until 1998, Mr. Stipnieks was a Senior Government Solicitor in the Australian Attorney General's Department, specializing in aviation and surface transport law and practice. He has represented Australia on the Legal Committee of the International Civil Aviation Organization at Montreal. Mr. Stipnieks' principal business address is 6933 Andre Drive, Indianapolis, Indiana 46278. Mr. Stipnieks is a citizen of Australia. 190 CLAUDE E. WILLIS, D.D.S. Director since 2001 Claude E. Willis, age 56, has been in private dental practice in Indianapolis for 29 years. He is a member of the American Dental Association, the Indianapolis District Dental Society and was named on a list of "Top Dentists in America" by the Consumers Research Council of America. A 1968 graduate of Purdue University's School of Science, Dr. Willis completed his graduate studies earning a Doctor of Dental Surgery Degree from Indiana University School of Dentistry in 1972. Dr. Willis' principal business address is 5938 W. State Road 135, Trafalgar, Indiana 46181. Dr. Willis is a citizen of the United States of America. 191 EXECUTIVE COMPENSATION This table shows the compensation paid or accrued to the Chairman of the Board, President and three executive officers for services rendered during the last three fiscal years.
LONG-TERM ANNUAL COMPENSATION COMPENSATION ------------------------------------------ ------------ SECURITIES NAME AND YEAR UNDERLYING PRINCIPAL POSITION COMPENSATION($) SALARY($) BONUS($) OPTIONS (#) ALL OTHER ------------------ --------------- --------- -------- ----------- --------- J. George Mikelsons, 2001 680,403(i) None None 5,775(ii) Chairman of the Board 2000 688,194 None None 3,5353(iii) and Chief Executive Officer 1999 688,194 None None 4,320(iv) James W. Hlavacek 2001 341,923(i) 16,000(v) None 5,775(ii) Executive Vice President 2000 350,000 None 50,000 3,506(iii) and Chief Operating Officer 1999 337,500 224,250 50,000 4,320(iv) Kenneth K. Wolff 2001 341,923(i) 16,000(v) None 5,775ii Executive Vice President and 2000 350,000 None 50,000 3,393(iii) Chief Financial Officer 1999 337,500 224,250 50,000 4,320(iv) Willie G. McKnight 2001 456,923(i) 8,000(v) None None Executive Vice President, 2000 323,077 210,000 100,000 None Marketing and Sales
- -------------------------------------------- (i) Reflects a salary reduction program due to September 11, 2001, terrorist attacks. Mr. McKnight's 2001 salary includes debt forgiveness of $115,000. (ii) Represents the amount of the Company's matching contribution to its 401(k) Plan in 2001. (iii)Represents the amount of the Company's matching contribution to its 401(k) Plan in 2000. (iv) Represents the amount of the Company's matching contribution to its 401(k) Plan in 1999. (v) Bonus amounts relate to a first quarter 2001 performance plan and were paid in the first half of 2001. Such amounts do not relate to year-end 2001 performance. 192 CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS Mr. Mikelsons is the sole owner of Betaco, Inc., a Delaware corporation ("Betaco") and Betaco Ltd., a Grand Cayman exempted company ("Betaco Ltd."). Betaco currently owns two airplanes (a Cessna Citation II and a Lear Jet) and three helicopters (a Bell 206B Jet Ranger III, an Aerospatiale 355F2 Twin Star and a Bell 206L-3 LongRanger). The two airplanes and the Twin Star helicopter are leased or subleased to ATA. The Jet Ranger III and LongRanger helicopters are leased to American Trans Air ExecuJet, Inc. ("ExecuJet"). The Company believes that the current terms of the leases and subleases with Betaco for this equipment are no less favorable to the Company than those that could be obtained from third parties. The lease for the Cessna Citation currently requires a monthly payment of $37,500 for a term beginning July 25, 1999, and ending on July 24, 2004. The lease for the Lear Jet requires a monthly payment of $33,600 for a term beginning December 24, 2001, and ending December 23, 2003. The lease for the JetRanger III currently requires a monthly payment of $7,000 for a term beginning June 15, 1993, and ending June 14, 2004. The lease for the Aerospatiale 355F2 Twin Star requires a monthly payment of $13,500 for a term beginning January 1, 2002, and ending December 31, 2003, and the lease for the LongRanger requires a monthly payment of $10,875 for a term beginning December 11, 2001, and ending December 10, 2003. The recent lease renewals lowered the payments to Betaco for the Lear Jet, Aerospatiale 355F2 Twin Star and LongRanger an aggregate of $7,225 per month because of the decline in values for these aircraft. Betaco is the owner of a 52 foot Express Buddy Davis boat, and Betaco Ltd. is the owner of a 125 foot Feadship motor yacht. The Company has used the vessels for business purposes in the past, but has not compensated Mr. Mikelsons for that usage. On July 1, 2002, the Company entered into an agreement with Mr. Mikelsons to compensate the crew necessary to maintain and operate the vessels in exchange for the Company's future business use of the vessels. If the fair market value of the Company's business use is less than the cost of the crew compensation, Mr. Mikelsons will reimburse the Company for the shortfall. Mr. Abel, Chairman of the Audit Committee, is a partner in the accounting firm of Blue & Co., LLC, which provided tax and accounting services to the Company in 2001. As part of the Company's compensation package to Willie McKnight, the Company's Executive Vice President, Marketing and Sales, on January 24, 2000, the Company provided Mr. McKnight with an interest-free loan of $230,000. The loan was evidenced by a Demand Promissory Note signed by Mr. McKnight. However, 50% of the loan was forgiven on January 24, 2001, and the remainder of the principal balance was forgiven on January 24, 2002. As of September 30, 2002, Mr. Mikelsons had outstanding indebtedness to ATA Holdings with an aggregate principal balance of $693,580. ATA Holdings does not charge Mr. Mikelsons interest on this indebtedness. 193 ATA HOLDINGS CORP. (FORMERLY AMTRAN, INC.) AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page Annual Consolidated Financial Statements: Report of Independent Auditors.............................................................. F-2 Consolidated Balance Sheets at December 31, 2001 and 2000................................... F-3 Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000 and 1999.......................................................... F-4 Consolidated Statements of Changes in Redeemable Preferred Stock, Common Stock and Other Shareholders' Equity for the Years Ended December 31, 2001, 2000 and 1999............................................................................. F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999............................................................................. F-6 Notes to Consolidated Financial Statements.................................................. F-7 Financial Statements and Supplemental Data - Quarterly Financial Summary - Unaudited................................................................................ F-29 Interim Consolidated Financial Statements: Consolidated Balance Sheets at September 30, 2002 and December 31, 2001.......................... F-30 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2002 and 2001.............................................................. F-31 Consolidated Statements of Changes in Redeemable Preferred Stock, Common Stock and Other Shareholders' Equity for the Quarters Ended March 31, June 30 and September 30, 2002............................................................................. F-32 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2001.................................................................... F-33 Notes to Consolidated Financial Statements....................................................... F-34
F-1 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Board of Directors Amtran, Inc. We have audited the accompanying consolidated balance sheets of Amtran, Inc. and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, changes in redeemable preferred stock, common stock and other shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. Our audits also included the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Amtran, Inc. and subsidiaries at December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth herein. /s/ ERNST & YOUNG LLP ERNST & YOUNG LLP Indianapolis, Indiana January 22, 2002 F-2 AMTRAN, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
DECEMBER 31, DECEMBER 31, ASSETS 2001 2000 Current assets: Cash and cash equivalents .................................. $ 184,439 $ 129,137 Aircraft pre-delivery deposits ............................. 166,574 126,307 Receivables, net of allowance for doubtful accounts (2001 - $1,526; 2000 - $1,191) ........................... 75,046 56,605 Inventories, net ........................................... 47,648 49,055 Assets held for sale ....................................... 18,600 - Prepaid expenses and other current assets .................. 19,471 25,411 --------------- ----------------- Total current assets ............................................ 511,778 386,515 Property and equipment: Flight equipment ........................................... 327,541 822,979 Facilities and ground equipment ............................ 119,975 111,825 --------------- ----------------- 447,516 934,804 Accumulated depreciation ................................... (132,573) (412,685) --------------- ------------------ 314,943 522,119 Goodwill ........................................................ 21,780 22,858 Assets held for sale ............................................ 33,159 - Prepaid aircraft rent ........................................... 49,159 31,979 Investment in BATA .............................................. 30,284 - Deposits and other assets ....................................... 41,859 68,959 --------------- ----------------- Total assets .................................................... $ 1,002,962 $ 1,032,430 =============== ================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt ....................... $ 5,820 $ 6,865 Short-term debt ............................................ 118,239 89,875 Accounts payable ........................................... 26,948 10,066 Air traffic liabilities .................................... 100,958 107,050 Accrued expenses ........................................... 177,102 147,095 ------------- ---------------- Total current liabilities ....................................... 429,067 360,951 Long-term debt, less current maturities ......................... 373,533 361,209 Deferred income taxes ........................................... 13,655 54,503 Other deferred items ............................................ 62,575 51,113 --------------- ----------------- Total liabilities ................................................ 878,830 827,776 Redeemable preferred stock; authorized and issued 800 shares...... 80,000 80,000 Shareholders' equity.............................................: Preferred stock; authorized 9,999,200 shares; none issued.... - - Common stock, without par value; authorized 30,000,000 shares, issued 13,266,642 -2001; 13,082,118 - 2000................... 61,964 59,012 Treasury stock; 1,710,658 shares - 2001; 1,696,355 shares - 2000 ............................................. (24,768) (24,564) Additional paid-in-capital .................................. 11,534 12,232 Other comprehensive loss .................................... (687) - Retained earnings (deficit) ................................. (3,911) 77,974 ----------------------------------- Total shareholders' equity ....................................... 44,132 124,654 ----------------------------------- Total liabilities and shareholders' equity........................ $ 1,002,962 $ 1,032,430 ================ =================
See accompanying notes F-3 AMTRAN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 2001 2000 1999 ---------------- --------------- --------------- Operating revenues: Scheduled service ......................................... $ 820,666 $ 753,301 $ 624,647 Charter .................................................... 359,770 435,262 389,979 Ground package ............................................. 52,182 59,848 58,173 Other ...................................................... 42,866 43,142 49,567 ---------------- --------------- --------------- Total operating revenues ...................................... 1,275,484 1,291,553 1,122,366 ---------------- --------------- --------------- Operating expenses: Salaries, wages and benefits ............................... 325,153 297,012 252,595 Fuel and oil ............................................... 251,333 274,820 170,916 Depreciation and amortization .............................. 121,327 125,041 96,038 Aircraft rentals ........................................... 98,988 72,145 58,653 Handling, landing and navigation fees ...................... 88,653 97,414 89,302 Aircraft maintenance, materials and repairs ................ 61,394 70,432 55,645 Crew and other employee travel ............................. 59,278 65,758 49,707 Passenger service .......................................... 43,856 45,571 39,231 Ground package cost ........................................ 42,160 50,903 49,032 Other selling expenses ..................................... 41,601 36,650 28,099 Commissions ................................................ 34,789 39,065 39,050 Advertising ................................................ 26,421 22,016 18,597 Facilities and other rentals ............................... 20,241 15,817 13,318 Special charges ............................................ 21,525 - - Impairment loss ............................................ 112,304 - - US Government grant ........................................ (66,318) - - Other ...................................................... 84,649 76,339 72,156 ---------------- --------------- --------------- Total operating expenses ...................................... 1,367,354 1,288,983 1,032,339 ---------------- --------------- --------------- Operating income (loss) ....................................... (91,870) 2,570 90,027 Other income (expense): Interest income ............................................ 5,331 8,389 5,375 Interest expense ........................................... (30,082) (31,452) (20,966) Other ...................................................... 554 562 3,361 ---------------- --------------- --------------- Other expenses ................................................ (24,197) (22,501) (12,230) ---------------- --------------- --------------- Income (loss) before income taxes (116,067) (19,931) 77,797 Income taxes (credit) ......................................... (39,750) (4,607) 30,455 ---------------- --------------- --------------- Net income (loss) ............................................. (76,317) (15,324) 47,342 Preferred stock dividends ..................................... (5,568) (375) - ---------------- --------------- --------------- Income (loss) available to common shareholders ................ $ (81,885) $ (15,699) $ 47,342 ================ =============== =============== Basic earnings per common share: Average shares outstanding .................................... 11,464,125 11,956,532 12,269,474 Net income (loss) per common share ............................ $ (7.14) $ (1.31) $ 3.86 ================ =============== =============== Diluted earnings per common share: Average shares outstanding .................................... 11,464,125 11,956,532 13,469,537 Net income (loss) per common share ............................ $ (7.14) $ (1.31) $ 3.51 ================ =============== ===============
See accompanying notes. F-4 AMTRAN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE PREFERRED STOCK, COMMON STOCK AND OTHER SHAREHOLDERS' EQUITY (Dollars in thousands)
REDEEM- ABLE ADDITIONAL DEFERRED OTHER RETAINED PREFERRED COMMON TREASURY PAID-IN COMP COMPR EARNINGS STOCK STOCK STOCK CAPITAL ESOP LOSS (DEFICIT) TOTAL ----- ----- ----- ------- ---- ---- --------- ----- Balance, December 31, 1998....... $ - $47,632 $(1,881) $11,735 $(1,066) $ - $46,331 $ 102,751 ------- ------- ------- ------- ------- ------- ------- --------- Net income.................... - - - - - - 47,342 47,342 Issuance of common stock for ESOP........................ - - - 37 533 - - 570 Restricted stock grants....... - 32 - (10) - - - 22 Stock options exercised....... - 6,897 - (3,207) - - - 3,690 Purchase of treasury stock.... - - (8,619) - - - - (8,619) Disqualifying disposition of stock....................... - - - 3,887 - - - 3,887 Acquisition of businesses..... - 1,265 - 468 - - - 1,733 ------- ------- ------- ------- ------- ------- ------- --------- Balance, December 31, 1999....... - 55,826 (10,500) 12,910 (533) - 93,673 151,376 ------- ------- ------- ------- ------- ------- ------- --------- Net loss...................... - - - - - - (15,324) (15,324) Issuance of redeemable preferred stock............. 80,000 - - - - - - 80,000 Issuance of common stock for ESOP........................ - - - 276 533 - - 809 Preferred dividends........... - - - - - - (375) (375) Restricted stock grants....... - 67 (14) 17 - - - 70 Stock options exercised....... - 2,937 - (1,356) - - - 1,581 Purchase of treasury stock.... - - (14,050) - - - - (14,050) Disqualifying disposition of stock....................... - - - 411 - - - 411 Acquisition of businesses..... - 182 - (26) - - - 156 ------- ------- ------- ------- ------- ------- ------- --------- Balance, December 31, 2000....... 80,000 59,012 (24,564) 12,232 - - 77,974 204,654 ======= ======= ======== ======= ======= ======= ======= ========= Net loss...................... - - - - - - (76,317) (76,317) Net loss on derivative instruments................. - - - - - (687) - (687) ----- ------ ----- Total comprehensive loss... (687) (76,317) (77,004) Preferred dividends........... - - - - - - (5,568) (5,568) Restricted stock grants....... - 40 (8) 10 - - - 42 Stock options exercised....... - 2,912 - (1,242) - - - 1,670 Purchase of treasury stock.... - - (196) - - - - (196) Disqualifying disposition of stock....................... - - - 534 - - - 534 ------- ------- ------- ------- ------- ------- ------- --------- Balance, December 31, 2001....... $80,000 $61,964 $(24,768) $11,534 $ - $ (687) $(3,911) $ 124,132 ======= ======= ======== ======= ======= ======= ======= =========
See accompanying notes. F-5 AMTRAN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 2001 2000 1999 --------------------------------------------------- Operating activities: Net income (loss).............................................. $ (76,317) $ (15,324) $ 47,342 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization............................... 121,327 125,041 96,038 Impairment loss............................................. 112,304 - - Deferred income taxes (credit).............................. (40,848) (3,990) 5,873 Other non-cash items........................................ 8,407 4,324 7,573 Changes in operating assets and liabilities: Receivables................................................. (18,441) (4,506) (21,197) Inventories................................................. (11,586) (15,191) (18,746) Prepaid expenses............................................ 5,940 (2,466) 7,484 Accounts payable............................................ 16,882 (10,168) 10,684 Air traffic liabilities..................................... (6,092) 13,543 (2,465) Accrued expenses............................................ 32,848 20,429 20,087 ---------------- ----------------- ---------------- Net cash provided by operating activities 144,424 111,692 152,673 ---------------- ----------------- ---------------- Investing activities: Aircraft pre-delivery deposits................................. (30,781) (116,978) (7,363) Capital expenditures........................................... (119,798) (146,523) (266,937) Acquisition of businesses, net of cash acquired................ - - 16,673 Investment in BATA............................................. 27,343 - - Noncurrent prepaid aircraft rent............................... (17,180) (16,811) (15,212) Additions to other assets...................................... 10,474 (10,593) (33,143) Proceeds from sales of property and equipment.................. 151 68 264 ---------------- ----------------- ---------------- Net cash used in investing activities (129,791) (290,837) (305,718) ---------------- ----------------- ---------------- Financing activities: Preferred stock dividends...................................... (5,568) (375) - Proceeds from sale/leaseback transactions...................... 5,229 10,791 6,890 Proceeds from short-term debt.................................. 71,537 90,825 - Payments on short-term debt.................................... (44,123) - - Proceeds from long-term debt................................... 219,422 33,117 99,902 Payments on long-term debt..................................... (207,294) (13,998) (1,590) Proceeds from stock option exercises........................... 1,670 1,822 3,690 Proceeds from redeemable preferred stock....................... - 80,000 - Purchase of treasury stock..................................... (204) (14,064) (8,619) ---------------- ----------------- ---------------- Net cash provided by financing activities................... 40,669 188,118 100,273 ---------------- ----------------- ---------------- Increase (decrease) in cash and cash equivalents............... 55,302 8,973 (52,772) Cash and cash equivalents, beginning of period................. 129,137 120,164 172,936 ---------------- ----------------- ---------------- Cash and cash equivalents, end of period....................... $ 184,439 $ 129,137 $ 120,164 ================ ================= ============== Supplemental disclosures: Cash payments for: Interest.................................................... $ 44,839 $ 31,628 $ 24,411 Income taxes (refunds)...................................... $ (9,721) $ 579 $ 11,910 Financing and investing activities not affecting cash: Capital lease............................................... $ - $ 117 $ 2,729 Accrued capital interest.................................... $ 7,465 $ 7,890 $ -
See accompanying notes. F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND BUSINESS DESCRIPTION The consolidated financial statements include the accounts of Amtran, Inc. (the "Company") and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The Company operates principally in one business segment through American Trans Air, Inc. ("ATA"), its principal subsidiary, which accounts for approximately 90% of the Company's operating revenues. ATA is a U.S.-certificated air carrier providing domestic and international charter and scheduled passenger air services. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. CASH EQUIVALENTS Cash equivalents are carried at cost, which approximates market, and are primarily comprised of money market funds, commercial paper and investments in U.S. Treasury bills, which are purchased with original maturities of three months or less (See "Note 3 - Cash and Cash Equivalents.") INVENTORIES Inventories consist primarily of expendable aircraft spare parts, fuel and other supplies. Aircraft parts inventories are stated at cost and are reduced by an allowance for obsolescence. The obsolescence allowance is provided by amortizing the cost of the aircraft parts inventory, net of an estimated residual value, over the related fleet's estimated useful service life. The obsolescence allowance at December 31, 2001 and 2000 was $10.9 million and $13.1 million, respectively. Inventories are charged to expense when consumed. REVENUE RECOGNITION Revenues are recognized when air transportation or other services are provided. Customer flight deposits and unused passenger tickets sold are included in air traffic liability. As is customary within the industry, the Company performs periodic evaluations of this estimated liability, and any resulting adjustments, which can be significant, are included in the results of operations for the periods in which the evaluations are completed. In 2001, the Company recognized reimbursement for estimated direct and incremental losses incurred as a result of the September 11 terrorist attacks according to guidelines established F-7 in the Air Transportation Safety and System Stabilization Act. The Company used accounting principles generally accepted in the United States to identify and measure such direct and incremental losses. Certain of those direct and incremental losses identified by the Company have been disallowed by the DOT, and are therefore excluded from the reimbursement recognized by the Company. PASSENGER TRAFFIC COMMISSIONS Passenger traffic commissions are recognized as expense when the transportation is provided and the related revenue is recognized. The amount of passenger traffic commissions paid but not yet recognized as expense is included in prepaid expenses and other current assets in the accompanying consolidated balance sheets. RECLASSIFICATIONS Certain 2000 balance sheet amounts have been reclassified to conform to the 2001 presentation. PROPERTY AND EQUIPMENT Property and equipment is recorded at cost and is depreciated to residual value over its estimated useful service life using the straight-line method. The estimated useful service lives for the principal depreciable asset classifications are as follows:
ASSET ESTIMATED USEFUL SERVICE LIFE - -------------------------------------------------------------------------------------------------------------------- Aircraft and related equipment Lockheed L-1011 (Series 50 and 100) Depreciating to individual aircraft retirement date (2002-2004) (See "Note 16 - Asset Impairment.") Lockheed L-1011 (Series 500) Depreciating to common retirement date of December 2010 Boeing 737-800 All aircraft are subject to operating leases Boeing 757-200 All aircraft are subject to operating leases Boeing 757-300 All aircraft are subject to operating leases Saab 340B 15 years Major rotable parts, avionics and assemblies Life of equipment to which applicable (generally ranging from 5-18 years) Improvements to leased flight equipment Period of benefit or term of lease Other property and equipment 3-7 years
AIRCRAFT LEASE RETURN CONDITIONS The Company finances a significant number of aircraft through operating leases. Many of these leases require that the airframes and engines be in a specified maintenance condition upon their return to the lessor at the end of the lease. If these return conditions are not met by the Company, the leases generally require financial compensation to the lessor. When an F-8 operating lease is within five years of its initial termination date, the Company accrues ratably over that five years the estimated return condition obligations at the end of the leases. AIRFRAME AND ENGINE OVERHAULS The Company has entered into engine manufacturers' agreements for engines which power the Boeing 737-800 and Saab 340B fleets, which provide for the Company to pay a monthly fee per engine flight hour in exchange for major overhaul and maintenance of those engines. The Company expenses the cost per flight hour under these agreements as incurred. The cost of engine overhauls for remaining fleets types, and the cost of airframe overhauls for all fleet types other than the Saab 340B, are capitalized when performed and amortized over estimated useful lives based upon usage, or to earlier fleet or aircraft retirement dates, for both owned and leased aircraft. Airframe overhauls for Saab 340B aircraft are expensed as incurred. AIRCRAFT PRE-DELIVERY DEPOSITS Advanced payments for future aircraft deliveries scheduled within the next 12 months are classified as current aircraft pre-delivery deposits in the accompanying consolidated balance sheets, as the aircraft will be acquired and paid for by third parties who will lease them to the Company. Advanced payments for future aircraft deliveries not scheduled within the next 12 months are classified as deposits and other assets. As of December 31, 2001 and 2000, deposits and other assets included advanced payments for future aircraft and engine deliveries totaling $4.1 million and $13.6 million, respectively. INTANGIBLE ASSETS Goodwill, which represents the excess of cost over fair value of net assets acquired, is amortized on a straight-line basis over 20 years. The Company periodically reviews the amortization periods and the carrying amounts of goodwill to assess its continued recoverability in accordance with Accounting Principles Board Opinion No. 17, Intangible Assets ("APB 17"). The Company's policy is to record an impairment loss in the period when it is determined that the carrying amount of the asset may not be recoverable. FINANCIAL INSTRUMENTS The carrying amounts of cash equivalents, receivables and debt approximate fair value. (See "Note 5 - Long-Term Debt.") The fair value of fixed-rate debt, including current maturities, is estimated using discounted cash flow analysis based on the Company's current incremental rates for similar types of borrowing arrangements. 2. IMPACT OF TERRORIST ATTACKS ON SEPTEMBER 11, 2001 On September 11, 2001, four commercial aircraft operated by two other U.S. airlines were hijacked and destroyed in terrorist attacks on the United States. These attacks resulted in significant loss of life and property damage in New York City, Washington, D.C. and western Pennsylvania. In response to these attacks, on September 11 the FAA temporarily suspended all commercial flights to, from and within the United States until September 13. The Company resumed limited flight operations on September 13, with the exception of flights to and from Chicago-Midway Airport, which commenced partial operations on F-9 September 14. From September 11 to September 14, the Company canceled over 800 scheduled flights. Upon resuming its pre-attack flight schedule the week of September 17, the Company experienced significantly lower passenger traffic and unit revenues than prior to the attacks. In response to this, the Company reduced its flight schedule by approximately 20%, as compared to the schedule operated immediately prior to September 11, and furloughed approximately 1,100 employees by the middle of October. By December 31, 2001, the Company had recalled approximately half of the furloughed employees and had added some capacity back to its flight schedule. In order to adjust its fleet to its reduced flight schedule, the Company accelerated the planned retirement of its fleet of 24 Boeing 727-200 aircraft. Most of these aircraft were retired from revenue service in the fourth quarter of 2001, although the Company will continue to use as many as five to ten aircraft in charter service through the middle of 2002. (See "Note 16 - Asset Impairment.") The Company also negotiated delayed delivery dates for certain Boeing 737-800 and Boeing 757-300 aircraft under its new aircraft order from Boeing. Delivery dates of seven Boeing 737-800 aircraft were delayed more than 12 months. The final Boeing 737-800 delivery is now planned for August 2004 rather than May 2004, and the final 757-300 delivery is planned for August 2002 rather than June 2002. (See "Note 12 - Commitments and Contingencies.") On September 22, 2001, President Bush signed into law the Air Transportation Safety and System Stabilization Act ("Act"). The Act provides for, among other things: (1) $5.0 billion in compensation for direct losses incurred by all U.S. airlines and air cargo carriers (collectively, "air carriers") as a result of the closure by the FAA of U.S. airspace following the September 11, 2001 terrorist attacks and for incremental losses incurred by air carriers through December 31, 2001 as a direct result of such attacks; (2) subject to certain conditions, the availability of up to $10.0 billion in U.S. Government guarantees of certain loans made to air carriers for which credit is not reasonably available as determined by a newly established Air Transportation Stabilization Board; (3) the authority of the Secretary of Transportation to reimburse air carriers (which authority expires 180 days after the enactment of the Act) for the increase in the cost of insurance, with respect to a premium for coverage ending before October 1, 2002, against loss or damage arising out of any risk from the operation of an aircraft over the premium in effect for a comparable operation during the period September 4, 2001 to September 10, 2001; (4) at the discretion of the Secretary of Transportation, a $100 million limit on the liability of any air carrier to third parties with respect to acts of terrorism committed on or to such air carrier during the 180-day period following the enactment of the Act; (5) the extension of the due date for the payment by eligible air carriers of certain excise taxes; (6) compensation to individual claimants who were physically injured or killed as a result of the terrorist attacks of September 11, 2001; and (7) the Secretary of Transportation to ensure that all communities that had scheduled air service before September 11, 2001 continue to receive adequate air service. In addition, the Act provides that, notwithstanding any other provision of law, liability for all claims, whether for compensatory or punitive damages, arising from the terrorist-related events of September 11, 2001 against any air carrier shall not be in an amount greater than the limits of the liability coverage maintained by the air carrier. With respect to the cash grants of up to $5.0 billion, each qualified air carrier is entitled to receive the lesser of: (1) its actual direct and incremental losses incurred between September 11, 2001 and December 31, 2001; or (2) its proportion of the $5.0 billion of total compensation available to all qualified air carriers under the Act allocated by August 2001 available seat miles or ton miles. F-10 The Company believes it is eligible to receive up to $74.0 million in connection with the Act in compensation for direct and incremental losses arising from the terrorist attacks of September 11 and the subsequent decline in demand for air travel. However, the Company has recorded $66.3 million in 2001 in U.S. Government grant compensation, as the DOT has disallowed certain losses recorded under generally accepted accounting principles ("GAAP"). Included in these potentially nonreimbursable losses are the Company's non-cash write-down of the Boeing 727-200 aircraft fleet ($35.2 million) and exit costs related to rent payments scheduled to continue on certain Boeing 727-200 aircraft after they are removed from service ($3.8 million.) The Company, along with the Air Transport Association, has requested that the DOT use GAAP as the standard for determining reimbursable losses under the Act. If the DOT reverses their position to disallow these losses, the Company may record additional U.S. Government grant revenue of up to $7.7 million in 2002, based upon the Company's estimated maximum allocation calculated from August 2001 available seat miles. As of December 31, 2001, the Company had received $44.5 million in cash compensation under the Act and expects to receive $21.8 million in additional cash in the second quarter of 2002. The Company's calculation of direct and incremental losses is subject to audit by the United States Government at a future date, yet to be determined. Components of direct and incremental losses incurred by the Company, for which U.S. Government compensation of $66.3 million was recorded, include: (1) $57.1 million in lost profit contribution (direct revenues lost, less variable operating expenses avoided) from planned flights not operated between September 11 and December 31, and from flights operated during this time period with lower load factors and unit revenues; (2) certain special charges of $17.8 million, that were deemed directly attributable to the attacks, as described in the following paragraphs; less (3) $8.6 million in expense reductions realized as a direct result of lower costs incurred by the Company after the September 11 attacks. Special charges are those direct expenses which, due to the events of September 11, are unusual under the provisions of APB Opinion 30, Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions ("APB 30"). These costs include travel expenses to reposition crew members and aircraft once flights resumed; expenses paid for passengers whose travel was interrupted by flight diversions and cancellations; and employee salaries for crew members and airport staff affected by the temporary FAA-mandated grounding of the Company's fleet. Also classified as special charges are increased hull and liability insurance costs; additional advertising expense incurred as a direct result of September 11; interest expense related to debt incurred under the Company's credit facility to provide operating cash after September 11; incremental security costs; toll-free telephone service costs related to the implementation of a reduced flight schedule on and after September 23; losses on abandoned capital projects; and additional letter of credit fees incurred. The Company also recorded special charges of $3.8 million related to exit costs for rent payments scheduled to continue on certain Boeing 727-200 aircraft after they are removed from service; however, Government grant revenue was not recorded in relation to these charges based on the Department of Transportation's current position that they are nonreimbursable. Special charges also include $3.3 million of expenses related to a proposed transaction in which Amtran would have been taken private, which had been substantially completed just prior to September 11. On June 18, 2001, the Company entered into a merger agreement F-11 with INDUS Acquisition Company ("INDUS"), a newly formed company wholly owned by J. George Mikelsons, the Company's Chairman, founder and majority shareholder, providing for approximately 28% of the outstanding shares of the Company's common stock not presently owned by Mr. Mikelsons to be converted into the right to receive $23 in cash per share. Also on June 18, 2001, the Company received from Citicorp USA, Inc. and Salomon Smith Barney, Inc. a commitment letter with respect to a $175.0 million secured credit facility to be used to finance that transaction. On September 21, 2001, following the events of September 11, Citicorp USA, Inc. and Salomon Smith Barney, Inc. terminated their obligations under the commitment letter on the basis that a material adverse change had occurred in the business condition (financial or otherwise), operations or properties of the Company, taken as a whole, since December 31, 2000. Completion of the proposed transaction was conditioned on, among other things, receipt of a financing commitment to be used to fund the proposed transaction. The Company attempted to find alternate financing to replace the lost commitment, but was unable to do so. On October 4, 2001, as a result of the termination of the financing commitment and the inability to find alternative financing, the Company entered into a mutual termination agreement with INDUS that terminated the merger agreement. The Company has not yet submitted an application for loan guarantees provided under the Act. The Company believes it meets the qualifications to receive such loan guarantees; however, the Company is not able to provide any estimate at this time as to the amount of loan guarantees, if any, that it may request or receive, or for what period of time those guarantees might remain in effect. As a result of the September 11, 2001 attacks, the Company's aviation insurers, and other air carriers' aviation insurers, have significantly reduced the maximum amount of insurance coverage they will underwrite for liability to persons other than employees or passengers resulting from acts of terrorism, war, hijacking or other similar perils (war-risk coverage). In addition, the Company and other air carriers, are being charged significantly higher premiums for this reduced coverage, as well as other aviation insurance. The Act provided for reimbursement to air carriers of incremental costs of the war-risk coverage for a 30-day period ended October 31, 2001. The Company received $0.9 million as a result of this provision. In addition, and pursuant to the Act, the Government has issued supplemental war-risk coverage to U.S. air carriers, including the Company, through May 20, 2002. It is anticipated that after this date a commercial product for war risk coverage will become available, but the Company may incur significant additional costs for this coverage. On November 19, 2001, President Bush signed into law the Aviation and Transportation Security Act ("Aviation Security Act"). This law provides for placing substantially all aspects of civil aviation passenger security and screening under federal control, to be phased in during 2002 and 2003, and creates a new Transportation Security Administration under the DOT. The cost of the provisions set forth in the Aviation Security Act will be funded by a new security fee of $2.50 per passenger enplanement, limited to $5 per one-way trip and $10 per round trip. Air carriers, including the Company, began collecting the new fee on February 1, 2002. The Aviation Security Act will also be funded by financial assessments to each air carrier beginning in the second quarter of 2002. The amount of the air carrier assessment is limited to the amount each air carrier spent on aviation security in 2000. F-12 3. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of the following:
DECEMBER 31, 2001 2000 ---------------------------- ---------------------------- (in thousands) Cash and money market funds $ 180,388 $ 19,264 Commercial paper - 108,938 U.S. Treasury repurchase agreements 4,051 935 --------------- --------------- $ 184,439 $ 129,137 --------------- ---------------
4. PROPERTY AND EQUIPMENT The Company's property and equipment consist of the following:
DECEMBER 31, 2001 2000 --------------------------- -------------------------- (in thousands) Flight equipment, including airframes, engines and other $ 327,541 $ 822,979 Less accumulated depreciation 58,396 351,329 --------------- --------------- 269,145 471,650 --------------- --------------- Facilities and ground equipment 119,975 111,825 Less accumulated depreciation 74,177 61,356 --------------- --------------- 45,798 50,469 --------------- --------------- $ 314,943 $ 522,119 --------------- ---------------
5. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, 2001 2000 ---------------------- ---------------------- (in thousands) Unsecured Senior Notes, fixed rate of 10.50%, payable in August 2004 $ 175,000 $ 175,000 Unsecured Senior Notes, fixed rate of 9.625% payable in December 2005 125,000 125,000 Aircraft pre-delivery deposit finance facilities, variable rates, 118,239 89,875 payable upon delivery of aircraft Borrowings against secured revolving bank credit facility, variable 35,000 - rate, payable in January 2003 Secured note payable to institutional lender, variable rate, payable 9,375 11,075 in varying installments through October 2005 Secured note payable to institutional lender, variable rate, payable 8,383 10,083 in varying installments through March 2005
F-13 Mortgage note payable to institutional lender, fixed rate of 8.75%, 9,538 9,937 payable in varying installments through June 2014 Mortgage note payable to institutional lender, fixed rate of 8.30%, 7,280 7,595 payable in varying installments through June 2014 City of Chicago variable-rate special facility revenue bonds, payable 6,000 6,000 in December 2020 City of Chicago variable-rate special facility revenue bonds, repaid - 16,960 in November 2001 Other 3,777 6,424 ------------- ------------- 497,592 457,949 Less current maturities and short-term debt 124,059 96,740 ------------- ------------- $ 373,533 $ 361,209 ============= =============
In July 1997, the Company sold $100.0 million principal amount of 10.50% unsecured senior notes. The Company sold an additional $75.0 million principal amount of these notes in December 1999. Interest on these notes is payable on February 1 and August 1 of each year. The Company may redeem the notes, in whole or in part, at any time on or after August 1, 2002, initially at 105.25% of their principal amount plus accrued interest, declining ratably to 100.0% of their principal amount plus accrued interest at maturity. The net proceeds of the $100.0 million unsecured notes issued in 1997 were approximately $96.9 million, after deducting costs and fees of issuance. The Company used a portion of the net proceeds to repay in full the Company's prior bank facility and used the balance of the proceeds for general corporate purposes. The net proceeds of the $75.0 million unsecured notes issued in 1999 were approximately $73.0 million after deducting costs and fees of issuance, and were used for general corporate purposes. In December 1998, the Company sold $125.0 million principal amount of 9.625% unsecured senior notes. Interest on these notes is payable on June 15 and December 15 of each year. The Company may redeem the notes, in whole or in part, at any time on or after June 15, 2003, initially at 104.81% of their principal amount plus accrued interest, declining to 102.41% of their principal amount plus accrued interest on June 15, 2004, then to 100.0% of their principal amount plus accrued interest at maturity. The net proceeds of the $125.0 million unsecured notes were approximately $121.0 million after deducting costs and fees of issuance. The Company used the net proceeds for the purchase of Lockheed L-1011-500 aircraft, engines and spare parts, and, together with operating cash and bank facility borrowings, for the purchase of Boeing 727-200 aircraft, engines, engine hushkits and spare parts. In June 1999, the Company obtained an $8.0 million loan at 8.30% secured by a 15-year mortgage on the new Maintenance and Operations Center. This building had a carrying amount of $8.0 million as of December 31, 2001. In December 1999, the Company issued $17.0 million in variable-rate special facility revenue bonds through the City of Chicago to finance the construction of a Federal Inspection Service facility at Chicago-Midway Airport. In November 2001, these bonds were paid in full by the City of Chicago, in exchange for ownership of the facility. F-14 In March and October 2000, the Company issued two $11.5 million variable rate five-year notes, each collateralized by one Lockheed L-1011-500 aircraft. The related aircraft have a combined carrying amount of $25.4 million as of December 31, 2001. In September 2000, the Company obtained a $10.0 million, 14-year loan at 8.75%, secured by a mortgage on its maintenance facility at the Indianapolis International Airport. The proceeds of the loan were used to repay an advance received from the City of Indianapolis in December 1995 that resulted from the sale/leaseback of the facility. In December 2000, the Company entered into three finance facilities to fund pre-delivery deposits on the new Boeing 757-300 and Boeing 737-800 aircraft. The Company obtained the first facility from Banca Commerciale Italiana. It provides up to $75.0 million in deposit funding, against which the Company had borrowed $75.0 million at December 31, 2001 and $55.7 million at December 31, 2000. The Company obtained a second facility from GE Capital Aviation Services, Inc. This facility provides for up to approximately $58.2 million in pre-delivery deposit funding, against which the Company had borrowed $23.2 million at December 31, 2001 and $14.3 million at December 31, 2000. The third facility, obtained from Rolls-Royce plc., will fund up to $40.0 million in deposits, against which the Company had borrowed $20.0 million at December 31, 2001 and $19.9 million at December 31, 2000. All of this debt has been classified as current in the accompanying balance sheets, because it will be repaid through the return of related pre-delivery deposits on aircraft scheduled for delivery within 12 months of each balance sheet date, as the aircraft will be acquired and paid for by third parties who will lease them to the Company. Interest on these facilities is payable monthly. The Company has a secured revolving bank credit facility which provides for maximum borrowings of $100.0 million, including up to $50.0 million for stand-by letters of credit. The facility matures January 2, 2003, and borrowings under the facility bear interest, at the option of ATA, at either LIBOR plus a margin or the agent bank's prime rate. The facility is subject to certain restrictive covenants and is collateralized by all six owned Boeing 727-200 aircraft, nine Lockheed L-1011-50 and 100 aircraft and engines and three Lockheed L-1011-500 aircraft and engines, which have a combined carrying amount of approximately $133.5 million as of December 31, 2001. As of December 31, 2001, the Company had borrowings of $35.0 million against the facility, and had outstanding letters of credit of $39.3 million secured by the facility. The unsecured senior notes, bank credit facility and other loans secured by certain collateral are subject to restrictive covenants, including, among other things, limitations on the incurrence of additional indebtedness; the payment of dividends; certain transactions with shareholders and affiliates; and the creation of liens on or other transactions involving certain assets. In addition, certain covenants require specified financial ratios to be maintained. F-15 Future maturities of long-term debt are as follows:
DECEMBER 31, 2001 ----------------- (in thousands) 2002 $ 124,059 2003 39,878 2004 179,749 2005 134,038 2006 1,602 Thereafter 18,266 ---------------- $ 497,592
Interest capitalized in connection with long-term asset purchase agreements and construction projects was $29.0 million, $15.3 million and $6.1 million in 2001, 2000, and 1999, respectively. The capitalized interest includes $14.7 million, $7.9 million and $0.0 million in 2001, 2000 and 1999, respectively, of interest to be paid to Boeing upon delivery of certain Boeing 737-800 and Boeing 757-300 aircraft in lieu of the Company making additional pre-delivery deposits, as allowed by the purchase agreement. 6. LEASE COMMITMENTS At December 31, 2001, the Company had the following operating aircraft leases:
-------------------------------------- --------------- ---------------------------- ---------------------------- TOTAL LEASED INITIAL LEASE EXPIRATIONS INITIAL LEASE TERMS -------------------------------------- --------------- ---------------------------- ---------------------------- Lockheed L-1011-100 1 2003 60 months -------------------------------------- --------------- ---------------------------- ---------------------------- Boeing 727-200 (1) 7 Between 2001 and 2003 6 to 84 months -------------------------------------- --------------- ---------------------------- ---------------------------- Boeing 757-200 16 Between 2002 and 2022 1 to 22 years -------------------------------------- --------------- ---------------------------- ---------------------------- Boeing 757-300 5 2021 20 years -------------------------------------- --------------- ---------------------------- ---------------------------- Boeing 737-800 14 Between 2016 and 2021 15 to 20 years -------------------------------------- --------------- ---------------------------- ---------------------------- Saab 340b 9 2009 and 2010 9.5 years -------------------------------------- --------------- ---------------------------- ---------------------------- Engines - Lockheed L-1011-500 6 2006 and 2007 7 years -------------------------------------- --------------- ---------------------------- ---------------------------- Engines - Boeing 757-200 5 Between 2008 and 2011 9 to 15 years -------------------------------------- --------------- ---------------------------- ---------------------------- Engines - Boeing 757-300 1 2024 22.5 years -------------------------------------- --------------- ---------------------------- ---------------------------- Engines - Boeing 737-800 2 2021 20 years -------------------------------------- --------------- ---------------------------- ----------------------------
(1) As of December 31, 2001, three of the aircraft had been retired from revenue service, but the Company remained obligated on the leases. The Company is responsible for all maintenance costs on these aircraft and engines, and it must meet specified airframe and engine return conditions upon lease expiration. As of December 31, 2001, the Company had other long-term leases related to certain ground facilities, including terminal space and maintenance facilities, with lease terms that vary from F-16 two to 45 years and expire at various dates through 2040. The lease agreements relating to the ground facilities, which are primarily owned by governmental units or authorities, generally do not provide for transfer of ownership, nor do they contain options to purchase. The Company also had two long-term leases related to certain ground equipment, which both expire in 2008. The Company leases its headquarters facility from the Indianapolis Airport Authority under an operating lease agreement, which expires in December 2002. The agreement has an option to extend for five years. The Company is responsible for maintenance, taxes, insurance and other expenses incidental to the operation of the facilities. Future minimum lease payments at December 31, 2001, for noncancelable operating leases with initial terms of more than one year are as follows:
FACILITIES AND GROUND FLIGHT EQUIPMENT EQUIPMENT TOTAL ---------------------------- ---------------------------- ---------------------------- (in thousands) 2002 $ 150,825 $ 11,821 $ 162,646 2003 147,110 11,889 158,999 2004 146,357 11,338 157,695 2005 145,191 9,946 155,137 2006 145,191 8,983 154,174 Thereafter 1,631,398 36,494 1,667,892 ----------------- ----------------- ----------------- $ 2,366,072 $ 90,471 $ 2,456,543 ----------------- ----------------- -----------------
Rental expense for all operating leases in 2001, 2000 and 1999 was $119.2 million, $88.0 million and $72.0 million, respectively. 7. INCOME TAXES The provision for income tax expense (credit) consisted of the following:
DECEMBER 31, 2001 2000 1999 ------------------------ ----------------------- ----------------------- (in thousands) Federal: Current $ 4,070 $ - $ 15,339 Deferred (40,546) (4,278) 10,889 --------------- --------------- -------------- (36,476) (4,278) 26,228 State: Current 510 328 1,284 Deferred (3,784) (657) 2,943 --------------- --------------- -------------- (3,274) (329) 4,227 --------------- --------------- -------------- Income tax expense (credit) $ (39,750) $ (4,607) $ 30,455 --------------- --------------- --------------
F-17 The provision for income tax expense (credit) differed from the amount obtained by applying the statutory federal income tax rate to income (loss) before income taxes as follows:
DECEMBER 31, 2001 2000 1999 --------------------- -------------------- -------------------- (in thousands) Federal income tax (credit) at statutory rate $ (40,626) $ (6,841) $ 27,175 State income tax (credit) net of federal benefit (2,328) (143) 1,997 Non-deductible expenses 2,041 1,872 1,578 Other, net 1,163 505 (295) -------------- -------------- --------------- Income tax expense (credit) $ (39,750) $ (4,607) $ 30,455 --------------- --------------- --------------
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The principal temporary differences relate to the use of accelerated methods of depreciation and amortization for tax purposes. Deferred tax liability and asset components are as follows:
DECEMBER 31, 2001 2000 ------------------------ ------------------------ (in thousands) Deferred tax liabilities: Property and equipment $ 35,031 $ 85,398 Other taxable temporary differences 342 714 --------------- --------------- Deferred tax liabilities 35,373 86,112 --------------- --------------- Deferred tax assets: Tax benefit of net operating loss carryforwards 383 12,739 Alternative minimum tax and other tax credit carryforwards 19,528 15,813 Vacation pay accrual 4,723 4,552 Other deductible temporary differences 2,042 2,978 --------------- --------------- Deferred tax assets 26,676 36,082 --------------- --------------- Net deferred tax liability $ 8,697 $ 50,030 =============== =============== Deferred taxes classified as: Current asset $ 4,958 $ 4,473 Non-current liability $ 13,655 $ 54,503
At December 31, 2001, for federal tax reporting purposes, the Company had approximately $0.4 million of net operating loss carryforward available to offset future federal taxable income and $19.5 million of alternative minimum tax and other tax credit carryforwards available to offset future federal tax liabilities. The net operating loss carryforward expires in 2015. The alternative minimum tax and other tax credit carryforwards have no expiration dates. 8. RETIREMENT PLAN The Company has a defined contribution 401(k) savings plan which provides for participation by substantially all the Company's employees who have completed one year of service. The Company has elected to contribute an amount equal to 55.0% in 2001, 50.0% in 2000 and 45.0% in 1999, of the amount contributed by each participant up to the first six F-18 percent of eligible compensation. Company matching contributions expensed in 2001, 2000 and 1999 were $4.7 million, $3.9 million and $3.1 million, respectively. In 1993, the Company added an Employee Stock Ownership Plan ("ESOP") feature to its existing 401(k) savings plan. The ESOP used the proceeds of a $3.2 million loan from the Company to purchase 200,000 shares of the Company's common stock. The selling shareholder was the Company's principal shareholder. Shares of common stock held by the ESOP were allocated to participating employees annually for seven years, ending in 1999, as part of the Company's 401(k) savings plan contribution. The fair value of the shares allocated during the year was recognized as compensation expense. As the program ended in 1999, the Company recognized no related compensation expense in 2001 and 2000, but recognized $0.7 million in 1999. 9. SHAREHOLDERS' EQUITY Since 1994, the Company's Board of Directors has approved the repurchase of up to 1,900,000 shares of the Company's common stock. As of December 31, 2001, the Company had repurchased 1,710,658 common shares at a cost of $24.8 million. The Company's 1993 Incentive Stock Plan for Key Employees (1993 Plan) authorizes the grant of options for up to 900,000 shares of the Company's common stock. The Company's 1996 Incentive Stock Plan for Key Employees (1996 Plan) authorizes the grant of options for up to 3,000,000 shares of the Company's common stock. The Company's 2000 Incentive Stock Plan for Key Employees (2000 Plan) authorizes the grant of options for up to 3,000,000 shares of the Company's common stock. Options granted have five to 10-year terms and generally vest and become fully exercisable over specified periods of up to three years of continued employment. A summary of common stock option changes follows:
WEIGHTED-AVERAGE NUMBER OF SHARES EXERCISE PRICE ---------------- -------------- Outstanding at December 31, 1998 2,370,253 $ 9.38 ---------------- -------------- Granted 582,510 26.33 Exercised (431,075) 8.56 Canceled (28,528) 15.02 ---------------- -------------- Outstanding at December 31, 1999 2,493,160 13.41 ---------------- -------------- Granted 638,550 15.69 Exercised (183,906) 8.61 Canceled (37,331) 17.88 ---------------- -------------- Outstanding at December 31, 2000 2,910,473 14.19 ---------------- -------------- Granted 106,600 12.21 Exercised (181,949) 9.18 Canceled (121,075) 21.60 ---------------- --------------
F-19 Outstanding at December 31, 2001 2,714,049 $ 14.14 ================ ============== Options exercisable at December 31, 1999 1,077,554 $ 10.04 ================ ============== Options exercisable at December 31, 2000 1,741,092 $ 11.51 ================ ============== Options exercisable at December 31, 2001 2,528,633 $ 13.80 ================ ==============
During 1996, the Company adopted the disclosure provisions of FASB Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("FAS 123") with respect to its stock options. As permitted by FAS 123, the Company has elected to continue to account for employee stock options following Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25") and related interpretations. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The weighted-average fair value of options granted during 2001, 2000 and 1999 is estimated at $5.44, $6.02 and $9.67 per share, respectively, on the grant date. These estimates were made using the Black-Scholes option pricing model with the following weighted-average assumptions for 2001, 2000 and 1999: risk-free interest rate of 3.59%, 5.06% and 6.29%; expected market price volatility of 0.62, 0.51 and 0.46; weighted-average expected option life of 1.04 years, 0.94 years and 0.92 years; estimated forfeitures of 10.8%, 6.0% and 5.6%; and no dividends. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models use highly subjective assumptions, including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employees' stock options. For purposes of pro forma disclosure, the estimated fair value of the options is amortized to expense over the options' vesting period (1 to 3 years). The Company's pro forma information follows:
2001 2000 1999 ---------------------- ---------------------- ------------------------------ (in thousands, except per share data) Net income (loss) available to common shareholders as reported $ (81,885) $ (15,699) $ 47,342 Net income (loss) available to common shareholders pro forma (83,696) (19,837) 42,340 Diluted income (loss) per share as reported (7.14) (1.31) 3.51 Dilute income (loss) per share pro forma (7.30) (1.66) 3.14
Options outstanding at December 31, 2001, expire from July 2003 to November 2011. A total of 2,840,658 shares are reserved for future grants as of December 31, 2001, under the 1993, 1996 and 2000 Plans. The following table summarizes information concerning outstanding and exercisable options at December 31, 2001: F-20
RANGE OF EXERCISE PRICES $6-8 $9-14 $15-19 $20-27 - --------------------------------------------------------- --------------- ---------------- --------------- ---------------- Options outstanding: Weighted-Average Remaining Contractual Life 5.6 years 5.7 years 6.8 years 7.0 years Weighted-Average Exercise Price $ 8.17 $ 10.70 $ 15.87 $ 26.20 Number 840,327 681,872 679,750 512,100 Options exercisable: Weighted-Average Exercise Price $ 8.18 $ 10.61 $ 15.87 $ 26.20 Number 836,827 645,872 600,534 445,400
10. REDEEMABLE PREFERRED STOCK In the last half of 2000, the Company issued and sold 300 shares of Series B convertible redeemable preferred stock, without par value ("Series B Preferred"), at a price of $100,000 per share. The purchaser of the Series B Preferred is entitled to cumulative quarterly dividends at an annual rate of 5.0% on the liquidation amount ($100,000 per share) of the Series B Preferred. The Series B Preferred is convertible into shares of the Company's common stock at a conversion rate of 6,381.62 shares of common stock per share of Series B Preferred, at a conversion price of $15.67 per share of common stock, subject to antidilution adjustments. The Series B Preferred is optionally redeemable by the Company under certain conditions, but the Company must redeem the Series B Preferred no later than September 20, 2015. Optional redemption by the Company may occur at 103.6% of the liquidation amount beginning September 20, 2003, decreasing 0.3% of the liquidation amount per year to 100.0% of the liquidation amount at the mandatory redemption date of September 20, 2015. Shares of Series B Preferred have the right to vote on or consent to only the following matters (in addition to any voting rights otherwise required by law): (1) amendments to the Company's Articles of Incorporation which are adverse to the holders of Series B Preferred; (2) if six quarterly dividends go unpaid, the owner of Series B Preferred, together with the owner of Series A Preferred (as defined below) and the owners of any other preferred stock ranking equal to Series B Preferred, will be entitled to elect at the next annual shareholders meeting 25% of the Company's Board of Directors, but no less than two directors; and (3) increases in the number of authorized shares of Series B Preferred and authorizations of preferred stock ranking senior to Series B Preferred. Votes will be allocated among holders of preferred stock based on the percentage owned by each holder of the total liquidation amount of all series of preferred stock. Also, in the last half of 2000, the Company issued and sold 500 shares of Series A redeemable preferred stock, without par value ("Series A Preferred"), at a price of $100,000 per share. The purchaser of the Series A Preferred is entitled to cumulative semiannual dividends at an annual rate of 8.44% on the liquidation amount ($100,000 per share) of the Series A Preferred. The Series A Preferred is optionally redeemable by the Company under certain conditions, but the Company must redeem the Series A Preferred in equal semiannual payments beginning December 28, 2010, and ending December 28, 2015. Optional redemption by the Company may occur at a redemption premium of 50.0% of the dividend rate beginning December 28, 2003, decreasing 10.0% per year to 20.0% of the dividend rate commencing December 28, 2006, and to 0.0% after the seventh year after issuance. Prior to the third anniversary of issuance, the Company may redeem the Series A Preferred with net proceeds of a public offering of the Company's common stock. Shares of Series A Preferred have the right to vote on or consent to only the following matters (in addition to any voting rights otherwise required by law): (1) amendments to the Company's Articles of Incorporation which are adverse to the holders of Series A Preferred; (2) if three semiannual F-21 dividends go unpaid, the owner of Series A Preferred, together with the owner of Series B Preferred and the owners of any other preferred stock ranking equal to Series A Preferred, will be entitled to elect at the next annual shareholders' meeting, 25% of the Company's Board of Directors, but no less than three directors; (3) approval of (a) an acquisition by the Company or one of its subsidiaries of assets and liabilities from a third party the net asset value of which equals 10% of the Company's net consolidated assets in its most recent publicly available balance sheet, or (b) a merger by the Company or one of its subsidiaries with a third party involving an acquisition or disposition of more than 10% of the Company's consolidated net assets in its most recent publicly available balance sheet (other than a disposition of all the Company's L-1011 or Boeing 727 aircraft) that, in either case, results in a downgrade of the Company's credit rating by Moody's to "C1" or by Standard & Poor's to "C+," unless the Company offers to redeem the Series A Preferred prior to that transaction at a price equal to the liquidation amount plus accrued and unpaid dividends to the redemption date; and (4) increases in the number of authorized shares of Series A Preferred and authorizations of preferred stock ranking senior to Series A Preferred. Votes will be allocated among holders of preferred stock based on the percentage owned by each holder of the total liquidation amount of all series of preferred stock. The Company has the right on any date on which dividends are payable to exchange in whole but not in part subordinated notes for shares of Series A Preferred; the principal amount of any exchanged subordinated notes will equal the liquidation amount of the shares of Series A Preferred, plus any accrued and unpaid dividends. 11. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share:
2001 2000 1999 ---- ---- ---- Numerator Net income (loss) $ (76,317,000) $ (15,324,000) $ 47,342,000 Preferred stock dividends (5,568,000) (375,000) - -------------- -------------- -------------- Income (loss) available to common shareholders $ (81,885,000) $ (15,699,000) $ 47,342,000 ============== ============== ============== Denominator: Denominator for basic earnings per share-weighted average shares 11,464,125 11,956,532 12,269,474 Effect of dilutive securities: - - 1,200,063 -------------- -------------- -------------- Employee stock options - - 1,200,063 -------------- -------------- -------------- Dilutive potential securities Denominator for diluted earnings per share 11,464,125 11,956,532 13,469,537 ============== ============== ============== Basic earnings (loss) per share $ (7.14) $ (1.31) $ 3.86 ============== ============== ============== Diluted earnings (loss) per share $ (7.14) $ (1.31) $ 3.51 ============== ============== ==============
F-22 Potentially dilutive securities of 2,467,511 and 1,160,066 in 2001 and 2000, respectively, were not included in the computation of diluted earnings per share because these years resulted in a net loss, and therefore, their effect would be antidilutive. 12. COMMITMENTS AND CONTINGENCIES In 2000, the Company entered into a series of agreements to purchase or lease 39 new Boeing 737-800 aircraft and ten new Boeing 757-300 aircraft, as well as the engines to power these new aircraft. The Boeing 737-800 aircraft are powered by General Electric CFM56-7B27 engines, and the Boeing 757-300 aircraft are powered by Rolls-Royce RB211-535 E4C engines. The Company also received purchase rights for an additional 50 aircraft. On December 27, 2001, the Company entered into an agreement to exercise purchase rights on two Boeing 757-300 aircraft to be delivered in May and June 2003. The Company has purchase rights remaining for eight Boeing 757-300 aircraft and 40 Boeing 737-800 aircraft. The Company has a purchase agreement with the Boeing Company to purchase directly from Boeing the 10 new Boeing 757-300s and 20 of the new Boeing 737-800s. The manufacturer's list price is $73.6 million for each 757-300 and $52.4 million for each 737-800, subject to escalation. The Company's purchase price for each aircraft is subject to various discounts. To fulfill its purchase obligations, the Company has arranged for each of these aircraft, including the engines, to be purchased by third parties that will, in turn, enter into long-term operating leases with the Company. As of December 31, 2001, the Company had taken delivery of five Boeing 737-800s and five Boeing 757-300s obtained directly from Boeing. As a result of the decreased demand for air travel due to the events of September 11, 2001 (See "Note 2 - Impact of Terrorist Attacks on September 11, 2001"), the Company delayed planned delivery dates of certain Boeing 737-800 and Boeing 757-300 aircraft. The delivery dates of seven aircraft were delayed by more than 12 months. All remaining aircraft to be purchased directly from Boeing are now scheduled for delivery between January 2002 and August 2004, rather than May 2004 as previously agreed. Aircraft pre-delivery deposits are required for these purchases, and the Company has funded these deposits using operating cash and deposit finance facilities (See "Note 5 - Long-Term Debt."). As of December 31, 2001, the Company had $170.7 million in pre-delivery deposits outstanding for these aircraft, of which $118.2 million was provided by deposit finance facilities with various lenders. Upon delivery of the aircraft, pre-delivery deposits funded with operating cash will be returned to the Company, and those funded with deposit facilities will be used to repay those facilities. The Company has entered into operating lease agreements with respect to 14 of the new Boeing 737-800s from International Lease Finance Corporation ("ILFC"). In conjunction with these lease agreements, the Company also committed to purchase two spare General Electric aircraft engines from ILFC. As of December 31, 2001, the Company has taken delivery of six Boeing 737-800s that are being leased from ILFC. The remaining aircraft under these operating lease agreements are scheduled for delivery between January 2002 and May 2004. Both spare engines were received in 2001 and were financed with an operating lease. The Company has an agreement to lease five of the new Boeing 737-800s from GE Capital Aviation Services ("GECAS"). As of December 31, 2001, the Company has taken delivery F-23 of three Boeing 737-800 aircraft that are being leased from GECAS. The two remaining aircraft, to be financed through GECAS operating leases, are scheduled for delivery in 2002. The Company has committed to purchase an additional four spare General Electric aircraft engines from the engine manufacturer. The spare engines under this agreement are scheduled for delivery between 2003 and 2006. The Company has committed to purchase an additional two spare Rolls Royce engines from the engine manufacturer. The first spare engine was received in the third quarter of 2001 and was financed with an operating lease. The second engine is scheduled for delivery in 2002. In March 2001, the Company entered into a limited liability company agreement with Boeing Capital Corporation ("BCC") to form BATA Leasing LLC ("BATA") a 50/50 joint venture. Because the Company does not control BATA, the Company's investment is being accounted for under the equity method. BATA will remarket the Company's fleet of 24 Boeing 727-200 aircraft in either passenger or cargo configurations. In exchange for supplying the aircraft and certain operating services to BATA, the Company has and will continue to receive both cash and equity in the income or loss of BATA. The Company transferred 12 Boeing 727-200 aircraft to BATA in 2001. The Company expects to transfer most of the remaining 12 Boeing 727-200 aircraft to BATA in the first half of 2002. Also in 2001, the Company entered into short-term operating leases with BATA on nine of the 12 transferred aircraft. As of December 31, 2001, eight of the nine leases had terminated, and the Company continued to operate one of these aircraft. The Company is subject to lease return conditions on these nine operating leases upon delivery of any related aircraft to a third party by BATA. As of December 31, 2001, a third-party lessee or buyer has not been identified for any of these aircraft. Management believes it is reasonably possible that a lessee or buyer will be identified. The Company estimates that it could incur approximately $7.0 million of expense to meet the return conditions, if all nine of the aircraft were leased by BATA to third parties. No liability has been recorded for these return conditions. Various claims, contractual disputes and lawsuits against the Company arise periodically involving complaints which are normal and reasonably foreseeable in light of the nature of the Company's business. The majority of these suits are covered by insurance. In the opinion of management, the resolution of these claims will not have a material adverse effect on the business, operating results or financial condition of the Company. 13. ACQUISITION OF BUSINESSES On January 26, 1999, the Company acquired all of the issued and outstanding stock of T. G. Shown Associates, Inc., which then owned 50% of the Amber Air Freight partnership. The Company already owned the other 50% of the partnership. On January 31, 1999, the Company purchased the membership interests of Travel Charter International, LLC ("TCI"), a Detroit-based independent tour operator. ATA had been providing passenger airline services to TCI for over 14 years. TCI's results of operations, beginning February 1999, were consolidated into the Company. On April 30, 1999, the Company acquired all of the issued and outstanding stock of Agency Access Training Center, Inc. ("AATC") and Key Tours Las Vegas, Inc. ("KTLV"), and additionally purchased the majority of the current assets and current liabilities of Keytours, Inc. ("KTI"), a Canadian corporation. All three companies (AATC, KTLV and KTI) were F-24 previously under common control and jointly operated an independent tour business in the Detroit metropolitan area using the brand name of Key Tours. ATA had been providing passenger airline services to Key Tours for over 15 years. Beginning May 1999, the results of operations of Key Tours' brand were consolidated into the Company. On April 30, 1999, the Company acquired all of the issued and outstanding stock of Chicago Express Airlines, Inc. ("Chicago Express"). The Company had maintained a code-share agreement with Chicago Express since April 1997. Chicago Express' results of operations, beginning May 1999, were consolidated into the Company. The Company paid approximately $16.1 million in cash and issued $1.9 million in stock for the purchase of all acquisitions discussed above, which were accounted for using the purchase method of accounting. 14. SEGMENT DISCLOSURES During 1999, the Company acquired several independent tour operator businesses and combined their operations with the Company's existing vacation package brand, ATA Vacations. (See "Note 13 - Acquisition of Businesses.") These companies comprise the ATA Leisure Corp. ("ATALC"). The Company identifies its segments on the basis of similar products and services. The airline segment derives its revenues primarily from the sale of scheduled service or charter air transportation. ATALC derives its revenues from the sale of vacation packages, which, in addition to air transportation, include hotels and other ground arrangements. ATALC purchases air transportation for its vacation packages from ATA and other airlines. The Company's revenues are derived principally from customers domiciled in the United States. The most significant component of the Company's property and equipment is aircraft and related improvements and parts. All aircraft are registered in the United States. The Company therefore considers all property and equipment to be domestic. The United States Government is the only customer that accounted for more than 10.0% of consolidated revenues. U.S. Government revenues accounted for 13.1%, 14.6% and 11.2% of consolidated revenues for 2001, 2000 and 1999, respectively. F-25 Segment financial data as of and for the years ended December 31, 2001, 2000 and 1999 follows:
For the Year Ended December 31, 2001 ---------------------------------------------------------------------------- OTHER/ AIRLINE ATALC ELIMINATIONS CONSOLIDATED ------- ----- ------------ ------------ (in thousands) Operating revenue (external) $ 1,127,400 $ 71,893 $ 76,191 $ 1,275,484 Inter-segment revenue 34,626 2,031 (36,657) - Operating expenses (external) 1,245,802 56,941 64,611 1,367,354 Inter-segment expenses 7,514 19,071 (26,585) - Operating income (loss) (91,290) (2,088) 1,508 (91,870) Segment assets (at year end) 1,156,428 162,349 (315,815) 1,002,962 For the Year Ended December 31, 2000 ---------------------------------------------------------------------------- OTHER/ AIRLINE ATALC ELIMINATIONS CONSOLIDATED ------- ----- ------------ ------------ (in thousands) Operating revenue (external) $ 1,132,031 $ 95,357 $ 64,165 $ 1,291,553 Inter-segment revenue 58,140 3,212 (61,352) - Operating expenses (external) 1,162,084 66,995 59,904 1,288,983 Inter-segment expenses 7,260 43,251 (50,511) - Operating income (loss) 20,827 (11,677) (6,580) 2,570 Segment assets (at year end) 1,109,042 120,496 (197,108) 1,032,430 For the Year Ended December 31, 1999 ---------------------------------------------------------------------------- OTHER/ AIRLINE ATALC ELIMINATIONS CONSOLIDATED ------- ----- ------------ ------------ (in thousands) Operating revenue (external) $ 972,081 $ 94,840 $ 55,445 $ 1,122,366 Inter-segment revenue 42,970 4,985 (47,955) - Operating expenses (external) 919,833 69,925 42,581 1,032,339 Inter-segment expenses 7,045 32,516 (39,561) - Operating income (loss) 88,173 (2,616) 4,470 90,027 Segment assets (at year end) 821,373 47,945 (54,037) 815,281
15. FUEL PRICE RISK MANAGEMENT During 2001, 2000 and 1999, the Company entered into fuel hedge contracts to minimize the risk of fuel price fluctuation. The extent to which fuel has been hedged and the type of hedge instruments used has varied. In early 1999, the Company hedged fuel using swap agreements, which establish specific swap prices for designated periods, and fuel cap agreements, which guarantee a maximum price per gallon for designated periods. Beginning in the fourth quarter of 2000, the Company again entered into fuel hedge contracts, this time exclusively hedging fuel price using heating oil swaps. During 2000 and 1999, the Company accounted for fuel hedge contracts in accordance with FASB Statement of Financial Accounting Standards No. 80, Accounting for Futures F-26 Contracts ("FAS 80"). According to FAS 80, changes in the market value of the hedge contracts are recognized in income when the effects of related changes in the price of the hedged item are recognized. Therefore, the Company recorded gains or losses on fuel hedge contracts as a component of fuel expense in the month of settlement. Effective January 1, 2001, the Company adopted FASB Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended ("FAS 133"). FAS 133 requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value must be immediately recognized in earnings. The Company's heating oil swap agreements have initial maturities of up to 12 months. As of December 31, 2001, the Company's existing instruments had remaining maturities of up to six months. In accordance with FAS 133, the Company accounts for its heating oil swap agreements as cash flow hedges. Upon the adoption of FAS 133, the fair value of the Company's fuel hedging contracts representing the amount the Company would pay if the agreements were terminated was $0.6 million. The Company recorded this amount, net of income taxes of $0.2 million, in other assets and other current liabilities, with a corresponding entry of the net fair value in accumulated other comprehensive income on the consolidated balance sheet. All changes in fair value of the heating oil swap agreements during 2001 were effective for purposes of FAS 133, so these valuation changes were recognized throughout the year in other comprehensive loss and were included in earnings as a component of fuel expense only upon settlement of each agreement. During 2001, the Company recognized hedging losses on settled contracts in fuel expense of approximately $2.6 million. The fair value of the Company's fuel hedging agreements at December 31, 2001, representing the amount the Company would pay if the agreements were terminated, totaled $1.1 million, which, net of income taxes of approximately $0.4 million, represents the balance of other comprehensive loss of $0.7 million in the consolidated balance sheet at December 31, 2001. 16. ASSET IMPAIRMENT Following the events of September 11, 2001, the Company decided to retire the Boeing 727-200 fleet earlier than originally planned, in order to adjust its fleet size to a reduced flight schedule. Most of these aircraft were retired from revenue service in the fourth quarter of 2001, although some are being used for charter service through the first half of 2002. In accordance with FASB Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of ("FAS 121"), the Company determined that the estimated future undiscounted cash flows expected to be generated by the Boeing 727-200s were less than the current net book value of these aircraft and the related rotable parts and inventory. Therefore, these assets were impaired under FAS 121. During the third quarter of 2001, the Company recorded an asset impairment charge of $35.2 million to reduce the carrying amount of the Boeing 727-200 aircraft and related assets to their estimated fair market value, including those aircraft which F-27 had been previously transferred to the joint venture BATA. During the fourth quarter of 2001, the Company recorded an additional asset impairment charge of $9.3 million to reflect a further decline in estimated fair market value of the assets. The carrying amount of those assets not yet transferred to BATA has been classified as assets held for sale in the accompanying balance sheet in accordance with FAS 121. Also in the fourth quarter of 2001, the Company determined that the estimated future undiscounted cash flows expected to be generated by the Lockheed L-1011-50 and 100 fleet was less than the current net book value of these aircraft and the related rotable parts and inventory. Therefore, these assets were impaired under FAS 121. During the fourth quarter of 2001, the Company recorded an asset impairment charge of $67.8 million to reduce the carrying amount of the Lockheed L-1011-50 and 100 aircraft and related assets to their estimated fair market value. The carrying amount of those assets has been classified as assets held for use and appears in the property and equipment section of the accompanying consolidated balance sheet in accordance with FAS 121. These assets will be depreciated in conjunction with the planned fleet retirement schedule. 17. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill represents the excess of cost over the fair value of net assets acquired (See Note 13, "Acquisition of Businesses.") The Company amortizes goodwill on a straight-line basis over 20 years in accordance with APB 17. The Company recorded goodwill amortization expense of $1.3 million in both 2001 and 2000, and $0.9 million in 1999. The Company periodically reviews the carrying value of goodwill and other intangible assets to assess their recoverability in accordance with APB 17 and FAS 121. The Company has no material intangible assets other than goodwill on its accompanying balance sheets. The Company's policy is to record an impairment loss when it is determined that the carrying amount of the asset may not be recoverable. No impairment losses related to goodwill or intangible assets were recognized in 2001, 2000 or 1999. In June 2001, the FASB issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, ("FAS 142"), effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized, but will be subject to annual impairment reviews. The Company will adopt FAS 142 in the first quarter of 2002. The Company has not yet determined what the effect of these impairment tests will be, if any, on the results of operations and financial position of the Company. F-28 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA AMTRAN, INC. AND SUBSIDIARIES 2001 QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 3/31 6/30 9/30(1) 12/31(1) - ------------------------------------------------ ----------------- ---------------- ----------------- ---------------- Operating revenues $ 347,485 $ 358,895 $ 321,469 $ 247,635 Operating expenses 349,719 342,336 317,017 385,282 Operating income (loss) (2,234) 16,559 4,452 (110,647) Other expenses (5,459) (5,828) (4,048) (8,862) Income (loss) before income taxes (7,693) 10,731 404 (119,509) Income taxes (credits) (3,309) 4,200 16 (40,657) Preferred stock dividends 375 2,333 375 2,485 Income (loss) available to common shareholders $ (4,759) $ 4,198 $ 13 $ (81,337) Net income (loss) per common share - basic $ (0.42) $ 0.37 $ 0.00 $ (7.05) Net income (loss) per common share - diluted $ (0.42) $ 0.33 $ 0.00 $ (7.05)
(1) During 2001, several nonrecurring events resulted in significant charges and credits to operating loss. See "Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 2 - Impact of Terrorist Attacks on September 11, 2001" and "Financial Statements - Notes to Consolidated Financial Statements and Supplementary Data- Note 16 - Asset Impairment." FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA AMTRAN, INC. AND SUBSIDIARIES 2000 QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
- ----------------------------------------------------- ---------------- --------------- --------------- --------------- (IN THOUSAND, EXCEPT PER SHARE DATA) 3/31 6/30 9/30 12/31 - ----------------------------------------------------- ---------------- --------------- --------------- --------------- Operating revenues $ 321,366 $ 333,534 $ 347,301 $ 289,352 Operating expenses 318,802 314,912 332,610 322,659 Operating income (loss) 2,564 18,622 14,691 (33,307) Other expenses (5,635) (6,073) (5,597) (5,196) Income (loss) before income taxes (3,071) 12,549 9,094 (38,503) Income taxes (credits) (1,117) 6,680 6,112 (16,282) Preferred stock dividends - - - 375 Income (loss) available to common shareholders $ (1,954) $ 5,869 $ 2,982 $ (22,596) Net income (loss) per common share- basic $ (0.16) $ 0.48 $ 0.25 $ (1.96) Net income (loss) per common share - diluted $ (0.16) $ 0.46 $ 0.23 $ (1.96)
F-29 ATA HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31, 2002 2001 --------------------------------------------- ASSETS (UNAUDITED) Current assets: Cash and cash equivalents................................. $ 113,058 $ 184,439 Aircraft pre-delivery deposits............................ 88,882 166,574 Receivables, net of allowance for doubtful accounts (2002 - $17,222; 2001 - $1,526)........................... 69,686 75,046 Inventories, net ......................................... 50,733 47,648 Assets held for sale...................................... - 18,600 Prepaid expenses and other current assets................. 29,242 19,471 ----------------------------------------------- Total current assets........................................... 351,601 511,778 Property and equipment: Flight equipment.......................................... 338,241 327,541 Facilities and ground equipment........................... 131,895 119,975 ----------------------------------------------- 470,136 447,516 Accumulated depreciation.................................. (176,205) (132,573) ----------------------------------------------- 293,931 314,943 Goodwill....................................................... 21,780 21,780 Assets held for sale........................................... 8,595 33,159 Prepaid aircraft rent.......................................... 75,798 49,159 Investment in BATA, LLC........................................ 19,138 30,284 Deposits and other assets ..................................... 43,635 41,859 ----------------------------------------------- Total assets................................................... $ 814,478 $ 1,002,962 =============================================== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Current maturities of long-term debt....................... $ 15,177 $ 5,820 Short-term debt............................................ 65,591 118,239 Accounts payable........................................... 29,634 26,948 Air traffic liabilities.................................... 92,417 100,958 Accrued expenses........................................... 177,508 177,102 ----------------------------------------------- Total current liabilities...................................... 380,327 429,067 Long-term debt, less current maturities........................ 334,727 373,533 Deferred income taxes.......................................... - 13,655 Deferred gains from sale and leaseback of aircraft............. 52,877 45,815 Other deferred items .......................................... 36,496 16,760 ----------------------------------------------- Total liabilities ............................................. 804,427 878,830 Redeemable preferred stock; authorized and issued 800 shares... 80,000 80,000 Shareholders' equity (deficit): Preferred stock; authorized 9,999,200 shares; none issued.. - - Common stock, without par value; authorized 30,000,000 shares; issued 13,476,193 - 2002; 13,266,642 - 2001............. 65,290 61,964 Treasury stock; 1,711,440 shares - 2002; 1,710,658 shares - 2001.................................................... (24,778) (24,768) Additional paid-in capital ................................ 10,824 11,534 Other comprehensive loss................................... - (687) Retained deficit........................................... (121,285) (3,911) ----------------------------------------------- Total shareholders' equity (deficit)........................... (69,949) 44,132 ----------------------------------------------- Total liabilities and shareholders' equity (deficit)........... $ 814,478 $ 1,002,962 ===============================================
See accompanying notes. F-30 ATA HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 2002 2001 ----------------- --------------- ------------------ ----------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) Operating revenues: Scheduled service........................ $ 231,633 $ 208,490 $ 664,431 $ 656,044 Charter.................................. 68,185 93,629 238,698 292,603 Ground package........................... 5,605 8,738 30,582 45,214 Other.................................... 11,866 10,612 32,689 33,988 ----------------- --------------- ------------------ ----------------- Total operating revenues.................. 317,289 321,469 966,400 1,027,849 ----------------- --------------- ------------------ ----------------- Operating expenses: Salaries, wages and benefits............. 95,094 84,956 264,782 249,444 Fuel and oil............................. 52,956 67,908 151,350 205,918 Aircraft rentals......................... 51,244 26,884 135,731 68,279 Handling, landing and navigation fees.... 29,343 21,640 85,473 70,299 Depreciation and amortization............ 18,850 32,156 60,258 101,400 Crew and other employee travel........... 14,485 15,089 41,933 46,695 Aircraft maintenance, materials and repairs 11,308 14,704 37,388 50,064 Other selling expenses................... 11,103 10,311 33,462 32,258 Passenger service........................ 10,379 12,614 29,677 35,725 Advertising.............................. 9,553 7,190 30,181 20,695 Insurance................................ 8,021 2,520 23,693 6,960 Facilities and other rentals............. 6,294 5,347 17,492 14,670 Commissions.............................. 3,964 7,707 18,089 28,520 Ground package cost...................... 3,757 6,381 23,832 36,665 Special charges.......................... - 9,367 - 9,367 Aircraft impairments and retirements..... 34,318 37,633 51,559 41,749 U.S. Government grant.................... - (62,597) 15,210 (62,597) Other.................................... 16,264 17,207 55,169 52,961 ----------------- --------------- ------------------ ----------------- Total operating expenses.................... 376,933 317,017 1,075,279 1,009,072 ----------------- --------------- ------------------ ----------------- Operating income (loss)..................... (59,644) 4,452 (108,879) 18,777 Other income (expense): Interest income.......................... 626 1,157 2,138 4,247 Interest expense......................... (7,729) (7,036) (25,979) (21,345) Other...................................... (620) 1,831 (988) 1,763 ----------------- --------------- ------------------ ----------------- Other expense............................... (7,723) (4,048) (24,829) (15,335) ----------------- --------------- ------------------ ----------------- Income (loss) before income taxes........... (67,367) 404 (133,708) 3,442 Income taxes (credits)...................... (6,746) 16 (19,569) 907 ----------------- --------------- ------------------ ----------------- Net income (loss)........................... (60,621) 388 (114,139) 2,535 Preferred stock dividends................... (375) (375) (3,235) (3,083) ----------------- --------------- ------------------ ----------------- Income (loss) available to common shareholders $ (60,996) $ 13 $ (117,374) $ (548) ================= =============== ================== ================= Basic earnings per common share: Average shares outstanding.................. 11,764,753 11,509,333 11,694,097 11,439,167 Net income (loss) per share................. $ (5.18) $ 0.00 $ (10.04) $ (0.05) ================= =============== ================== ================= Diluted earnings per common share: Average shares outstanding.................. 11,764,753 12,515,904 11,694,097 11,439,167 Net income (loss) per share................. $ (5.18) $ 0.00 $ (10.04) $ (0.05) ================= =============== ================== =================
See accompanying notes. F-31 ATA HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE PREFERRED STOCK, COMMON STOCK AND OTHER SHAREHOLDER EQUITY
OTHER REDEEMABLE ADDITIONAL COMPREHENSIVE PREFERRED COMMON TREASURY PAID-IN INCOME RETAINED STOCK STOCK STOCK CAPITAL (LOSS) DEFICIT TOTAL --------- --------- --------- --------- -------- --------- --------- Balance, December 31, 2001..... $ 80,000 $ 61,964 $ (24,768) $ 11,534 $ (687) $ (3,911) $ 124,132 --------- --------- --------- --------- -------- --------- --------- Net income.................... - - - - - 1,880 1,880 Net gain on derivative instruments.................. - - - - 629 - 629 -------- --------- --------- Total comprehensive income...................... - - - - 629 1,880 2,509 -------- --------- --------- Preferred stock dividends..... - - - - - (375) (375) Restricted stock grants....... - 10 - 3 - - 13 Stock options exercised....... - 291 - (138) - - 153 --------- --------- --------- --------- -------- --------- --------- Balance, March 31, 2002........ $ 80,000 $ 62,265 $ (24,768) $ 11,399 $ (58) $ (2,406) $ 126,432 ========= ========= ========= ========= ======== ========= ========= Net loss...................... - - - - - (55,398) (55,398) Net gain on derivative instruments.................. - - - - 391 - 391 -------- --------- --------- Total comprehensive income (loss)............... - - - - 391 (55,398) (55,007) -------- --------- --------- Preferred stock dividends..... - - - - - (2,485) (2,485) Payment of liability with stock................... - 2,445 - (295) - - 2,150 Restricted stock grants....... 3 (10) 1 - - (6) Stock options exercised....... 577 - (281) - - 296 --------- --------- --------- --------- -------- --------- --------- Balance, June 30, 2002........ $ 80,000 $ 65,290 $ (24,778) $ 10,824 $ 333 $(60,289) $ 71,380 ========= ========= ========= ========= ======== ========= ========= Net loss..................... - - - - - (60,621) (60,621) Net loss on derivative instruments................. - - - - (333) - (333) -------- --------- --------- Total comprehensive loss....................... - - - - (333) (60,621) (60,954) -------- --------- --------- Preferred stock dividends.... - - - - - (375) (375) --------- --------- --------- --------- -------- --------- --------- Balance, September 30, 2002 .. $ 80,000 $ 65,290 $ (24,778) $ 10,824 $ - $ (121,285) $ 10,051 ========= ========= ========= ========= ======== ========= =========
See accompanying notes. F-32 ATA HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMEMTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, 2002 2001 ------------------- ----------------- (UNAUDITED) (UNAUDITED) Operating activities: Net income (loss)........................................ $ (114,139) $ 2,535 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization........................... 60,258 101,400 Aircraft impairments and retirements.................... 51,559 41,749 Deferred income taxes (credits)......................... (13,655) 2,842 Other non-cash items.................................... 30,913 (4,650) Changes in operating assets and liabilities: U.S. Government grant receivable........................ 15,210 (29,996) Other receivables....................................... (9,850) 2,805 Inventories............................................. (5,570) (10,554) Prepaid expenses........................................ (9,771) 6,850 Accounts payable........................................ 2,686 29,949 Air traffic liabilities................................. (8,541) (17,331) Accrued expenses (3,984) 16,375 ------------------- ---------------- Net cash provided by (used in) operating activities..... (4,884) 141,974 ------------------- ---------------- Investing activities: Aircraft pre-delivery deposits........................... 77,396 (61,666) Capital expenditures..................................... (57,618) (251,031) Noncurrent prepaid aircraft rent......................... (19,273) (18,778) Investment in BATA, LLC.................................. 18,632 18,043 Reductions (additions) to other assets................... (3,867) 5,272 Proceeds from sales of property and equipment............ 408 32 ------------------- ---------------- Net cash provided by (used in) investing activities 15,678 (308,128) ------------------- ---------------- Financing activities: Preferred stock dividends................................ (3,235) (3,083) Proceeds from sale/leaseback transactions................ 2,794 369 Proceeds from short-term debt............................ 56,859 71,537 Payments on short-term debt.............................. (109,507) (18,726) Proceeds from long-term debt............................. 194,491 151,238 Payments on long-term debt............................... (224,016) (5,600) Proceeds from stock options exercises.................... 449 1,434 Purchase of treasury stock............................... (10) (204) ------------------- ---------------- Net cash provided by (used in) financing activities (82,175) 196,965 ------------------- ---------------- Increase (decrease) in cash and cash equivalents......... (71,381) 30,811 Cash and cash equivalents, beginning of period........... 184,439 129,137 ------------------- ---------------- Cash and cash equivalents, end of period................. $ 113,058 $159,948 =================== ================ Supplemental disclosures: Cash payments for: Interest................................................ $ 33,102 $ 33,794 Income taxes (refunds).................................. $ 3,063 $ (7,931) Financing and investing activities not affecting cash: Accrued capitalized interest............................ $ (6,406) $ 11,293
See accompanying notes. F-33 ATA HOLDINGS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation The accompanying consolidated financial statements of ATA Holdings Corp., formerly Amtran, Inc., and subsidiaries (the "Company") have been prepared in accordance with instructions for reporting interim financial information on Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States. The consolidated financial statements for the quarters ended September 30, 2002 and 2001 reflect, in the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows for such periods. Results for the nine months ended September 30, 2002 are not necessarily indicative of results to be expected for the full fiscal year ending December 31, 2002. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. 2. Earnings per Share The following tables set forth the computation of basic and diluted earnings per share:
THREE MONTHS ENDED SEPTEMBER 30 2002 2001 ------------------------------------------------ Numerator: Net income (loss) $ (60,621,000) $ 388,000 Preferred stock dividends (375,000) (375,000) ------------------------------------------------ Income (loss) available to common shareholders-numerator for basic and diluted earnings per share $ (60,996,000) $ 13,000 ================================================ Denominator: Denominator for basic earnings per share - weighted average shares 11,764,753 11,509,333 Effect of potential dilutive securities: Employee stock options - 1,006,571 ------------------------------------------------ Denominator for diluted earnings per share -adjusted weighted average shares 11,764,753 12,515,904 ================================================ Basic income (loss) per share $ (5.18) $ 0.00 ================================================ Diluted income (loss) per share $ (5.18) $ 0.00 ================================================
F-34
NINE MONTHS ENDED SEPTEMBER 30 2002 2001 -------------------------------------------------- Numerator: Net income (loss) $(114,139,000) $ 2,535,000 Preferred stock dividends (3,235,000) (3,083,000) -------------------------------------------------- Loss available to common shareholders-numerator for basic and diluted earnings per share $(117,374,000) $ (548,000) ================================================== Denominator: Denominator for basic and diluted earnings per share - weighted average shares 11,694,097 11,439,167 ================================================== Basic loss per share $ (10.04) $ ================================================== (0.05) Diluted loss per share $ (10.04) $ ================================================== (0.05)
In accordance with Financial Accounting Standards Board ("FASB") Statement No. 128, "Earnings per Share," the impact of 1,914,486 shares of convertible redeemable preferred stock in the three months and nine months ended September 30, 2002 and 2001, has been excluded from the computation of diluted earnings per share because their effect would be antidilutive. In addition, the impact of 180,886 and 668,841 employee stock options, respectively, has been excluded from the computation of diluted earnings per share for the nine months ended September 30, 2002 and 2001, respectively, because their effect would be antidilutive. 3. Segment Disclosures The Company identifies its segments on the basis of similar products and services. The airline segment derives its revenues primarily from the sale of scheduled service or charter air transportation. ATA Leisure Corp. ("ATALC") derives its revenues from the sale of vacation packages, which, in addition to air transportation, include hotels and other ground arrangements. ATALC purchases air transportation for its vacation packages from ATA and other airlines. On July 1, 2002, the Company outsourced the management operations of two of its ATALC brands, ATA Vacations and Travel Charter International ("TCI"), to Milwaukee-based The Mark Travel Corporation ("MTC"). MTC will create, advertise, take reservations and deliver these ATALC brands. MTC will receive revenue from the package sales, and the Company will receive a royalty fee from MTC. Other ATALC products, including Key Tours' Canadian Rail programs and Key Tours' Las Vegas ground operations, will not be outsourced. The Company expects this segment to have a less material effect on the consolidated financial statements as a result of the outsourcing arrangements, and does not consider it a reportable segment due to its immateriality. F-35 4. Commitments and Contingencies In 2000, the Company entered into a purchase agreement with the Boeing Company to purchase directly from Boeing 10 new Boeing 757-300s and 20 new Boeing 737-800s. The Boeing 737-800 aircraft are powered by General Electric CFM56-7B27 engines, and the Boeing 757-300 aircraft are powered by Rolls-Royce RB211-535 E4C engines. The Company also received purchase rights for an additional 50 aircraft. The manufacturer's list price is $73.6 million for each 757-300 and $52.4 million for each 737-800, subject to escalation. The Company's purchase price for each aircraft is subject to various discounts. To fulfill its purchase obligations, the Company has arranged for each of these aircraft, including the engines, to be purchased by third parties that will, in turn, enter into long-term operating leases with the Company. As of September 30, 2002, the Company had taken delivery of eight Boeing 737-800s and 10 Boeing 757-300s obtained directly from Boeing. All remaining aircraft to be purchased directly from Boeing are currently scheduled for delivery between October 2002 and August 2004. Aircraft pre-delivery deposits are required for these purchases, and the Company has funded these deposits using operating cash and deposit finance facilities. As of September 30, 2002, the Company had $93.3 million in pre-delivery deposits outstanding for these aircraft, of which $65.6 million was provided by deposit finance facilities with various lenders. Upon delivery of the aircraft, pre-delivery deposits funded with operating cash will be returned to the Company, and those funded with deposit facilities will be used to repay those facilities. In December 2001, the Company entered into an agreement to exercise purchase rights on two Boeing 757-300 aircraft to be delivered in May and June 2003. The Company currently has purchase rights remaining for eight Boeing 757-300 aircraft and 40 Boeing 737-800 aircraft. The Company has operating lease agreements in place to lease 14 new Boeing 737-800s from International Lease Finance Corporation ("ILFC"). As of September 30, 2002, the Company had taken delivery of 12 Boeing 737-800s that are being leased from ILFC. The remaining two aircraft under these operating lease agreements are scheduled for delivery in June 2003 and May 2004. The Company has an agreement with General Electric to purchase four spare engines, which are scheduled for delivery between 2003 and 2006. In March 2001, the Company entered into a limited liability company agreement with Boeing Capital Corporation ("BCC") to form BATA Leasing LLC ("BATA") a 50/50 joint venture. Because the Company does not control BATA, the Company's investment is being accounted for under the equity method of accounting. BATA is expected to remarket the Company's fleet of Boeing 727-200 aircraft in either passenger or cargo configurations. In exchange for supplying the aircraft and certain operating services to BATA, the Company has and will continue to receive both cash and equity in the income or loss of BATA. The Company transferred 12 Boeing 727-200 aircraft to BATA in 2001, and subsequently leased nine of those aircraft back through short-term operating leases with BATA. As of June 30, 2002, all nine leases had terminated, but the Company is subject to lease return conditions contained in these nine operating leases upon delivery of any of these aircraft to a third party by BATA. As of September 30, 2002, a third-party lessee or buyer has not been identified for any of these aircraft. Management believes it is reasonably possible that a lessee or buyer will be identified. The Company estimates that it could incur up to $7.0 million of expense to meet the return F-36 conditions, if all nine of the aircraft were sold or leased by BATA to third parties. No liability has been recorded for these return conditions. Various claims, contractual disputes and lawsuits against the Company arise periodically involving complaints which are normal and reasonably foreseeable in light of the nature of the Company's business. The majority of these suits are covered by insurance. In the opinion of management, the resolution of these claims will not have a material adverse effect on the business, operating results or financial condition of the Company. 5. New Accounting Pronouncements In June 2001, the FASB issued Statement of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets ("FAS 142"), effective for fiscal years beginning after December 15, 2001. As required upon adoption of FAS 142, as of June 30, 2002 the Company had completed transitional impairment reviews on its goodwill. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" for a description of the Company's application of FAS 142. The Company adopted FASB Statement of Financial Accounting Standard No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("FAS 144") effective January 1, 2002. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" for a description of the Company's application of FAS 144. 6. The Air Transportation Safety and System Stabilization Act passed in response to the September 11, 2001 terrorist attacks provided for, among other things, up to $5.0 billion in compensation for the direct and incremental losses resulting from the terrorist attacks incurred by U. S. domestic passenger and cargo airlines from September 11, 2001 through December 31, 2001. Due to the limited guidance provided by the legislation and the evolving guidance provided by the interpretive rules of the Department of Transportation ("DOT"), the Company has made subjective and judgmental estimates in calculating and recording the amount of grant revenue to recognize. In the third and fourth quarters of 2001, the Company recognized $66.3 million in total grant revenues. As of December 31, 2001, $44.5 million had been received, and $21.8 million was recorded as a receivable. In the second quarter of 2002, the DOT issued new guidelines for measuring reimbursable losses and the Company submitted a final application, accompanied by the required accountant's report on agreed upon procedures. Based on review of its application with the DOT, the Company determined that it is probable that a portion of the receivable recorded in 2001 may not be collected, and therefore recorded a valuation allowance of $15.2 million against the $21.8 million receivable as of June 30, 2002. As of September 30, 2002, the remaining receivable had not yet been collected, but the Company does not currently believe that a further change to the valuation allowance is necessary. The Company is continuing to discuss its compensation claim with the DOT, and currently expects that claim to be settled during the fourth quarter of 2002. 7. In the quarter and nine months ended September 30, 2002 the Company recorded an income tax credit of $6.7 million and $19.6 million, respectively, applicable to $67.4 million and $133.7 million, respectively, in pre-tax loss for those periods, while in the quarter and nine months ended September 30, 2001 the Company recorded income tax expense of $16,000 and $0.9 million, respectively, applicable to $0.4 million and $3.4 million, respectively, in pre-tax income for those periods. The effective tax rate applicable to the quarter and nine months ended September 30, 2002 were 14.6% and 10.0%, respectively, as compared to 4.0% and 26.4%, respectively, in the same periods of 2001. The Company expects to incur a loss for the full year of 2002. When combined with annual losses reported in 2000 and 2001, this three-year cumulative loss creates a presumption under accounting principles generally accepted in the United States that net deferred tax assets should be fully reserved, if their recovery cannot be reasonably assured through carry-backs or other tax strategies. As of September 30, 2002 the Company projects that it will have a net deferred tax asset of $57.7 million as of the end of 2002, and that it can be reasonably assured of recovering $18.4 million of that deferred tax asset in cash refunds in 2003, using a five-year carry-back of expected 2002 alternative minimum tax net operating losses to the years 1997 through 2001. Therefore, the Company has determined that a full valuation allowance against the remaining net deferred tax asset of $39.3 million is required, by adjusting the Company's effective tax rate for 2002 prospectively from the third quarter. This allowance adjustment, included in income tax expense, resulted in an effective tax rate of 14.6% for tax credits applicable to losses incurred through the third quarter of 2002. F-37 APPENDIX AI GLOSSARY "Adjusted Expected Distributions" means with respect to the Certificates of any Trust on any Current Distribution Date the sum of (x) the amount of accrued and unpaid interest on such Certificates (excluding interest, if any, payable with respect to the Deposits related to such Trust) and (y) the greater of: (A) the difference between (a) the Pool Balance of such Certificates as of the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the original aggregate face amount of the Certificates of such Trust) and (b) the Pool Balance of such Certificates as of the Current Distribution Date calculated on the basis that (i) the principal of the Non-Performing Equipment Notes held in such Trust has been paid in full and such payments have been distributed to the holders of such Certificates, (ii) the principal of the Performing Equipment Notes held in such Trust has been paid when due (but without giving effect to any Acceleration of Performing Equipment Notes) and such payments have been distributed to the holders of such Certificates and (iii) the principal of any Equipment Notes formerly held in such Trust that have been sold pursuant to the terms hereof has been paid in full and such payments have been distributed to the holders of such Certificates, but without giving effect to any reduction in the Pool Balance as a result of any distribution attributable to Deposits occurring after the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, occurring after the initial issuance of the Certificates of such Trust); and (B) the amount of the excess, if any, of (i) the Pool Balance of such Class of Certificates as of the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the original aggregate face amount of the Certificates of such Trust), less the amount of the Deposits for such Class of Certificates as of such preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the original aggregate amount of the Deposits for such Class of Certificates) other than any portion of such Deposits thereafter used to acquire Equipment Notes pursuant to the Note Purchase Agreement, over (ii) the Aggregate LTV Collateral Amount for such Class of Certificates for the Current Distribution Date; provided that, until the date of the initial LTV Appraisals for all of the Aircraft, clause (B) above shall not apply. For purposes of calculating Adjusted Expected Distributions with respect to the Certificates of any Trust, any premium paid on the Equipment Notes held in such Trust which has not been distributed to the Certificateholders of such Trust (other than such premium or a portion thereof applied to the payment of interest on the Certificates of such Trust or the reduction of the Pool Balance of such Trust) shall be added to the amount of Adjusted Expected Distributions. "Aggregate LTV Collateral Amount" for any class of certificates for any Distribution Date means the sum of the applicable LTV Collateral Amounts for each aircraft, minus the Pool Balance for each class of certificates, if any, senior to such class, after giving effect to any distribution of principal on such Distribution Date with respect to such senior class or classes. (Intercreditor Agreement Section 1.1) "Aircraft Operative Agreements" means, collectively, the Participation Agreements, leases and indentures. AI-1 "Appraised Current Market Value" means, for any aircraft, the lower of the average and the median of the three most recent LTV Appraisals of such aircraft. "Assumed Amortization Schedule" means the assumed amortization schedule for the secured promissory notes set forth in the table on page 122 of this prospectus. "Assumed Appraised Value" means, with respect to any aircraft, the median value for such aircraft set forth in "Description of the Aircraft and the Appraisals." "Average Life Date" for any secured promissory note means the date which follows the redemption date by a period equal to the then Remaining Weighted Average Life at the redemption date of such secured promissory note. "Base Rate" when used with respect to a Liquidity Facility, means a fluctuating interest rate per annum in effect from time to time, which rate per annum is at all times to be equal to (a) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a business day, for the next preceding business day) by the Federal Reserve Bank of New York, or if such rate is not so published for any day that is a business day, the average of the quotations for such day for such transactions received by the applicable Liquidity Provider from three Federal funds brokers of recognized standing selected by it, plus (b) one quarter of one percent ( 1/4 of 1%) per annum. (Liquidity Facility, Section 1.01) "Basic Rent" with respect to each lease, means, for any aircraft, the scheduled rent payable quarterly for the term for such aircraft pursuant to the related lease. "Boeing" means The Boeing Company. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks are authorized or required to close in Indianapolis, Indiana, New York, New York, Wilmington, Delaware or Salt Lake City, Utah. "Cash Collateral Account" means, for each class of certificates, the account in the name of the Subordination Agent into which the proceeds of any Downgrade Drawing, Non-Extension Drawing and Final Drawing will be deposited. (Intercreditor Agreement, Section 1.1) "Certificate Account" means one or more non-interest bearing accounts established and maintained by the pass through trustee, for the deposit of payments representing Scheduled Payments received by such pass through trustee. "Civil Reserve Air Fleet Program" with respect to each lease, means the Civil Reserve Air Fleet Program currently administered by the United States Air Force Air Mobility Command pursuant to Chapter 931, Section 9511 et al. "Code" means the Internal Revenue Code of 1986, as amended. "Collateral" means all of the Loan Trustee's right, title and interest in the property described in the granting clause of an owned aircraft indenture. "Controlling Party" means: AI-2 o the Class A pass through trustee if final distributions on the Class A certificates have not been made, and o the Class B trustee, upon payment of final distributions of the aggregate outstanding balance of the Class A certificates, together with accrued interest to the holders of the Class A certificates (Intercreditor Agreement, Section 2.6(b)) Under certain circumstances, the Liquidity Provider may elect to act as the Controlling Party. (Intercreditor Agreement, Section 2.6(a)) "Delayed Deposit Agreements" means all deposit agreements to be dated as of the Issuance Date with respect to all classes of additional certificates to be issued as set forth in Appendix IV hereto between the Escrow Agent and the Depositary. "Delivery Period" means the period commencing on the Issuance Date and ending on the Delivery Period Termination Date. "Delivery Period Termination Date" means the earlier of (a) September 29, 2002 and (b) the date on which all secured promissory notes issued with respect to all of the aircraft (or substitute aircraft in lieu thereof) have been purchased by the pass through trustees in accordance with the Note Purchase Agreement. "Deposit" means the proceeds of this offering that are deposited with the Depositary and under the applicable Deposit Agreement. "Deposit Account" means the accounts established in the name of the Escrow Agent with respect to each pass through trust under the applicable Deposit Agreement. "Deposit Agreements" means all of the deposit agreements with respect to all classes of certificates to be dated as of the Issuance Date between the Escrow Agent and the Depositary. "Deposit Make-Whole Premium" means, with respect to the distribution of unused Deposits to holders of any class of certificates, as of any date of determination, in the case of a withdrawal specified in the second paragraph of "Description of The Deposit Agreements--Unused Deposits" an amount equal to the excess, if any, of (a) the present value of the excess of (A) the scheduled payment of principal and interest to maturity of the related series of secured promissory notes, assuming the maximum principal amount thereof (the "Maximum Amount") minus the Non-Premium Amount attributable to such class of certificates and such class of certificates' proportionate share (in the same proportion that the amount of unused Deposits with respect to such class of certificates bears to the unused Deposits with respect to all classes of certificates) of the Par Redemption Amount, on each remaining Regular Distribution Date for such class under the Assumed Amortization Schedule over (B) the scheduled payment of principal and interest to maturity of the secured promissory notes actually acquired by the pass through trustee for such class on each such Regular Distribution Date, such present value computed by discounting such excess on a quarterly basis on each Regular Distribution Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield plus, in the case of Class A, 310.5 basis points and, in the case of Class B, 640.2 basis points over (b) the amount of such unused Deposits to be distributed to the holders of such certificates, minus the Non-Premium Amount attributable to such class of certificates and such class of certificates' proportionate share of the Par Redemption Amount, plus accrued and unpaid interest on such net amount to but excluding the date of determination from and AI-3 including the preceding Regular Distribution Date (or if such date of determination precedes the first Regular Distribution Date, the date of issuance of the certificates) and (ii) in the case of a withdrawal specified in the third paragraph of "Description of The Deposit Agreements--Unused Deposits", an amount equal to the excess, if any, of (a) the present value of the scheduled payment of principal and interest to maturity of the related series of secured promissory notes in the principal amount equal to the amount of such unused Deposits on each remaining Regular Distribution Date for such class under the Assumed Amortization Schedule (such present value being computed by discounting such principal and interest payments on a quarterly basis on each Regular Distribution Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield) over (b) the amount of such unused Deposits to be distributed to the holders of such certificates plus accrued and unpaid interest on such Deposits to but excluding such date of determination from and including the preceding Regular Distribution Date (or if such date of determination precedes the first Regular Distribution Date, the date of issuance of the certificates). (Note Purchase Agreement, Annex A.) "Depositary" means IntesaBci, acting through its New York branch, for all classes of certificates. "Depreciation Assumption" means the assumption that the initial appraised value of each aircraft declines by approximately 3% per year. "Disposition" means the disposition of any Series A secured promissory note (or any underlying collateral). "Distribution Date" means each Special Distribution Date and Regular Distribution Date. "Downgrade Drawing" means a drawing by the Subordination Agent of the Maximum Available Commitment under a Liquidity Facility at the time of such drawing as a result of (i) the downgrading of the debt rating of the Liquidity Provider or if applicable, any guarantor of the obligations of the Liquidity Provider, below the applicable Threshold Rating or (ii) any guarantee of the Liquidity Provider's obligations under the Liquidity Facility becoming invalid or unenforceable or the guarantor denying its liability thereunder. (Liquidity Facility, Section 2.2; Intercreditor Agreement, Section 3.6(c)) "Drawing" means any Interest Drawing, Downgrade Drawing, Non-Extension Drawing or Final Drawing. "DTC" means The Depository Trust Company. "DTC Participants" means those securities brokers and dealers, banks, trust companies and clearing corporations for whom DTC effects, directly or indirectly, book-entry transfers and pledges of security deposited with DTC. "Escrow Agent" means Wells Fargo Bank Northwest, National Association, and any successor appointed pursuant to the terms of an Escrow Agreement. "Escrow Agreements" means all of the escrow and paying agent agreements with respect to all classes of certificates to be dated as of the Issuance Date, among the Escrow Agent, the Paying Agent, a pass through trustee and the initial purchaser of the relevant class of pass through certificate. AI-4 "Escrow Receipt" means one or more receipts issued by the Escrow Agent under the applicable Escrow Agreement that will be affixed by the relevant pass through trustee to each certificate and will evidence a fractional undivided interest in amounts deposited in the applicable Paying Agent Account. "Event of Loss" with respect to an aircraft, airframe or any engine means any of the following events with respect to such property: Loss of such property or its use due to destruction or damage rendering repair uneconomic or such property permanently unfit for normal use by ATA. o Any damage to such property which results in an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss. o The theft, disappearance, confiscation, condemnation, seizure, or requisition (including loss of title) of such property (other than a requisition for use by the United States government or any agency or instrumentality thereof), involving, in the case of any event referred to in this clause, loss of possession of such property for a period of more than 180 consecutive days (or, if earlier, 30 days after the end of the term of the Lease) or, in the case of a requisition of title, such requisition has not been reversed within 90 days (or, if earlier, 30 days after the end of the term of the Lease). o Except as otherwise provided in each lease, as a result of any law, rule, regulation, order or other action by the FAA, or any other governmental authority of the country of registry of such property, the use of such property in the normal course of business of air transportation shall have been prohibited for six consecutive months, unless ATA, prior to the expiration of such six-month period, has undertaken and is diligently carrying forward all steps necessary or desirable to permit normal use of such property until the date normal use of the Aircraft is resumed, or the expiration of the term of the leases. o The requisition for use of the aircraft by the United States government or any instrumentality or agency thereof that continues for 30 days beyond the end of the term of the lease. o With respect to any engine, any divestiture of title to an engine treated as an Event of Loss pursuant to the lease. An Event of Loss with respect to an aircraft is deemed to have occurred if an Event of Loss occurs with respect to the airframe which is a part of such aircraft. (Leases, Section 10; Owned Aircraft Indentures, Section 4.05). "Expected Distributions" means, with respect to the Certificates of any Trust on any Current Distribution Date, the sum of (x) accrued and unpaid interest on such Certificates (excluding interest, if any, payable with respect to the Deposits related to such Trust) and (y) the difference between: (A) the Pool Balance of such Certificates as of the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the original aggregate face amount of the Certificates of such Trust) and AI-5 (B) the Pool Balance of such Certificates as of the Current Distribution Date, calculated on the basis that (i) the principal of the Equipment Notes held in such Trust has been paid when due (whether at stated maturity or upon redemption, prepayment, purchase, acceleration or otherwise) and such payments have been distributed to the holders of such Certificates and (ii) the principal of any Equipment Notes formerly held in such Trust that have been sold pursuant to the terms hereof has been paid in full and such payments have been distributed to the holders of such Certificates, but without giving effect to any reduction in the Pool Balance as a result of any distribution attributable to the Deposits occurring after the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, occurring after the initial issuance of the Certificates of such Trust). For purposes of calculating Expected Distributions with respect to the Certificates of any Trust, any premium paid on the Equipment Notes held in such Trust which has not been distributed to the Certificateholders of such Trust (other than such premium or a portion thereof applied to the payment of interest on the Certificates of such Trust or the reduction of the Pool Balance of such Trust) shall be added to the amount of such Expected Distributions. For purposes of calculating Expected Distributions with respect to the certificates of any pass through trust, any premium paid on the secured promissory notes held in such pass through trust that has not been distributed to the certificateholders of such pass through trust (other than such premium or a portion thereof applied to the payment of interest on the certificates of such pass through trust or the reduction of the Pool Balance of such pass through trust) shall be added to the amount of such Expected Distributions. (Intercreditor Agreement, Section 1.1) "Final Distributions" means, with respect to the certificates of any pass through trust on any Distribution Date, the sum of (x) the aggregate amount of all accrued and unpaid interest on such certificates (excluding interest payable, if any, on the Deposits relating to such pass through trust) and (y) the Pool Balance of such certificates as of the immediately preceding Distribution Date (less the amount of the Deposits for such class of certificates as of such preceding Distribution Date other than any portion of such Deposits thereafter used to acquire secured promissory notes pursuant to the Note Purchase Agreement). For purposes of calculating Final Distributions with respect to the certificates of any pass through trust, any premium paid on the secured promissory notes held in such pass through trust that has not been distributed to the certificateholders of such pass through trust (other than such premium or a portion thereof applied to the payment of interest on the certificates of such pass through trust or the reduction of the Pool Balance of such pass through trust) will be added to the amount of such Final Distributions. (Intercreditor Agreement, Section 1.1) "Final Drawing" means a drawing by the Subordination Agent under a Liquidity Facility in an amount equal to the Maximum Available Commitment under such Liquidity Facility at the time of such drawing as a result of the termination of such Liquidity Facility by the applicable Liquidity Provider. (Intercreditor Agreement 3.6(i)) "Final Maturity Date" means, for the Class A certificates August 20, 2014 and for the Class B certificates August 20, 2009. "Guarantee" means the guarantee by ATA Holdings Corp.of all obligations of ATA as lessee under a lease or as obligor under an owned aircraft indenture. "Indenture Default" means an event of default under any indenture as the term "Event of Default" is defined under that indenture. AI-6 "Intercreditor Agreement" means the intercreditor agreement to be dated as of the Issuance Date among the pass through trustees, the Liquidity Provider and the Subordination Agent. "Interest Drawing" means a drawing made by the Subordination Agent under the Liquidity Facility on any Distribution Date to pay interest then due and payable on the certificates of the applicable pass through trust at the Stated Interest Rate for such pass through trust. (Liquidity Facility, Section 2.2(a); Intercreditor Agreement, Section 3.6(a)) "Issuance Date" means the date of the initial issuance of the certificates. "Lease Default" means any event that with the giving of notice, or lapse of time, or both would become a Lease Event of Default. "Lease Event of Default" means an Event of Default under any lease as the term "Event of Default" is defined under that lease. "Leased Aircraft Trust Agreement" means, with respect to each aircraft, the trust agreement between the related Owner Trustee and the related Owner Participant. "LIBOR" means, with respect to any interest period (a) the rate per annum appearing on display page 3750 (British Bankers Association -- LIBOR) of the Dow Jones Markets Service (or any successor or substitute therefor) at approximately 11:00 A.M. (London time) two business days before the first day of such interest period, as the rate for dollar deposits with a maturity comparable to such interest period, or (b) if the rate calculated pursuant to clause (a) above is not available, the average (rounded upwards, if necessary, to the next 1/16 of 1%) of the rates per annum at which deposits in dollars are offered for the relevant interest period by three banks of recognized standing selected by the applicable Liquidity Provider in the London interbank market at approximately 11:00 A.M. (London time) two business days before the first day of such interest period in an amount approximately equal to the principal amount of the LIBOR advance to which such interest period is to apply and for a period comparable to such interest period. "Liquidity Expenses" means the Liquidity Obligations other than (a) the principal amount of any Drawings under the Liquidity Facility and (b) any interest accrued on any Liquidity Obligations. (Intercreditor Agreement, Section 1.1) "Liquidity Facility" means each of the revolving credit agreements dated as of the Issuance Date between the Liquidity Provider and Subordination Agent with respect to each pass through trust entered into by the Liquidity Provider with the Subordination Agent with respect to the certificates of each pass through trust pursuant to which the Liquidity Provider will, if necessary, make one or more advances to the Subordination Agent that will be used solely to pay up to six consecutive quarterly installments of interest on such certificates when due, subject to certain limitations. "Liquidity Obligations" means all principal, interest, fees and other amounts owing to the Liquidity Provider under the Liquidity Facilities or certain other agreements. (Intercreditor Agreement, Section 1.1) "Liquidity Provider" means AIG Matched Funding Corp. and any other successor liquidity provider. "Loan Trustee" means the indenture trustee under any indenture. AI-7 "LTV Appraisal" means a current fair market value appraisal (which may be a "desk-top" appraisal) performed by any of Aircraft Information Services, Inc., Morten, Beyer & Agnew, Inc. and Simat, Hellisan & Eichner, Inc. or any other nationally recognized appraiser on the basis of an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller under no compulsion to sell and both having knowledge of all relevant facts. (Intercreditor Agreement, Sections 1.1) "LTV Collateral Amount" of any aircraft for any class of certificates means, as of any Distribution Date, the lesser of (a) the LTV Ratio for such class of certificates multiplied by the Appraised Current Market Value of such aircraft (or with respect to any such aircraft which has suffered an Event of Loss under and as defined in the relevant lease (in the case of a leased aircraft) or indenture (in the case of an owned aircraft), the amount of the insurance proceeds paid to the related Loan Trustee in respect of such aircraft to the extent then held by such Loan Trustee (and/or on deposit in the Special Payments Account) or payable to such Loan Trustee in respect of such aircraft) and (b) the outstanding principal amount of the secured promissory notes secured by such aircraft after giving effect to any principal payments of such secured promissory notes on or before such Distribution Date. (Intercreditor Agreement, Section 1.1) "LTV Ratio" means for the Class A certificates 51% and for the Class B certificates 66%. (Intercreditor Agreement, Section 1.1) "Make-Whole Amount" means, with respect to any secured promissory note, the amount (as determined by an independent investment banker of national standing) by which (a) the present value of the remaining scheduled payments of principal and interest to maturity of such secured promissory note, computed by discounting such payments on a semiannual basis from each payment date under the applicable indenture (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield exceeds (b) the outstanding principal amount of such secured promissory note plus accrued interest to the date of determination. "Mandatory Document Terms" means the Mandatory Document Terms described under "Description of Certificates -- Obligation to Purchase Secured Promissory Notes." "Mandatory Economic Terms" means the Mandatory Economic Terms described under "Description of Certificates -- Obligation to Purchase Secured Promissory Notes." "Maximum Available Commitment" means the amount, at the time of determination under each Liquidity Facility, equal to the then Required Amount of such Liquidity Facility less the aggregate amount of each Interest Drawing outstanding under such Liquidity Facility at such time, provided that following a Downgrade Drawing, a Final Drawing or a Non-Extension Drawing under a Liquidity Facility, the Maximum Available Commitment under such Liquidity Facility will be zero. "Minimum Sale Price" means, with respect to any aircraft or the secured promissory notes issued in respect of such aircraft, at any time, the lesser of (x) 75% of the Appraised Current Market Value of such aircraft and (y) the aggregate outstanding principal amount of such secured promissory notes, plus accrued and unpaid interest on such secured promissory notes. (Intercreditor Agreement, Section 1.1) "Non-Extension Drawing" means a drawing by the Subordination Agent of the Maximum Available Commitment under a Liquidity Facility at the time of such drawing, as a result of the Liquidity Provider notifying the Subordination Agent of its intent to terminate such Liquidity Facility AI-8 and such Liquidity Facility not being replaced by the 25th day prior to the proposed termination date. (Liquidity Facility, Section 2.2(b); Intercreditor Agreement, Section 3.6(d)) "Non-Performing Secured Promissory Note" means a secured promissory note that is not a Performing Secured Promissory Note. "Non-Premium Amount" means the amount equal to unused Deposits to be distributed due to the failure of any aircraft to be delivered prior to the Delivery Period Termination Date due to any reason not occasioned by ATA's fault or negligence. "Note Holders" means registered holders of the secured promissory notes. "Note Purchase Agreement" means the note purchase agreement dated as of the Issuance Date among ATA, the pass through trustees, the Subordination Agent, the Escrow Agent and the Paying Agent. "Order" means the order referred to in the definition of the term "Preference Amount." "Owner Participant" means the owner of the beneficial interest of an owner trust in a leveraged lease transaction. "Owner Trustee" means the trustee of an owner trust in a leveraged lease transaction. "Participation Agreement" means (a) in the case of a leased aircraft, an agreement among ATA, the pass through trustees, the applicable Owner Trustee, the applicable Owner Participant, the Loan Trustee and the Subordination Agent stating the terms and conditions under which the parties will participate in a leveraged lease financing relating to an aircraft and (b) in the case of an owned aircraft, an agreement among ATA, the pass through trustees, the Loan Trustee and the Subordination Agent stating the terms and conditions under which the parties will participate in a mortgage financing relating to an aircraft. "Par Redemption Amount" means $5,000,000. "Pass Through Trust Agreements" means the two pass through trust agreements between ATA, ATA Holdings Corp. and Wilmington Trust Company, as trustee, dated as of March 28, 2002. "Paying Agent" means Wilmington Trust Company and any successor appointed in accordance with the terms of the Escrow Agreement. "Paying Agent Account" means a non-interest bearing deposit account established by the Paying Agent in the name of the Escrow Agent. "Performing Secured Promissory Note" means a secured promissory note with respect to which no payment default has occurred and is continuing (without giving effect to any acceleration); provided that in the event of a bankruptcy proceeding involving ATA under the U.S. Bankruptcy Code, (a) any payment default occurring before the date of the order for relief for such proceeding shall not be taken into consideration during the 60-day period under Section 1110(a)(2)(A) of the U.S. Bankruptcy Code (or such longer period as may apply under Section 1110(b) of the U.S. Bankruptcy Code) (the "Section 1110 Period"), (b) any payment default occurring after the date of the order of relief in such proceeding will not be taken into consideration if such payment default is cured under Section 1110(a)(2)(B) of the U.S. Bankruptcy Code before the later of 30 days after the AI-9 date of such default or the expiration of the Section 1110 Period and (c) any payment default occurring after the Section 1110 Period will not be taken into consideration if such payment default is cured before the end of the grace period, if any, set forth in the related indenture. (Intercreditor Agreement, Section 1.1) "Permitted Investments" means obligations of the United States of America or agencies or instrumentalities thereof for the payment of which the full faith and credit of the United States of America is pledged, maturing in not more than 60 days or such lesser time as is necessary for payment of any Special Payment on a Special Distribution Date. "Pool Balance" means for each pass through trust, the original aggregate face amount of the certificates of such pass through trust less the aggregate amount of all payments made in respect of the certificates of such pass through trust or in respect of Deposits relating to such pass through trust other than payments made in respect of interest or premium on the certificates or the Deposits or reimbursement of any costs or expenses incurred in connection with the certificates or the Deposits. The Pool Balance for each pass through trust or for the certificates issued by any pass through trust as of any Distribution Date will be computed after giving effect to any special distribution with respect to unused Deposits, payment of principal of the secured promissory notes or payment with respect to other trust property held in such pass through trust and the distribution to be made on that date. "Pool Factor" means as of any Distribution Date the quotient (rounded to the seventh decimal place) computed by dividing (a) the Pool Balance of such pass through trust by (b) the original aggregate face amount of the certificates of such pass through trust. The Pool Factor for each pass through trust or for the certificates issued by any pass through trust as of any Distribution Date will be computed after giving effect to any special distribution with respect to unused Deposits, payment of principal of the secured promissory notes or payments with respect to other trust property held in such pass through trust and the distribution of the trust property to be made on that date. Each pass through trust will have a separate Pool Factor. The Pool Factor for each pass through trust will be 1.0000000 on the Issuance Date of the certificates. After the Issuance Date, the Pool Factor for each pass through trust will decline to reflect reductions in the Pool Balance of such pass through trust. In the event of an early redemption, purchase or default of the secured promissory notes held in a pass through trust, the Pool Factor and the Pool Balance of such pass through trust will be recomputed after giving effect thereto. The amount of a certificateholder's pro rata share of the Pool Balance of a pass through trust can be determined by multiplying the par value of the holder's certificate of such pass through trust by the Pool Factor for such pass through trust as of the applicable Regular Distribution Date or Special Distribution Date. Notice of the Pool Factor and the Pool Balance for each pass through trust will be mailed to certificateholders of such pass through trust on each Regular Distribution Date and Special Distribution Date. "PTC Event of Default" means, with respect to the pass through trust agreement for each class of certificates, the failure to pay within 10 Business Days of the applicable due date: (a) the outstanding Pool Balance of the applicable class of certificates on the Final Maturity Date for such class of certificates; or (b) interest due on such class of certificates on any Distribution Date (unless the Subordination Agent has made a drawing under the applicable Liquidity Facility (including under the Cash Collateral Account) in an amount sufficient to pay such interest and has distributed such amount to the applicable pass through trustee). (Intercreditor Agreement, Section 1.1) AI-10 "Rating Agency" means at any time, the nationally recognized Rating Agency that we have requested to rate the certificates and that is then rating the certificates. The initial Rating Agency will be Moody's Investors Service. "Receiptholder" means a holder of an Escrow Receipt. "Registration Rights Agreement" means the Exchange and Registration Rights Agreement dated as of March 28, 2002 among the pass through trustees, the initial purchasers of the certificates and ATA. "Regular Distribution Dates" means February 20, May 20, August 20 and November 20. "Remaining Weighted Average Life" on a given date with respect to any secured promissory note means the number of days equal to the quotient obtained by dividing (a) the sum of the products obtained by multiplying (1) the amount of each then remaining scheduled installment of principal of such secured promissory note, including the payment due on the maturity date of such secured promissory note, by (2) the number of days from and including the redemption date to but excluding the scheduled payment date of such principal installment, by (b) the then unpaid principal amount of such secured promissory note. "Rent Payment Dates" means, with respect to each lease, February 20, May 20, August 20 and November 20 during the term of such lease. A "Replacement Facility" for any pass through trust will mean an irrevocable liquidity facility in substantially the form of the initial Liquidity Facility for such pass through trust, including reinstatement provisions, or, subject to certain conditions, in such other form (which may include a letter of credit) as shall permit the Rating Agency to confirm in writing its ratings then in effect for the certificates (before downgrading of such ratings, if any, as a result of the downgrading of the applicable Liquidity Provider, in a face amount equal to the Required Amount for such Liquidity Facility and issued by a person having unsecured debt rating issued by the Rating Agency or Standard & Poor's which are equal to or higher than the Threshold Rating. (Intercreditor Agreement, Section 1.1) "Required Amount" means, for any day and with respect to any pass through trust, the sum of the aggregate amount of interest, calculated at the Stated Interest Rate applicable to the certificates issued by such pass through trust, that would be payable on such certificates on each of the six consecutive Regular Distribution Dates immediately following such day or, if such day is a Regular Distribution Date, on such day and the succeeding five quarterly Regular Distribution Dates, in each case calculated based on the Pool Balance for such class on such day and without regard to expected future payments of principal on such certificates. "Scheduled Payment" means , with respect to any Equipment Note, (i) any payment of principal or interest on such Equipment Note (other than an Overdue Scheduled Payment) due from the obligor thereon or (ii) any payment of interest on the corresponding Class of Certificates with funds drawn under any Liquidity Facility, which payment represents the installment of principal at the stated maturity of such installment of principal on such Equipment Note, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Note, or both; provided that any payment of principal of, premium, if any, or interest resulting from the redemption or purchase of any Equipment Note shall not constitute a Scheduled Payment. AI-11 "Special Distribution Date" means each date on which a Special Payment will be distributed to certificateholders. "Special Payment" means any payment received by a pass through trustee other than a Scheduled Payment. "Special Payments Account" means one or more accounts established and maintained by the pass through trustee for the deposit of payments representing Special Payments received by such pass through trustee. "Stated Interest Rate" means, for any class of certificates, the interest rate applicable to such class of certificates as specified on the cover page of the prospectus, plus in each case, an additional margin of 0.50% for any period required by the Registration Rights Agreement for the corresponding secured promissory notes. "Supplemental Rent", with respect to each lease, means all amounts, liabilities and obligations (other than Basic Rent) which are owned by ATA under each lease and the agreements related thereto. "Subordination Agent" means Wilmington Trust Company or any successor Subordination Agent appointed in accordance with the Intercreditor Agreement. "Threshold Rating" means the short-term unsecured debt rating of P-1 by Moody's or the short-term corporate credit rating of A-1 by Standard & Poor's, as the case may be. (Intercreditor Agreement, Section 1.1) "Treasury Yield" means, at the time of determination and for purposes of determining the Make-Whole Amount and the Deposit Make-Whole Premium, the interest rate (expressed as a quarterly equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semiannual yield to maturity for United States Treasury securities maturing on the Average Life Date of such secured promissory note and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities trading in the public securities markets, (a) one maturing as close as possible to, but earlier than, the Average Life Date of such secured promissory note and (b) the other maturing as close as possible to, but later than, the Average Life Date of such secured promissory note, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such secured promissory note is reported in the most recent H.15(519), such weekly average yield to maturity as published in such H.15(519). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Amount will be the third Business Day prior to the applicable payment or redemption date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable payment or redemption date. "Triggering Event" means (x) the occurrence of an Indenture Default under all of the indentures resulting in a PTC Event of Default with respect to the most senior class of certificates then outstanding, (y) the acceleration of, or failure to pay at final maturity, all of the outstanding secured promissory notes or (z) certain bankruptcy or similar events involving ATA. (Intercreditor Agreement, Section 1.1) AI-12 APPENDIX AII [AISI LOGO] AIRCRAFT INFORMATION SERVICES. INC. 15 January 2002 Mr. Charles Cleaver American Trans Air PO Box 51609 7337 West Washington Street Indianapolis, IN 46251-0609 Subject: AISI Report No.: A2S003BV0 AISI Sight Unseen New Aircraft Base Value Appraisal - Nine B737-800 Aircraft Reference: (a) Morgan Stanley Email messages 10 January 2002 Dear Mr. Cleaver: Aircraft Information Services, Inc. (AISI) is pleased to offer American Trans Air (ATA) our opinion of the sight unseen base value of nine B737-800 new aircraft scheduled to be delivered from the manufacturer to ATA between January 2002 and December 2002 as listed and defined in Table I and referenced (a) data above. 1. METHODOLOGY AND DEFINITIONS The standard terms of reference for commercial aircraft value are 'base value' and 'current market value' of an 'average' aircraft. Base value is a theoretical value that assumes a hypothetical balanced market while current market value is the value in the real market; both assume a hypothetical average aircraft condition. All other values are derived from these values. AISI value definitions are consistent with the current definitions of the International Society of Transport Aircraft Trading (ISTAT), those of 01 January 1994. AISI is a member of that organization and employs an ISTAT Certified and Senior Certified Appraiser. AISI defines a 'base value' as that of a transaction between an equally willing and informed buyer and seller, neither under compulsion to buy or sell, for a single unit cash transaction with no hidden value or liability, with supply and demand of the sale item roughly in balance and with no event which would cause a short term change in the market. Base values are typically given for aircraft in 'new' condition, 'average half-life' condition, or 'adjusted' for an aircraft in a specifically described condition at a specific time. Headquarters, 26072 Merit Circle, Suite 123, Laguna Hills CA 9263 TEL 949-582-8888 FAX 949-582-8887 E-MAIL AISINews@aol.com AII-1 [AISI LOGO] 15 January 2002 AISI File No. A2S003BVO Page - 2 - An 'average' aircraft is an operable airworthy aircraft in average physical condition and with average accumulated flight hours and cycles, with clear title and standard unrestricted certificate of airworthiness, and registered in an authority which does not represent a penalty to aircraft value or liquidity, with no damage history and with inventory configuration and level of modification which is normal for its intended use and age. AISI assumes average condition unless otherwise specified in this report. AISI also assumes that airframe, engine and component maintenance and essential records are sufficient to permit normal commercial operation under a strict airworthiness authority. 'Half-life' condition assumes that every component or maintenance service which has a prescribed interval that determines its service life, overhaul interval or interval between maintenance services, is at a condition which is one-half of the total interval. An 'adjusted' appraisal reflects an adjustment from half life condition for the actual condition, utilization, life remaining or time remaining of an airframe, engine or component. It should be noted that AISI and ISTAT value definitions apply to a transaction involving a single aircraft, and that transactions involving more than one aircraft are often executed at considerable and highly variable discounts to a single aircraft price, for a variety of reasons relating to an individual buyer or seller. AISI defines a 'current market value', which is synonymous with the older term 'fair market value' as that value which reflects the real market conditions including short term events, whether at, above or below the base value conditions. Assumption of a single unit sale and definitions of aircraft condition, buyer/seller qualifications and type of transaction remain unchanged from that of base value. Current market value takes into consideration the status of the economy in which the aircraft is used, the status of supply and demand for the particular aircraft type, the value of recent transactions and the opinions of informed buyers and sellers. Current market value assumes that there is no short term time constraint to buy or sell. AISI encourages the use of base values to consider historical trends, to establish a consistent baseline for long term value comparisons and future value considerations, or to consider how actual market values vary from theoretical base values. Base values are less volatile than current market values and tend to diminish regularly with time. Base values are normally inappropriate to determine near term values. AISI encourages the use of current market values to consider the probable near term value of an aircraft. If more than one aircraft is contained in this report than it should be noted that the values given are not directly additive, that is, the total of the given values is not the value of the fleet but rather the sum of the values of the individual aircraft if sold individually over time so as not to exceed demand. AII-2 [AISI LOGO] 15 January 2002 AISI File No. A2S003BVO Page - 3 - 2. VALUATION The aircraft are valued predicated upon the reference (a) data which describes the aircraft MTOW and any engine upgrades. Following is AISI's opinion of the base value for the subject aircraft on their respective scheduled delivery dates in current US Dollars. Valuations are presented in Table I subject to the assumptions, definitions and disclaimers herein. The terrorist actions that occurred in the United States on 11 September 2001 have had a significant negative effect on current market values of all commercial aircraft as demand for air travel has declined sharply. The amount of decline varies considerably with new aircraft affected the least and older aircraft affected the most. The present used aircraft market is considered to be a distressed market and is very tenuous, with very few transactions upon which to base value opinions. The best value indicators available at present are lease rates and numbers of stored aircraft. Base value opinions have also declined but only where irreversible market changes have occurred with regard to specific aircraft types in the judgment of AISI. Typically an irreversible market change occurs when it is believed that the decline in current market value is permanent, thus causing a corresponding but usually smaller decline in base value. AII-3 [AISI LOGO] 15 January 2002 AISI File No. A2S003BV0 Page - 4 - Table I Scheduled Aircraft Expected Manufacturer's Serial Registration New Delivery Base Value- Delivery Date Number Number Current USDollars B737-800 (with winglets), CFM56-7B27 Engines, 174,2001b MTOW Jan-02 32609 N316TZ $49,540,000 Apr-02 32610 N320TZ $49,720,000 May-02 32611 N322TZ $49,870,000 Jun-03 32882 N324TZ $50,010,000 July-02 32884 N325TZ $50,150,000 Oct-02 32612 N326TZ $50,590,000 Nov-02 32613 N32TFZ $50,740,000 Nov-02 32614 N328TZ $50,740,000 Dec-02 32615 N329TZ $50,880,000 AII-4 [AISI LOGO] 15 January 2002 AISI File No. A2S003BV0 Page - 5 - Unless otherwise agreed by Aircraft Information Services, Inc. (AISI) in writing, this report shall be for the sole use of the client/addressee. This report is offered as a fair and unbiased assessment of the subject equipment. AISI has no past, present, or anticipated future interest in the subject equipment. The conclusions and opinions expressed in this report are based on published information, information provided by others, reasonable interpretations and calculations thereof and are given in good faith. Such conclusions and opinions are judgments that reflect conditions and values which are current at the time of this report. The values and conditions reported upon are subject to any subsequent change. AISI shall not be liable to any party for damages arising out of reliance or alleged reliance on this report, or for any party's action or failure to act as a result of reliance or alleged reliance on this report. Sincerely, AIRCRAFT INFORMATION SERVICES, INC. /s/ John D. McNicol John D. McNicol Vice President Appraisals & Forecasts AII-5 - -------------------------------------------------------------------------------- MORTEN BEYER & AGNEW (MBA) has been retained by American Trans Air (the "Client") to determine the Current Base Value of (9) Boeing 737-800 aircraft delivered new as passenger aircraft. The aircraft are further identified in Section III of this report. In performing this valuation, MBA did not independently inspect these aircraft or the associated records and documentation associated with these aircraft. MBA utilized the technical data of the aircraft provided by the Client, but at Client's request did not independently verify the accuracy of the technical and specification data so provided. Section II of this report presents definitions of various terms, such as Current Base Value, Current Market Value, Future Base Value, and Lease-Encumbered Value as promulgated by the Appraisal Program of the International Society of Transport Aircraft Trading (ISTAT). ISTAT is a non-profit association of management personnel from banks, leasing companies, airlines, manufacturers, brokers, and others who have a vested interest in the commercial aviation industry and who have established a technical and ethical certification program for expert appraisers. Based on the information set forth in this report, it is our opinion as of January 15, 2002, that the aggregate Current Base Values of these aircraft is $404,620,000 with the respective values noted in Section V of this report. AII-6 - -------------------------------------------------------------------------------- CURRENT MARKET VALUE ISTAT defines Current Market Value (CMV) as the appraiser's opinion of the most likely trading price that may be generated for an asset under market circumstances that are perceived to exist at the time in question. Current Market Value assumes that the asset is valued for its highest, best use, and the parties to the hypothetical sale transaction are willing, able, prudent and knowledgeable and under no unusual pressure for a prompt transaction. It also assumes that the transaction would be negotiated in an open and unrestricted market on an arm's-length basis, for cash or equivalent consideration, and given an adequate amount of time for effective exposure to prospective buyers. Market Value of a specific asset will tend to be consistent with its Base Value in a stable market environment. In situations where a reasonable equilibrium between supply and demand does not exist, trading prices, and therefore Market Values, are likely to be at variance with the Base Value of the asset. Market Value may be based upon either the actual (or specified) physical condition or maintenance time or condition status of the asset, or alternatively upon an assumed average physical condition and mid-life, mid-time maintenance status. BASE VALUE The ISTAT definition of Base Value (BV) has, essentially, the same elements of Market Value except that the market circumstances are assumed to be in a reasonable state of equilibrium. Thus, BV pertains to an idealized aircraft and market combination, but will not necessarily reflect the actual CMV of the aircraft in question at any point in time. BV is founded in the historical trend of values and value in use, and is generally used to analyze historical values or to project future values. ISTAT defines Base Value as the Appraiser's opinion of the underlying economic value of an aircraft, engine, or inventory of aircraft parts/equipment (hereinafter referred to as "the asset"), in an open, unrestricted, stable market environment with a reasonable balance of supply and demand. Full consideration is assumed of its "highest and best use". An asset's Base Value is founded in the historical trend of values and in the American Trans Air Job File #02105 Page 2 of 10 AII-7 projection of value trends and presumes an arm's-length, cash transaction between willing, able, and knowledgeable parties, acting prudently, with an absence of duress and with a reasonable period of time available for marketing. In most cases, the Base Value of an asset assumes the physical condition is average for an asset of its type and age. It further assumes the maintenance time/life status is at mid-time, mid-life (or benefiting from an above-average maintenance status if its is new or nearly new, as the case may be). Since Base Value pertains to a somewhat idealized asset and market combination it may not necessarily reflect the actual current value of the asset in question, but is a nominal starting value to which adjustments may be applied to determine an actual value. Because it is related to long-term market trends, the Base Value definition is commonly applied to analyses of historical values and projections of residual values. FUTURE BASE VALUE Future Base Values are established by using the Base Value at the beginning of the current year (present value), from which point the Future Base Values are projected. The Base Value used for the purpose of projecting the Future Base Values consider the aircraft to be at mid-life and mid-time conditions pertaining to the various aspects of the maintenance status. The Future Base Values are based on aircraft having an approximate life of 35 years from the date of manufacture. The Future Base Values commence from the present time to the 35th year from the date of manufacture of this aircraft. DISTRESS VALUE Distress Value is the Appraiser's opinion of the price at which an asset could be sold under abnormal conditions, such as an artificially limited marketing time period, the perception of the seller being under duress to sell, an auction, bankruptcy liquidation, commercial restrictions, legal complications, or other such factors that significantly reduce the bargaining leverage of the seller and give the buyer a significant advantage that can translate into heavily discounted actual trading prices. Apart from the fact that the seller is uncommonly motivated, the parties to the transaction are otherwise assumed to be willing, able, prudent and knowledgeable, negotiating at arm's-length, American Trans Air Job File #02105 Page 3 of 10 AII-8 normally under the market conditions that are perceived to exist at the time, not an idealized balanced market. While the Distress Value normally implies that the seller is under some duress, there are occasions when buyers, not sellers are under duress or time pressure and, therefore, willing to pay a premium value. SECURITIZED VALUE OR LEASE ENCUMBERED VALUE Securitized Value or Lease Encumbered Value is the Appraiser's opinion of the value of an asset, under lease, given a specified lease payment stream (rents and term), and estimated future residual value at lease termination, and an appropriate discount rate. The lease encumbered residual value may include consideration of lease termination conditions and remaining maintenance reserves, if any. The Securitized Value or Lease-Encumbered Value may be more or less than the Appraiser's opinion of Current Market Value, taking into account various factors, such as, the credit risks associated with the parties involved, the time-value of money to those parties, provisions of the lease that may pertain to items such as security deposits, purchase options at various dates, term extensions, sub-lease rights, repossession rights, reserve payments and return conditions. American Trans Air Job File #02105 Page 4 of 10 AII-9 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Boeing 737-800 Seating: 189Y Engines: CFM56-7B27 MGTOW (lbs): 174,200 American Trans Air Job File #02105 Page 5 of 10 AII-10 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Boeing 737NG-Next Generation 737-800 HISTORY & DEVELOPMENT Boeing has taken the "classic" 737 Family and developed the 737-800 as part of its Next Generation family of aircraft. With upgraded avionics and cockpit and a redesigned wing, the 737-800 is making its mark in North America and Europe. No longer a short haul aircraft, it is not uncommon to see this aircraft placed in transcontinental and on international South American routes, once reserved for the 757-200. Boeing continues to compete against itself in this market and judging by the 757-200 order book, the 737 appears to be winning. The 737-800 is powered exclusively by the CFM56-7 engine, and is also ETOPS capable. The -800 is currently the best seller in the B737 NG family. The newest addition to the 737-800 is the blended winglet technology, which is now in operation with 3 operators worldwide. With 187 seats in an all economy configuration, the 737-800 offers excellent seat mile costs and payload/range capabilities. MARKET DEVELOPMENT Like the 737-700, the 737-800 has a very strong presence around the world, primarily in North America and Europe, and will for sometime to come. The values of this aircraft have been slightly discounted due to Boeing's aggressive price cutting in order to keep up with Airbus, and this value deterioration started to take place even before the events of September 2001. While many of the airlines are deferring their orders for aircraft, the 737-800 will retain market share as illustrated by which Qantas assumed a 15 aircraft delivery from American. The 737-800 is expected to be in operation with the Australian carrier in January 2002. The biggest competitor to the 737-800, and the 737-NG series, continues to be the Airbus A320 family. To date, Airbus is winning with 2789 cumulative orders to Boeing's 1926. American Trans Air Job File #02105 Page 6 of 10 AII-11 MARKET OUTLOOK A larger number of deferred aircraft is expected as a reaction to September 11, along with an outright cancellation of some orders as airlines seek to deal with the falling traffic. Three 737-800s have currently been on the market for sale since the first quarter of 2001. The outlook for the 737-800 continues to look strong, as it is still a preferred aircraft with superior operating economics. STAGE 3 - The subject aircraft complies with the currently effective Stage III / Chapter III aircraft noise limitations. However, the FAA and the ICAO are currently adopting more stringent Stage IV noise regulations. The schedule of their implementation has not been determined, but when enacted and effective may limit the continued utilization of the subject aircraft in most areas of the world. GEOGRAPHIC DISTRIBUTION: BOEING 737-800 [GRAPHIC OMITTED] North America, Mexico, Caribbean Europe & CIS 639 Aircraft 209 Aircraft 28 Operators 31 Operators Asia & Pacific 63 Aircraft 10 Operators South & Central Africa & Middle East America 18 Aircraft 24 Aircraft 8 Operators 5 Operators American Trans Air Job File #02105 Page 7 of 10 AII-12 - -------------------------------------------------------------------------------- In developing the Current Base Value of these aircraft, MBA did not inspect the aircraft or their historical maintenance documentation, but relied on partial information supplied by the Client and not independently verged by MBA. Therefore, we used certain assumptions that are generally accepted industry practice to calculate the value of aircraft when more detailed information is not available. The principal assumptions for the aircraft are as follows, for each aircraft: 1. The aircraft is to be delivered new. 2. The overhaul status of the airframe, engines, landing gear and other major components are the equivalent of new delivery unless otherwise specified. 3. The specifications of the aircraft are those most common for an aircraft of this type new delivery. 4. The aircraft is in a standard airline configuration. 5. Its modification status is comparable to that most common for an aircraft of its type and vintage. 6. No accounting is made for lease obligations or terms of ownership. American Trans Air Job File #02905 Page 8 of 10 AII-13 AMERICAN TRANS AIR (ATA) 2002-1 - -------------------------------------------------------------------------------- Values in ($000,000) AIRCRAFT DELIVERY SERIAL ENGINE MTOW CURRENT DATE NUMBER TYPE BASE VALUE - ------------------------------------------------------------------------------- Boeing 737-800 Jan-02 32609 CFM56-7B27 174,200 44.37 Boeing 737-800 Apr-02 32610 CFM56-7B27 174,200 44.64 Boeing 737-800 May-02 32611 CFM56-7B27 174,200 44.73 Boeing 737-800 Jun-02 32882 CFM56-7B27 174,200 44.83 Boeing 737-800 Jul-02 32884 CFM56-7B27 174,200 44.92 Boeing 737-800 Oct-02 32612 CFM56-7B27 174,200 45.19 Boeing 737-800 Nov-02 32613 CFM56-7B27 174,200 45.28 Boeing 737-800 Nov-02 32614 CFM56-7B27 174,200 45.28 Boeing 737-800 Dec-02 32615 CFM56-7B27 174,200 45.38 ------- TOTAL VALUE 404.62 ------- American Trans Air Job File #02105 Page 9 of 10 AII-14 - -------------------------------------------------------------------------------- This report has been prepared for the exclusive use of American Trans Air and shall not be provided to other parties by MBA without the express consent of American Trans Air. MBA certifies that this report has been independently prepared and that it fully and accurately reflects MBA's opinion as to the Current Base Value. MBA further certifies that it does not have, and does not expect to have, any financial or other interest in the subject or similar aircraft. This report represents the opinion of MBA as to the Current Base Value of the subject aircraft and is intended to be advisory only, in nature. Therefore, MBA assumes no responsibility or legal liability for any actions taken, or not taken, by American Trans Air or any other party with regard to the subject aircraft. By accepting this report, all parties agree that MBA shall bear no such responsibility or legal liability. This report has been prepared by: /s/ BRYSON P. MONTELEONE BRYSON P. MONTELEONE VICE-PRESIDENT Reviewed by: /s/ MORTEN S. BEYER JANUARY 15, 2002 MORTEN S. BEYER, APPRAISER FELLOW CHAIRMAN & CEO ISTAT CERTIFIED SENIOR APPRAISER American Trans Air Job File #02105 Page 10 of 10 AII-15 Simat, Helliesen & Eichner, Inc. Tel: +1-212-682-8455 90 Park Avenue Fax: +1-212-986-1825 New York, New York 10016 Email: cmedland@sh-e.com SH&E February 12, 2001 American Trans Air, Inc. P.O. Box 51609 Indianapolis, IN 46251 Attention: Mr. Charles Cleaver Vice President & Treasurer VALUE OPINION OF NINE BOEING 737-800 AIRCRAFT INTRODUCTION Simat, Helliesen & Eichner, Inc. ("SH&E") was asked by American Trans Air, Inc. (the "Client") to determine the Base Value ("BV") of nine (9) new Boeing 737-800 jet transport aircraft that will be delivered during 2002 (the "Subject Aircraft"). DETERMINATION SH&E has determined the aggregate Base Value of the Subject Aircraft to be USD $398.67 million. The individual aircraft values are shown in Attachment A. ASSET DESCRIPTION The Subject Aircraft are newly manufactured Boeing 737-800 aircraft. The type, maximum takeoff weight, serial number and date of delivery for each of the Subject Aircraft are shown in Attachment A. SH&E VALUATION METHODOLOGY SH&E's appraisal's are performed according to the International Society of Transport Aircraft Trading (ISTAT) principles of appraisal practice and code of ethics. AII-16 American Trans Air, In. February 12, 2002 Page 2 SH&E's valuation methodology starts by determining a half-life value for the appraised asset. The term "half-life" represents an asset that is mid-way between scheduled or routine major repairs and overhauls, with all life-limited components at half-life. This initial appraisal can then be adjusted (positive or negative) for each individual unit to reflect the asset's maintenance status relative to the next overhaul. In most cases, the half-life value of an asset assumes its physical condition is average and its maintenance time is at mid-life (or benefiting from an above-average maintenance status if it is new or nearly new, as the case may be). SH&E half-life values are determined on an annual basis by reviewing recent past sales, aircraft and engine availability trends, technological aspects, environmental constraints and maintenance requirements. DEFINITION OF BASE VALUE The Base Value ("BV") is the appraiser's opinion of the underlying economic value of an asset in an open, unrestricted and stable market environment with a reasonable balance of supply and demand, and also assumes full considerations of its "highest and best use". An asset's BV is founded in the historical trend of values and in the projection of value trends and presumes an arm's-length, cash transaction between willing, able and knowledgeable parties, acting prudently, with an absence of duress and with a reasonable period of time available for marketing. Since BV pertains to a somewhat idealized asset and market combination it may not necessarily reflect the actual value of the asset in question, but is a nominal starting value to which adjustments may be applied to determine an actual value. Since BV is related to long-term market trends, the BV definition is normally applied to analyses of historical values and projections of residual values and lease rates. ASSUMPTIONS SH&E used information supplied by the Client together with in-house data accumulated through other recent studies of aircraft transactions. Specific assumptions include the following: o SH&E did not perform a physical inspection of the Subject Aircraft and has assumed that they will be in a condition similar to equipment of comparable age and type. o All normally required maintenance will be performed including compliance with all Airworthiness Directives. o All of the data and information provided by the Client is an accurate representation of the actual conditions or circumstances of the Subject Aircraft. AII-17 American Trans Air, In. February 12, 2002 Page 3 o All maintenance records are complete and accurate, in compliance with all regulatory requirements and in accordance with accepted industry standards. o The Subject Aircraft will not have been involved in any major incident or accident that resulted in significant damage. o The Subject Aircraft will remain in their delivery configuration and continue to be certified for operations under the U.S. Federal Aviation Administration (or a comparable authority). o The Maximum Take-off Weights (MTOW) of the Subject Aircraft are as shown on Attachment A. SH&E's opinions are based upon historical relationships and expectations that it believes are reasonable. Some of the underlying assumptions, including those described above are detailed explicitly or implicitly elsewhere in this report, and may not materialize because of unanticipated events and circumstances. SH&E's opinions could, and would, vary materially, should any of the above assumptions prove to be inaccurate. QUALIFICATIONS Founded in 1963 and with offices in New York, Boston, Washington, London and Amsterdam, SH&E is the world's largest consulting firm specializing in commercial aviation. Its staff of over 90 personnel encompasses expertise in all disciplines of the industry and the firm has provided appraisal, consulting, strategic planning and technical services to airlines, leasing companies, government agencies, airframe and engine manufacturers, and financial institutions. A related service that SH&E offers its clients is Asset Management. Over the last few years, SH&E has been the principal Asset Manager responsible for the recovery and subsequent remarketing of a number of individual aircraft and some significant portfolios. In addition, we have been the advisors and re-marketing agents to Bank of New York, NationsCredit, NationsBank, Greyrock Capital, Potomac, Concorde, Integrated Resources and the First Fidelity Trust. In the course of those and other similar assignments we have sold, leased or parted-out over 150 aircraft, a like number of engines and approximately $30 million worth of spare parts. In addition to the above aircraft valuations, SH&E annually values in excess of $1 billion worth of aircraft spare parts and spare engines. We have developed a statistically based methodology for the appraisal of spare parts that provides accurate valuations with known confidence levels. SH&E has also valued a number of portfolios of ground equipment, the valuations of which have AII-18 American Trans Air, In. February 12, 2002 Page 4 been assisted by our recent acquisition, on behalf of a client, of sufficient ground equipment for the start-up of an eight aircraft airline. This active participation in the market place provides SH&E with practical and first hand knowledge of aircraft values and lease rates. SH&E annually appraises aviation equipment worth over $20 billion. The major U.S. bond rating agencies have used SH&E's Residual Value model to validate their own depreciation schedules. LIMITATIONS The opinions expressed herein are not given as an inducement or endorsement for any financial transaction. Although they are prepared for the exclusive use of the addressee, the addressee may provide this report to third parties without SH&E's written consent. SH&E accepts no responsibility for damages, if any, that may result from decisions made or actions taken by third parties that may be based upon this report. In accepting this report the Client agrees to indemnify and hold SH&E harmless against all losses, claims and costs arising as a result of this report except when attributable to SH&E's negligence or willful misconduct. This report reflects SH&E's expert opinion and best judgment based upon the information available to it at the time of its preparation. SH&E does not have, and does not expect to have, any financial interest in the appraised property. Yours sincerely, /s/ Clive G. Medland - -------------------------------- Clive G. Medland, FRAeS Senior Vice President Senior Appraiser International Society of Transport Aircraft Trading Att. AII-19 BASE VALUES (USD $ Millions) - -------------------------------------------------------------------------------- Delivery Serial MTOW Base # Aircraft Type Date Number (lbs) Engine Type Value - -------------------------------------------------------------------------------- 1 Boeing 737-800 Jan-02 32609 174,200 CFM 56-7B27 $42.90 - -------------------------------------------------------------------------------- 2 Boeing 737-800 Apr-02 32610 174,200 CFM 56-7B27 $43.55 - -------------------------------------------------------------------------------- 3 Boeing 737-800 May-02 32611 174,200 CFM 56-7B27 $43.77 - -------------------------------------------------------------------------------- 4 Boeing 737-800 Jun-02 32882 174,200 CFM 56-7B27 $43.98 - -------------------------------------------------------------------------------- 5 Boeing 737-800 Jul-02 32884 174,200 CFM 56-7B27 $44.20 - -------------------------------------------------------------------------------- 6 Boeing 737-800 Oct-02 32612 174,200 CFM 56-7B27 $44.85 - -------------------------------------------------------------------------------- 7 Boeing 737-800 Nov-02 32613 174,200 CFM 56-7B27 $45.07 - -------------------------------------------------------------------------------- 8 Boeing 737-800 Nov-02 32614 174,200 CFM 56-7B27 $45.07 - -------------------------------------------------------------------------------- 9 Boeing 737-800 Dec-02 32615 174,200 CFM 56-7B27 $45.28 - -------------------------------------------------------------------------------- TOTAL $398.67 - -------------------------------------------------------------------------------- AII-20 ================================================================================ No dealer, sales person or other person has been authorized to give any information or to make any representations in connection with the offer contained herein other than those contained in this prospectus, and, if given or made, such information or representation must not be relied upon as having been authorized by the Company. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy to any person in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this prospectus nor any sale made hereunder shall under any circumstances create an implication that there has been no change in the affairs of the Company since the date hereof or that the information contained herein is correct as of any time subsequent to the date hereof. ================================================================================ $203,612,000 CLASS A PASS THROUGH CERTIFICATES, SERIES 2002-1 $56,280,000 CLASS B PASS THROUGH CERTIFICATES, SERIES 2002-1 AMERICAN TRANS AIR, INC. Applicable Underlying Payments Fully and Unconditionally Guaranteed by ATA Holdings Corp. OFFER TO EXCHANGE $203,612,000 Class A Pass Through Certificates and $56,280,000 Class B Pass Through Certificates FOR A Like Amount of Registered Class A and Class B Pass Through Certificates ------------------------ PROSPECTUS ------------------------ ================================================================================ (This page has been left blank intentionally.) PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Information relating to indemnification of directors and officers is incorporated by reference herein from Item 14 of the Company's Registration Statement on Form S-1 (No. 33-59630). ITEM 21. EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF DOCUMENTS - ------------- --------------------------------------------------------------- *3.1 -- Restated Articles of Incorporation of the Company *3.2 -- By-laws of the Company 4.1-- Form of Indenture (Leased Aircraft) Trust Indenture and Mortgage, dated as of [ ], between Wells Fargo Bank Northwest, N.A., not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee, Owner Trustee, and Wilmington Trust Company, not in its individual capacity, except as expressly provided herein, but solely as Loan Trustee, Loan Trustee 4.2-- Form of Indenture (Owned Aircraft) Trust Indenture and Mortgage, dated as of [ ], between American Trans Air, Inc., Owner, and Wilmington Trust Company, not in its individual capacity, except as expressly stated herein, but solely as Mortgagee, Mortgagee 4.3-- Form of Class A American Trans Air, Inc. Pass Through Certificates (included in Exhibit 4.5) 4.4-- Form of Class B American Trans Air, Inc. Pass Through Certificates (included in Exhibit 4.6) 4.5-- Pass Through Trust Agreement, dated as of March 28, 2002, between Amtran, Inc., American Trans Air, Inc. and Wilmington Trust Company, as Trustee, made with respect to the formation of American Trans Air 2002-1A Pass Through Trust and the issuance of 8.328% Initial American Trans Air 2002-1A Pass Through Trust Certificates and 8.328% Exchange American Trans Air 2002-1A Pass Through Certificates 4.6-- Pass Through Trust Agreement, dated as of March 28, 2002, between Amtran, Inc., American Trans Air, Inc. and Wilmington Trust Company, as Trustee, made with respect to the formation of American Trans Air 2002-1B Pass Through Trust and the issuance of 10.699% Initial American Trans Air 2002-1B Pass Through Certificates and 10.699% Exchange American Trans Air 2002-1B Pass Through Certificates 4.7-- Revolving Credit Agreement (2002-1A), dated as of March 28, 2002, between Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the American Trans Air 2002-1A Pass Through Trust, as Borrower, and AIG Matched Funding Corp., as Liquidity Provider, relating to American Trans Air 2002-1A Pass Through Trust, Series 2002-1A, and 8.328% American Trans Air Pass Through Certificates, Series 2002-1A 4.8-- Revolving Credit Agreement (2002-1B), dated as of March 28, 2002, between Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the American Trans Air 2002-1B Pass Through Trust, as Borrower, and AIG Matched Funding Corp., as Liquidity Provider, relating to American Trans Air 2002-1B Pass Through Trust, Series 2002-1B 10.699% American Trans Air Pass Through Certificates, Series 2002-1B 4.9-- Intercreditor Agreement, dated as of March 28, 2002, among Wilmington Trust Company, not in its individual capacity but solely as Trustee under the American Trans Air 2002-1A
II-1 Pass Through Trust and American Trans Air 2002-1B Pass Through Trust, AIG Matched Funding Corp., as Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, not in its individual capacity except as expressly set forth herein but solely as Subordination Agent and Trustee 4.10-- Registration Rights Agreement, dated as of March 28, 2002, among American Trans Air, Inc., Amtran, Inc., Wilmington Trust Company, not in its individual capacity but solely as Trustee under American Trans Air 2002-1A Pass Through Trust and American Trans Air-Pass Through Trust and Nyala Funding LLC and PK Airfinance US, Inc. 4.11-- Deposit Agreement (Class A), dated as of March 28, 2002, between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and Intesa BCI S.P.A., acting through its New York Branch, as Depositary 4.12-- Deposit Agreement (Class B), dated as of March 28, 2002, between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and Intesa BCI S.P.A., acting through its New York Branch, as Depositary 4.13-- Escrow and Paying Agent Agreement (Class A), dated as of March 28, 2002, among Wells Fargo Bank Northwest, National Association, as Escrow Agent, Nyala Funding LLC, as Purchaser, Wilmington Trust Company, not in its individual capacity but solely as Pass Through Trustee for and on behalf of American Trans air 2002-1A Pass Through Trust, as Pass Through Trustee, and Wilmington Trust Company, as Paying Agent 4.14-- Escrow and Paying Agent Agreement (Class B), dated as of March 28, 2002, among Wells Fargo Bank Northwest, National Association as Escrow Agent, Nyala Funding LLC, as Purchaser, Wilmington Trust Company, not in its individual capacity but solely as Pass Through Trustee for and on behalf of American Trans Air 2002-1B Pass Through Trust, as Pass Through Trustee, and Wilmington Trust Company, as Paying Agent 4.15-- Note Purchase Agreement, dated as of March 28, 2002, among American Trans Air, Inc., Amtran, Inc., as Guarantor, Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wells Fargo Bank Northwest, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent 4.15a-- Note Purchase Agreement Amendment No. 1 [ATA EETC 2002-1], dated as of October 15, 2002, among American Trans Air, Inc., ATA Holdings Corp. (f/k/a Amtran, Inc.), as Guarantor, Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wells Fargo Bank Northwest, National Association, as Escrow Agent and Wilmington Trust Company, as Paying Agent 4.16-- Indemnity Agreement, dated as of March 28, 2002, between IntesaBci S.P.A., New York Branch, as Depositary, American Trans Air, Inc. and Amtran, Inc. 4.17-- Delayed Funding Implementation Agreement, dated as of March 28, 2002, among American Trans Air, Inc., Company, Amtran, Inc., Guarantor, Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wells Fargo Bank Northwest, National Association, as Escrow Agent, Wilmington Trust Company, as Paying Agent, AIG Matched Funding Corp., as Class A Liquidity Provider and Class B Liquidity Provider, Nyala Funding LLC, as Initial Purchaser of Class A Certificates and PK Airfinance US, Inc. as Initial Purchaser of Class B Certificates 4.17a-- Delayed Funding Implementation Agreement Amendment No. 1 [ATA EETC 2002-1], dated as of October 15, 2002, among American Trans Air, Inc., ATA Holdings Corp. (f/k/a Amtran, Inc.), as Guarantor, Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wells Fargo Bank Northwest, National Association, as Escrow Agent, Wilmington Trust Company, as Paying Agent, AIG Matched Funding Corp., as Class A Liquidity
II-2 Provider and Class B Liquidity Provider, Nyala Funding LLC, as Initial Purchaser of Class A Certificates, and PK Airfinance US, Inc. as Initial Purchaser of Class B Certificates 4.18-- Delayed Deposit Agreement (Class A), dated as of March 28, 2002, between Wells Fargo Bank Northwest, National Association, as Escrow Agent and IntesaBci S.P.A., acting through its New York Branch, as Depositary 4.19-- Delayed Deposit Agreement (Class B), dated as of March 28, 2002, between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.P.A., acting through its New York Branch, as Depositary 4.19a-- Delayed Deposit Agreement (Class B) Amendment No. 1 [ATA EETC 2002-1], dated as of October 15, 2002, between Wells Fargo Bank Northwest, National Association, as Escrow Agent and IntesaBci S.P.A., acting through its New York Branch, as Depositary 4.20-- Delayed Indemnity Agreement, dated as of March 28, 2002, between IntesaBci S.P.A., New York Branch, as Depositary, American Trans Air, Inc. and Amtran, Inc. 4.20a-- Delayed Indemnity Agreement Amendment No. 1 [ATA EETC 2002-1], dated as of October 15, 2002, between IntesaBci S.P.A., acting through its New York Branch, as Depositary, American Trans Air, Inc., and ATA Holdings Corp. (f/k/a Amtran, Inc.) **5.1-- Opinion of Troutman Sanders LLP as to the legality of the Exchange Certificates and the Guarantee being registered hereby 5.2-- Opinion of Brian T. Hunt, General Counsel of ATA Holdings Corp. **12.1-- Computation of ratio of earnings to fixed charges **23.1-- Consent of Troutman Sanders LLP (included in Exhibit 5.1) 23.2-- Consent of Ernst & Young LLP 23.3-- Consent of AISI 23.4-- Consent of MBA 23.5-- Consent of SH&E 23.6-- Consent of Brian T. Hunt, General Counsel of ATA Holdings Corp. (included in Exhibit 5.2) 24.1-- Power of Attorney (see signature page in Part II of Registration Statement) **25.1-- Statement of Eligibility of Wilmington Trust Company for the 2002-1A Pass Through Certificates, on Form T-1 **25.2-- Statement of Eligibility of Wilmington Trust Company for the 2002-1B Pass Through Certificates, on Form T-1 **99.1 -- Form of Letter of Transmittal **99.2 -- Form of Notice of Guaranteed Delivery **99.3-- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees **99.4-- Form of Letter to Clients
* Previously filed as exhibit to ATA Holdings Corp.'s Registration Statement on Form S-1 (File No. 33-59630), and incorporated herein by reference. ** To be filed by subsequent amendment. ITEM 22. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X are II-3 not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. (b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (c) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated document by first-class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (d) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (e) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to section 13(a) and section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Indianapolis, State of Indiana, on the 22nd day of November, 2002. ATA Holdings Corp. By /s/ J. George Mikelsons ----------------------------------------- J. George Mikelsons Chairman of the Board of Directors POWER OF ATTORNEY The undersigned directors and officers of ATA Holdings Corp. do hereby constitute and appoint Kenneth K. Wolff, with full power of substitution, our true and lawful attorney-in-fact and agent to do any and all acts and things in our name and behalf in our capacities as directors and officers, and to execute any and all instruments for us and in our names in the capacities indicated below which such person may deem necessary or advisable to enable ATA Holdings Corp. to comply with the Securities Act of 1933, as amended (the "Securities Act"), and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Registration Statement, including specifically, but not limited to, power and authority to sign for us, or any of us, in the capacities indicated below and any and all amendments (including pre-effective and post-effective amendments or any other registration statement filed pursuant to the provisions of Rule 462(b) under the Securities Act) hereto; and we do hereby ratify and confirm all that such person or persons shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLES DATES ---------- ------ ----- /S/ J. GEORGE MIKELSONS Chairman of the Board of Directors and November 22, 2002 - ---------------------------------------- Chief Executive Officer (J. GEORGE MIKELSONS) /S/ JAMES W. HLAVACEK Executive Vice President and Chief November 22, 2002 - --------------------------------------- Operating Officer and Director (JAMES W. HLAVACEK) /S/ KENNETH K. WOLFF Executive Vice President and Chief November 22, 2002 - --------------------------------------- Financial Officer and Director (KENNETH K. WOLFF) (Principal Financial and Accounting Officer)
1 /S/ ROBERT A. ABEL Director November 22, 2002 - ---------------------------------------- (ROBERT A. ABEL) /S/ CLAUDE E. WILLIS Director November 22, 2002 - ----------------------------------- (CLAUDE E. WILLIS) /S/ ANDREJS P. STIPNIEKS Director November 22, 2002 - ----------------------------------------- (ANDREJS P. STIPNIEKS)
SIGNATURES ---------- Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Indianapolis, State of Indiana, on the 22nd day of November, 2002. American Trans Air, Inc. By /s/ J. George Mikelsons ------------------------------------------ J. George Mikelsons Sole Director 2 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENTS - ------------- --------------------------------------------------------------- *3.1 -- Restated Articles of Incorporation of the Company *3.2 -- By-laws of the Company 4.1-- Form of Indenture (Leased Aircraft) Trust Indenture and Mortgage, dated as of [ ], between Wells Fargo Bank Northwest, N.A., not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee, Owner Trustee, and Wilmington Trust Company, not in its individual capacity, except as expressly provided herein, but solely as Loan Trustee, Loan Trustee 4.2-- Form of Indenture (Owned Aircraft) Trust Indenture and Mortgage, dated as of [ ], between American Trans Air, Inc., Owner, and Wilmington Trust Company, not in its individual capacity, except as expressly stated herein, but solely as Mortgagee, Mortgagee 4.3-- Form of Class A American Trans Air, Inc. Pass Through Certificates (included in Exhibit 4.5) 4.4-- Form of Class B American Trans Air, Inc. Pass Through Certificates (included in Exhibit 4.6) 4.5-- Pass Through Trust Agreement, dated as of March 28, 2002, between Amtran, Inc., American Trans Air, Inc. and Wilmington Trust Company, as Trustee, made with respect to the formation of American Trans Air 2002-1A Pass Through Trust and the issuance of 8.328% Initial American Trans Air 2002-1A Pass Through Trust Certificates and 8.328% Exchange American Trans Air 2002-1A Pass Through Certificates 4.6-- Pass Through Trust Agreement, dated as of March 28, 2002, between Amtran, Inc., American Trans Air, Inc. and Wilmington Trust Company, as Trustee, made with respect to the formation of American Trans Air 2002-1B Pass Through Trust and the issuance of 10.699% Initial American Trans Air 2002-1B Pass Through Certificates and 10.699% Exchange American Trans Air 2002-1B Pass Through Certificates 4.7-- Revolving Credit Agreement (2002-1A), dated as of March 28, 2002, between Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the American Trans Air 2002-1A Pass Through Trust, as Borrower, and AIG Matched Funding Corp., as Liquidity Provider, relating to American Trans Air 2002-1A Pass Through Trust, Series 2002-1A, and 8.328% American Trans Air Pass Through Certificates, Series 2002-1A 4.8-- Revolving Credit Agreement (2002-1B), dated as of March 28, 2002, between Wilmington Trust Company, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the American Trans Air 2002-1B Pass Through Trust, as Borrower, and AIG Matched Funding Corp., as Liquidity Provider, relating to American Trans Air 2002-1B Pass Through Trust, Series 2002-1B 10.699% American Trans Air Pass Through Certificates, Series 2002-1B 4.9-- Intercreditor Agreement, dated as of March 28, 2002, among Wilmington Trust Company, not in its individual capacity but solely as Trustee under the American Trans Air 2002-1A Pass Through Trust and American Trans Air 2002-1B Pass Through Trust, AIG Matched Funding Corp., as Class A Liquidity Provider and Class B Liquidity Provider, and Wilmington Trust Company, not in its individual capacity except as expressly set forth herein but solely as Subordination Agent and Trustee 4.10-- Registration Rights Agreement, dated as of March 28, 2002, among American Trans Air, Inc., Amtran, Inc., Wilmington Trust Company, not in its individual capacity but solely as Trustee under American Trans Air 2002-1A Pass Through Trust and American Trans Air-Pass Through Trust and Nyala Funding LLC and PK Airfinance US, Inc.
3 4.11-- Deposit Agreement (Class A), dated as of March 28, 2002, between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and Intesa BCI S.P.A., acting through its New York Branch, as Depositary 4.12-- Deposit Agreement (Class B), dated as of March 28, 2002, between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and Intesa BCI S.P.A., acting through its New York Branch, as Depositary 4.13-- Escrow and Paying Agent Agreement (Class A), dated as of March 28, 2002, among Wells Fargo Bank Northwest, National Association, as Escrow Agent, Nyala Funding LLC, as Purchaser, Wilmington Trust Company, not in its individual capacity but solely as Pass Through Trustee for and on behalf of American Trans air 2002-1A Pass Through Trust, as Pass Through Trustee, and Wilmington Trust Company, as Paying Agent 4.14-- Escrow and Paying Agent Agreement (Class B), dated as of March 28, 2002, among Wells Fargo Bank Northwest, National Association as Escrow Agent, Nyala Funding LLC, as Purchaser, Wilmington Trust Company, not in its individual capacity but solely as Pass Through Trustee for and on behalf of American Trans Air 2002-1B Pass Through Trust, as Pass Through Trustee, and Wilmington Trust Company, as Paying Agent 4.15-- Note Purchase Agreement, dated as of March 28, 2002, among American Trans Air, Inc., Amtran, Inc., as Guarantor, Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wells Fargo Bank Northwest, National Association, as Escrow Agent, and Wilmington Trust Company, as Paying Agent 4.15a-- Note Purchase Agreement Amendment No. 1 [ATA EETC 2002-1], dated as of October 15, 2002, among American Trans Air, Inc., ATA Holdings Corp. (f/k/a Amtran, Inc.), as Guarantor, Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wells Fargo Bank Northwest, National Association, as Escrow Agent and Wilmington Trust Company, as Paying Agent 4.16-- Indemnity Agreement, dated as of March 28, 2002, between IntesaBci S.P.A., New York Branch, as Depositary, American Trans Air, Inc. and Amtran, Inc. 4.17-- Delayed Funding Implementation Agreement, dated as of March 28, 2002, among American Trans Air, Inc., Company, Amtran, Inc., Guarantor, Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wells Fargo Bank Northwest, National Association, as Escrow Agent, Wilmington Trust Company, as Paying Agent, AIG Matched Funding Corp., as Class A Liquidity Provider and Class B Liquidity Provider, Nyala Funding LLC, as Initial Purchaser of Class A Certificates and PK Airfinance US, Inc. as Initial Purchaser of Class B Certificates 4.17a-- Delayed Funding Implementation Agreement Amendment No. 1 [ATA EETC 2002-1], dated as of October 15, 2002, among American Trans Air, Inc., ATA Holdings Corp. (f/k/a Amtran, Inc.), as Guarantor, Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent, Wells Fargo Bank Northwest, National Association, as Escrow Agent, Wilmington Trust Company, as Paying Agent, AIG Matched Funding Corp., as Class A Liquidity Provider and Class B Liquidity Provider, Nyala Funding LLC, as Initial Purchaser of Class A Certificates, and PK Airfinance US, Inc. as Initial Purchaser of Class B Certificates 4.18-- Delayed Deposit Agreement (Class A), dated as of March 28, 2002, between Wells Fargo Bank Northwest, National Association, as Escrow Agent and IntesaBci S.P.A., acting through its New York Branch, as Depositary 4.19-- Delayed Deposit Agreement (Class B), dated as of March 28, 2002, between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.P.A., acting through its New York Branch, as Depositary
4 4.19a-- Delayed Deposit Agreement (Class B) Amendment No. 1 [ATA EETC 2002-1], dated as of October 15, 2002, between Wells Fargo Bank Northwest, National Association, as Escrow Agent and IntesaBci S.P.A., acting through its New York Branch, as Depositary 4.20-- Delayed Indemnity Agreement, dated as of March 28, 2002, between IntesaBci S.P.A., New York Branch, as Depositary, American Trans Air, Inc. and Amtran, Inc. 4.20a-- Delayed Indemnity Agreement Amendment No. 1 [ATA EETC 2002-1], dated as of October 15, 2002, between IntesaBci S.P.A., acting through its New York Branch, as Depositary, American Trans Air, Inc., and ATA Holdings Corp. (f/k/a Amtran, Inc.) **5.1-- Opinion of Troutman Sanders LLP as to the legality of the Exchange Certificates and the Guarantee being registered hereby 5.2-- Opinion of Brian T. Hunt, General Counsel of ATA Holdings Corp. **12.1-- Computation of ratio of earnings to fixed charges **23.1-- Consent of Troutman Sanders LLP (included in Exhibit 5.1) 23.2-- Consent of Ernst & Young LLP 23.3-- Consent of AISI 23.4-- Consent of MBA 23.5-- Consent of SH&E 23.6-- Consent of Brian T. Hunt, General Counsel of ATA Holdings Corp. (included in Exhibit 5.2) 24.1-- Power of Attorney (see signature page in Part II of Registration Statement) **25.1-- Statement of Eligibility of Wilmington Trust Company for the 2002-1A Pass Through Certificates, on Form T-1 **25.2-- Statement of Eligibility of Wilmington Trust Company for the 2002-1B Pass Through Certificates, on Form T-1 **99.1 -- Form of Letter of Transmittal **99.2 -- Form of Notice of Guaranteed Delivery **99.3-- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees **99.4-- Form of Letter to Clients
* Previously filed as exhibit to ATA Holdings Corp.'s Registration Statement on Form S-1 (File No. 33-59630), and incorporated herein by reference. ** To be filed by subsequent amendment. - ------------------------ 5 EX-4.1 3 file002.txt WELLS FARGO TRUST INDENTURE ================================================================================ TRUST INDENTURE AND MORTGAGE N___TZ dated as of __________, 200_ between WELLS FARGO BANK NORTHWEST, N.A., not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee, Owner Trustee and WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided herein, but solely as Loan Trustee, Loan Trustee -------------------------------- Equipment Notes covering one Boeing 737-800 aircraft bearing manufacturer's serial no. _____ and U.S. registration mark N___TZ leased by American Trans Air, Inc. ================================================================================ 2002 EETC - Mortgage (LL) (11) Mortgage N__TZ TABLE OF CONTENTS
GRANTING CLAUSE ................................................................................1 1. DEFINITIONS AND CONSTRUCTION................................................................8 1.01. Definitions and Construction....................................................8 2. THE EQUIPMENT NOTES.........................................................................8 2.01. Form of Equipment Notes.........................................................8 2.02. Issuance and Terms of Equipment Notes...........................................8 2.03. Payments from Collateral Only...................................................9 2.04. Method of Payment..............................................................12 2.05. Application of Payments........................................................14 2.06. Termination of Interest in Collateral..........................................15 2.07. Registration, Transfer and Exchange of Equipment Notes.........................15 2.08. Mutilated, Destroyed, Lost, or Stolen Equipment Notes..........................17 2.09. Payment of Expenses on Transfer; Cancellation..................................18 2.10. Mandatory Redemptions of Equipment Notes.......................................18 2.11. Lessee's Assumption of Equipment Notes..........................................18 2.12. Voluntary Redemptions of Equipment Notes........................................19 2.13. Redemptions; Notice of Redemption..............................................19 2.14. Option to Purchase Equipment Notes.............................................20 2.15. Subordination..................................................................21 3. RECEIPT, DISTRIBUTION, AND APPLICATION OF INCOME...........................................22 3.01. Basic Rent Distribution........................................................22 3.02. Event of Loss; Replacement; Voluntary Termination; Refinancing.................23 3.03. Payments After Event of Default................................................24 3.04. Certain Payments...............................................................26 3.05. Other Payments.................................................................27 3.06. Payments to Owner Trustee......................................................27 3.07. Application of Payments Under Guarantee........................................28 4. COVENANTS OF OWNER TRUSTEE; MORTGAGE EVENTS OF DEFAULT; REMEDIES...........................28 4.01. Covenants of Owner Trustee.....................................................28 4.02. Mortgage Event of Default......................................................29 4.03. Certain Rights.................................................................31 4.04. Remedies ......................................................................33 4.05. Return of Aircraft, Etc........................................................36 4.06. Remedies Cumulative............................................................37 2002 EETC - Mortgage (LL) (11) i Mortgage N__TZ 4.07. Discontinuance of Proceedings..................................................38 4.08. Waiver of Past Defaults........................................................38 4.09. Appointment of Receiver........................................................38 4.10. Loan Trustee Authorized to Execute Bills of Sale, etc..........................39 4.11. Rights of Note Holders to Receive Payment......................................39 5. DUTIES OF LOAN TRUSTEE.....................................................................39 5.01. Notice of Event of Default.....................................................39 5.02. Action upon Instructions; Certain Rights and Limitations.......................40 5.03. Indemnification................................................................43 5.04. No Duties Except as Specified in Mortgage or Instructions......................43 5.05. No Action Except Under Lease, Mortgage, or Instructions........................44 5.06. Replacement Airframes and Replacement Engines..................................44 5.07. Mortgage Supplements for Replacements..........................................47 5.08. Effect of Replacement..........................................................47 5.09. Investment of Amounts Held by Loan Trustee.....................................48 6. OWNER TRUSTEE AND LOAN TRUSTEE.............................................................48 6.01. Acceptance of Trusts and Duties................................................48 6.02. Absence of Duties..............................................................49 6.03. No Representations or Warranties as to Aircraft or Documents....................49 6.04. No Segregation of Money; No Interest...........................................50 6.05. Reliance; Agreements; Advice of Counsel........................................50 6.06. Capacity in Which Acting.......................................................51 6.07. Compensation...................................................................51 6.08. Instructions from Note Holders.................................................51 7. INDEMNIFICATION OF LOAN TRUSTEE BY OWNER TRUSTEE...........................................52 7.01. Scope of Indemnification.......................................................52 8. SUCCESSOR AND SEPARATE TRUSTEES............................................................53 8.01. Notice of Successor Owner Trustee..............................................53 8.02. Resignation of Loan Trustee; Appointment of Successor..........................53 8.03. Appointment of Additional and Separate Trustees................................54 9. SUPPLEMENT AND AMENDMENTS..................................................................56 9.01. Instructions of Majority; Limitations..........................................56 9.02. Trustees Protected.............................................................59 9.03. Documents Mailed to Note Holders...............................................59 9.04. No Request Necessary for Lease Supplement or Mortgage Supplement...............59 9.05. Notices to Liquidity Provider..................................................59 2002 EETC - Mortgage (LL) (11) ii Mortgage N__TZ 10. MISCELLANEOUS.............................................................................59 10.01. Termination of Mortgage.......................................................59 10.02. No Legal Title to Collateral in Note Holders..................................60 10.03. Sale of Aircraft by Loan Trustee Is Binding...................................60 10.04. Mortgage Benefits Specified Persons Only......................................60 10.05. Notices ......................................................................60 10.06. Severability..................................................................61 10.07. No Oral Modification or Continuing Waivers....................................61 10.08. Successors and Assigns........................................................61 10.09. Headings .....................................................................61 10.10. Normal Commercial Relations...................................................61 10.11. Governing Law; Counterpart Form...............................................62 10.12. Voting By Note Holders........................................................62 10.13. Bankruptcy....................................................................62 10.14. No Action Contrary to Lessee's Rights Under the Lease.........................62 10.15. Payments With Respect to Insured Obligations........ERROR! BOOKMARK NOT DEFINED. SCHEDULE I Equipment Notes Original Amount, Interest Rate, and Amortization EXHIBIT A Aircraft Description EXHIBIT B Form of Equipment Note ANNEX A Definitions
2002 EETC - Mortgage (LL) (11) iii Mortgage N__TZ TRUST INDENTURE AND MORTGAGE N___TZ This Trust Indenture and Mortgage (this "Mortgage") is entered into as of __________, 200_ between Wells Fargo Bank Northwest, N.A., a national banking association organized under the laws of the United States, not in its individual capacity, except when referred to as "WFB", but solely as Owner Trustee under the Trust Agreement referred to below (together with its successors under the Trust Agreement, the "Owner Trustee"), and Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity, except when referred to as "WTC", but solely as Loan Trustee hereunder (together with its successors hereunder, the "Loan Trustee"). W I T N E S S E T H - - - - - - - - - - Owner Trustee desires by this Mortgage, among other things, (i) to provide for the issue by Owner Trustee to the Pass-Through Trustees of Equipment Notes evidencing the loans made by each of the Loan Participants to finance a portion of Owner Trustee's payment of Lessor's Cost for the Aircraft, as provided in the Participation Agreement, and (ii) to provide for the assignment, mortgage and pledge by Owner Trustee to Loan Trustee, as part of the Collateral hereunder, among other things, of all of Owner Trustee's right, estate and interest in and to the Aircraft, and, except as hereinafter expressly provided as to Excluded Payments, all of Owner Trustee's right, title and interest in, to and under the Lease and all payments and other amounts received hereunder or thereunder in accordance with the terms hereof, as security for Owner Trustee's and Lessee's obligations to the holders of the Equipment Notes and the Mortgage Indemnitees and for the benefit and security of such Persons; All things have been done to make the Equipment Notes, when executed by Owner Trustee and authenticated and delivered by Loan Trustee hereunder, the valid, binding and enforceable obligations of Owner Trustee; and All things necessary to make this Mortgage the valid, binding and legal obligation of Owner Trustee for the uses and purposes herein set forth, in accordance with its terms, have been done and performed and have happened: GRANTING CLAUSE NOW, THEREFORE, THIS MORTGAGE WITNESSETH, that, to secure the prompt payment of the Original Amount of, interest on, Make-Whole Amount, if any, 2002 EETC - Mortgage (LL) (11) 1 Mortgage N__TZ and all other amounts due with respect to, all Equipment Notes from time to time outstanding hereunder and the performance and observance by Owner Trustee of all the agreements, covenants, and provisions contained herein and in the other Operative Agreements to which it is a party and the Equipment Notes, for the benefit of the Note Holders and each of the Mortgage Indemnitees and the prompt payment of all amounts from time to time owing hereunder and under the Participation Agreement to the Note Holders or any Mortgage Indemnitee by Owner Trustee or Lessee and for the uses and purposes and subject to the terms and provisions hereof, and in consideration of the premises and of the covenants herein contained, and of the acceptance of the Equipment Notes by the holders thereof, and for other good and valuable consideration the receipt and adequacy whereof are hereby acknowledged, Owner Trustee hereby grants to Loan Trustee, its successors in trust and assigns, for the security and benefit of the Note Holders and each of the Mortgage Indemnitees, a first-priority security interest in and mortgage lien on all right, title, and interest of Owner Trustee in, to, and under the following described property, rights, and privileges, whether now existing or hereafter acquired, other than Excluded Payments (which, collectively, excluding Excluded Payments but including all property hereafter specifically subjected to the Lien of this Mortgage by the terms hereof or any supplement hereto, are included within, and are referred to as, the "Collateral"): (1) the Aircraft (including the Airframe and the Engines, all as more particularly described in the Aircraft Description Exhibit) and all replacements thereof and substitutions therefor to which Owner Trustee shall from time to time acquire title as provided herein and in the Lease), as the same is now and will hereafter be constituted, whether now owned by Owner Trustee or hereafter acquired, leased or intended to be leased under the Lease, and in the case of such Engines, whether or not any such Engine shall be installed in or attached to the Airframe or any other airframe, including all Parts of whatever nature, which are from time to time included within the definitions of "Airframe" or "Engines", whether now owned or hereafter acquired, including all substitutions, renewals and replacements of and additions, improvements, accessions and accumulations to the Airframe and Engines (other than additions, improvements, accessions and accumulations which constitute appliances, parts, instruments, appurtenances, accessories, furnishings, or other equipment excluded from the definition of Parts), and all Aircraft Documents; (2) all right, title, interest, claims and demands of Owner Trustee, as Lessor, in, to and under the Lease and the Guarantee, together with all rights, powers, privileges, options and other benefits of Owner Trustee 2002 EETC - Mortgage (LL) (11) 2 Mortgage N__TZ as lessor under the Lease, including the immediate and continuing right to receive and collect all amounts of Basic Rent, Supplemental Rent, income, revenues, issues, profits, insurance proceeds, condemnation awards and other payments, tenders and security now or hereafter payable to or receivable by Lessor under the Lease pursuant thereto, and the right to make all waivers and agreements, to give and receive copies of all notices and other instruments or communications, to accept surrender or redelivery of the Aircraft or any part thereof, as well as all the rights, powers and remedies on the part of Owner Trustee as Lessor under the Lease, to take such action upon the occurrence of a Lease Event of Default thereunder, including the commencement, conduct and consummation of legal, administrative or other proceedings, as shall be permitted by the Lease or by Law, and to do any and all other things whatsoever which Owner Trustee or any lessor may be entitled to do under or in respect of the Lease and any right to restitution from Lessee or any other Person in respect of any determination of invalidity of the Lease; [(3) each Permitted Sublease assignment and each assigned Permitted Sublease (to the extent assigned under such Permitted Sublease assignment), and all Rent thereunder (including all rents or other amounts of Basic Rent, Supplemental Rent, and payments of any kind made under such assigned Permitted Sublease (to the extent assigned under such Permitted Sublease assignment]1; [(3)/(4)] the Purchase Agreement (to the extent specified in the Purchase Agreement Assignment), the Consent and Agreement, the Engine Warranty Assignment, the Engine Consent and Agreement, and the Bills of Sale and any and all other contracts, agreements, warranties and instruments relating to the Airframe and Engines or any rights or interests therein to which Owner Trustee is now or may hereafter be a party; together with all rights, powers, privileges, licenses, easements, options and other benefits of Owner Trustee under each contract, agreement and instrument referred to in this clause (3/4), including the right to receive and collect all payments to Owner Trustee thereunder now or hereafter payable to or receivable by Owner Trustee pursuant thereto and the right to make all waivers and agreements, to give and receive notices and other instruments or communications, or to take any other action under or in respect of any thereof or to take such action upon the occurrence of a default thereunder, including the commencement, conduct and consummation of legal, administrative or other proceedings, as shall be permitted thereby or by Law, and to do any and all other things which Owner Trustee is or may be entitled to do thereunder and any right to restitution from - ---------------------- (1) Insert bracketed language if the Lease provides for the assignment of a permitted sublease. 2002 EETC - Mortgage (LL) (11) 3 Mortgage N__TZ Lessee, Owner Participant or any other Person in respect of any determination of invalidity of any thereof); [(4)/(5)] all rents, issues, profits, revenues and other income of the property subjected or required to be subjected to the Lien of this Mortgage including such proceeds resulting from the sale, lease, or other disposition thereof, and all estate, right, title and interest of every nature whatsoever of Owner Trustee in and to the same; [(5)/(6)] without limiting the generality of the foregoing, all insurance and requisition proceeds with respect to the Aircraft or any part thereof, including the insurance required under (ss.) 11 of the Lease; [(6)/(7)] without limiting the generality of the foregoing, rights of Owner Trustee to amounts paid or payable by Lessee to Owner Trustee under the Participation Agreement and all rights of Owner Trustee to enforce payments of any such amounts thereunder; [(7)/(8)] without limiting the generality of the foregoing, money and securities from time to time deposited or required to be deposited with Loan Trustee pursuant to any terms of this Mortgage or the Lease or required hereby or by the Lease to be held by Loan Trustee hereunder (other than Excluded Payments); and [(8)/(9)] all proceeds of the foregoing. BUT EXCLUDING from the foregoing and from the Collateral all Excluded Payments, and the right to enforce and collect the same, and SUBJECT TO all of the terms and conditions of this Mortgage and the rights of Owner Trustee and Owner Participant hereunder. Concurrently with the delivery of this Mortgage, Owner Trustee is delivering to Loan Trustee the original executed counterpart of the Lease (to which a chattel paper receipt is attached), and executed copies of the Participation Agreement, the Purchase Agreement (to the extent assigned by the Purchase Agreement Assignment), the Purchase Agreement Assignment with the Consent and Agreement and the Engine Warranty Assignment and Engine Consent and Agreement. TO HAVE AND TO HOLD all and singular the aforesaid property unto Loan Trustee, and its successors and assigns, in trust for the benefit and security of the Note Holders and the Mortgage Indemnitees, except as provided in (ss.) 2.15 and (ss.) 3 without any preference, distinction or priority of any one Equipment Note over any other by reason of priority of time of issue, sale, negotiation, date 2002 EETC - Mortgage (LL) (11) 4 Mortgage N__TZ of maturity thereof or otherwise for any reason whatsoever, and for the uses and purposes and in all cases and as to all property specified in paragraphs (1) through [(9)] inclusive above, subject to the terms and provisions set forth in this Mortgage. Anything herein contained to the contrary notwithstanding, Owner Trustee shall remain liable under each of the Mortgage Agreements to which it is a party to perform all of the obligations assumed by it thereunder, except to the extent prohibited or excluded from doing so pursuant to the terms and provisions thereof, and Loan Trustee, the Note Holders and the Mortgage Indemnitees shall have no obligation or liability under the Mortgage Agreements, by reason of or arising out of the assignment hereunder, nor shall Loan Trustee, the Note Holders or the Mortgage Indemnitees be required or obligated in any manner to perform or fulfill any obligations of Owner Trustee under or pursuant to any of the Mortgage Agreements to which it is a party, or, except as herein expressly provided, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Owner Trustee does hereby constitute Loan Trustee the true and lawful attorney of Owner Trustee, irrevocably, granted for good and valuable consideration and coupled with an interest and with full power of substitution, and with full power (in the name of Owner Trustee or otherwise) to ask for, require, demand, receive, compound and give acquittance for any and all money and claims for money (in each case including insurance and requisition proceeds but in all cases excluding Excluded Payments) due and to become due under or arising out of the Mortgage Agreements, and all other property which now or hereafter constitutes part of the Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or to take any action or to institute any proceedings which Loan Trustee may deem to be necessary or advisable in the premises. Without limiting the generality of the foregoing, but subject to the rights of Owner Trustee and Owner Participant hereunder, during the continuance of any Mortgage Event of Default, Loan Trustee shall have the right under such power of attorney to accept any offer in connection with the exercise of remedies as set forth herein of any purchaser to purchase the Airframe and Engines and upon such purchase to execute and deliver in the name of and on behalf of Owner Trustee an appropriate bill of sale and other instruments of transfer relating to the Airframe and Engines when purchased by such purchaser, and to perform all other necessary or appropriate acts with respect to any such purchase, and in 2002 EETC - Mortgage (LL) (11) 5 Mortgage N__TZ its discretion to file any claim or take any other action or proceedings, either in its own name or in the name of Owner Trustee or otherwise, which Loan Trustee may deem necessary or appropriate to protect and preserve the right, title and interest of Loan Trustee in and to such Rents and other sums and the security intended to be afforded hereby; provided, that no action of Loan Trustee pursuant to this paragraph shall increase the obligations or liabilities of Owner Trustee to any Person beyond those obligations and liabilities specifically set forth in this Mortgage and in the other Operative Agreements. Under the Lease, Lessee is directed, so long as this Mortgage shall not have been fully discharged, to make all payments of Rent (other than Excluded Payments) and all other amounts which are required to be paid to or deposited with Owner Trustee pursuant to the Lease (other than Excluded Payments) directly to, or as directed by, Loan Trustee at such address or addresses as Loan Trustee shall specify, for application as provided in this Mortgage. Owner Trustee agrees that promptly upon receipt thereof, it will transfer to Loan Trustee any and all money from time to time received by it constituting part of the Collateral, for distribution by Loan Trustee pursuant to this Mortgage, except that Owner Trustee shall accept for distribution pursuant to the Trust Agreement any amounts distributed to it by Loan Trustee under this Mortgage. Owner Trustee agrees that at any time and from time to time, upon the written request of Loan Trustee, Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as Loan Trustee may reasonably deem necessary or desirable to perfect, preserve or protect the mortgage, security interests and assignments created or intended to be created hereby or to obtain for Loan Trustee the full benefits of the assignment hereunder and of the rights and powers herein granted. Owner Trustee does hereby warrant and represent that it has not assigned or pledged, and hereby covenants and agrees that it will not assign or pledge, so long as the assignment hereunder shall remain in effect, and the Lien hereof shall not have been released pursuant to (ss.) 10.01, any of its right, title or interest hereby assigned, to anyone other than Loan Trustee, and that it will not, except as otherwise provided in this Mortgage and except with respect to Excluded Payments to which it is entitled, (i) accept any payment from Lessee or any Permitted Sublessee under any Mortgage Agreement, (ii) enter into any agreement amending or supplementing any Mortgage Agreement, (iii) execute any waiver or modification of, or consent under, the terms of, or exercise any rights, powers or privileges under, any Mortgage Agreement, (iv) settle or compromise any claim (other than those relating to an Excluded Payment) arising under any Mortgage Agreement or (v) submit or consent to the 2002 EETC - Mortgage (LL) (11) 6 Mortgage N__TZ submission of any dispute, difference or other matter arising under or in respect of any Mortgage Agreement to arbitration thereunder. Owner Trustee will not without the written consent of Loan Trustee: (a) receive or collect or agree to the receipt or collection of any payment of Rent (other than Excluded Payments), including Basic Rent, Stipulated Loss Value, Termination Value, EBO Price, or any other payment to be made pursuant to (ss.) 9, 10, or 17 of the Lease prior to the date for the payment thereof provided for by the Lease or assign, transfer or hypothecate (other than to Loan Trustee hereunder) any payment of Rent (other than Excluded Payments), including Basic Rent, Stipulated Loss Value, Termination Value, EBO Price, or any other payment to be made pursuant to (ss.) 9, 10, or 17 of the Lease, then due or to accrue in the future under the Lease in respect of the Airframe and Engines; or (b) except as contemplated by the Trust Agreement in connection with the appointment of a successor owner trustee, sell, mortgage, transfer, assign or hypothecate (other than to Loan Trustee hereunder) its interest in the Airframe and Engines or any part thereof or in any amount to be received by it from the use or disposition of the Airframe and Engines, other than amounts distributed to it pursuant to (ss.) 3. Any and all property described or referred to in the granting clauses hereof which is hereafter acquired by Owner Trustee shall ipso facto, and without any further conveyance, assignment or act on the part of Owner Trustee or Loan Trustee, become and be subject to the Lien herein granted as fully and completely as though specifically described herein, but nothing contained in this paragraph shall be deemed to modify or change the obligations of Owner Trustee contained in the foregoing paragraphs. Owner Trustee does hereby ratify and confirm the Lease and does hereby agree that it will not violate any covenant or agreement made by it therein, herein or in any other Owner Trustee Agreement. Notwithstanding the Granting Clause or any of the foregoing paragraphs, there is hereby excluded from the foregoing security interest all Excluded Payments. Owner Trustee and Loan Trustee hereby covenant and agree as follows: 2002 EETC - Mortgage (LL) (11) 7 Mortgage N__TZ 1. DEFINITIONS AND CONSTRUCTION 1.01. DEFINITIONS AND CONSTRUCTION. The terms defined in Annex A, when capitalized as in Annex A, have the same meanings when used in this Mortgage. Annex A also contains rules of usage that control construction in this Mortgage. 2. THE EQUIPMENT NOTES 2.01. FORM OF EQUIPMENT NOTES. The Equipment Notes shall be substantially in the form of Exhibit B. 2.02. ISSUANCE AND TERMS OF EQUIPMENT NOTES. The Equipment Notes shall be dated the date of issuance thereof, shall be issued in two separate series consisting of Series A and Series B and in the maturities and principal amounts and shall bear interest as specified in Schedule I hereto. On the Delivery Date, each Series of Equipment Notes shall be issued to the Subordination Agent on behalf of the related Pass-Through Trustee under the applicable Pass-Through Trust Agreement. The Equipment Notes shall be issued in registered form only. The Equipment Notes shall be issued in denominations of $1,000 and integral multiples thereof, except that one Equipment Note of each Series may be in an amount that is not an integral multiple of $1,000. Each Equipment Note shall bear interest at the applicable Debt Rate (calculated on the basis of a year of 360 days comprised of twelve 30 day months and payable for the actual number of days elapsed (including the first day but excluding the last day)) on the unpaid Original Amount thereof from time to time outstanding, payable in arrears on __________, 200_, and on each [February 20], [May 20], [August 20] and [November 20] thereafter until maturity. The Original Amount of each Equipment Note shall be payable on the dates and in the installments equal to the corresponding percentage of the Original Amount as set forth in Schedule I hereto which shall be attached as Schedule I to the Equipment Notes. Notwithstanding the foregoing, the final payment made under each Equipment Note shall be in an amount sufficient to discharge in full the unpaid Original Amount and all accrued and unpaid interest on, and any other amounts due under, such Equipment Note. Each Equipment Note shall bear interest at the Past Due Rate (calculated on the basis of a year of 360 days and payable for the actual number of days elapsed (including the first day but excluding the last day)) on any part of the Original Amount, Make-Whole Amount, if any, and to the extent permitted by applicable Law, interest and any other amounts payable thereunder not paid when due 2002 EETC - Mortgage (LL) (11) 8 Mortgage N__TZ for any period during which the same shall be overdue, in each case for the period the same is overdue. Amounts shall be overdue if not paid when due (whether at stated maturity, by acceleration or otherwise). Notwithstanding anything to the contrary contained herein, if any date on which a payment under any Equipment Note becomes due and payable is not a Business Day then such payment shall not be made on such scheduled date but shall be made on the next succeeding Business Day, and if such payment is made on such next succeeding Business Day, no interest shall accrue on the amount of such payment during such extension. The interest rate borne by the Equipment Notes shall be subject to adjustments to the extent, and under the circumstances, specified by the Registration Rights Agreement. Without limiting the Lessee's obligations to pay Supplemental Rent, Owner Trustee hereby agrees to pay all amounts described in clauses (2) through (6) of the definition of Supplemental Rent. The Equipment Notes shall be executed on behalf of Owner Trustee by its President or one of its Vice Presidents, Assistant Vice Presidents or Assistant Secretaries or other authorized officer. Equipment Notes bearing the signatures of individuals who were at any time the proper officers of Owner Trustee shall bind Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Equipment Notes or did not hold such offices at the respective dates of such Equipment Notes. Owner Trustee may from time to time execute and deliver Equipment Notes with respect to the Aircraft to Loan Trustee for authentication upon original issue and such Equipment Notes shall thereupon be authenticated and delivered by Loan Trustee upon the written request of Owner Trustee signed by a Vice President or Assistant Vice President or other authorized officer of Owner Trustee; provided, that each such request shall specify the aggregate Original Amount of all Equipment Notes to be authenticated hereunder on original issue with respect to the Aircraft. Each Equipment Note shall be dated the date of its authentication, which shall be the Delivery Date of the Aircraft in the case of the original issuance of Equipment Notes. No Equipment Note shall be secured by or entitled to any benefit under this Mortgage or be valid or obligatory for any purposes, unless there appears on such Equipment Note a certificate of authentication in the form provided for herein executed by Loan Trustee by the manual signature of one of its authorized officers and such certificate upon any Equipment Notes shall be conclusive evidence, and the only evidence, that such Equipment Note has been duly authenticated and delivered hereunder. 2.03. PAYMENTS FROM COLLATERAL ONLY. 2002 EETC - Mortgage (LL) (11) 9 Mortgage N__TZ (a) Without impairing any of the other rights, powers, remedies, privileges, or Liens of the Note Holders under this Mortgage, each Note Holder, by its acceptance of a Equipment Note, agrees that, except as expressly provided in this Mortgage, the Participation Agreement or any other Operative Agreement, (i) the obligation to make all payments of the Original Amount of, interest on, Make-Whole Amount, if any, and all other amounts due with respect to the Equipment Notes, and the performance by Owner Trustee of every obligation or covenant contained in this Mortgage and in the Participation Agreement or any of the other Operative Agreements, shall be payable only from the income and proceeds from the Trust Estate to the extent included in the Collateral and only to the extent that Owner Trustee shall have sufficient income or proceeds from the Trust Estate to the extent included in the Collateral to enable Loan Trustee to make such payments in accordance with the terms of (ss.) 3, and all of the statements, representations, covenants and agreements made by Owner Trustee (when made in such capacity) contained in this Mortgage and any agreement referred to herein other than the Trust Agreement, unless expressly otherwise stated, are made and intended only for the purpose of binding the Trust Estate and establishing the existence of rights and remedies which can be exercised and enforced against the Trust Estate; therefore, anything contained in this Mortgage or such other agreements to the contrary notwithstanding (except for any express provisions or representations that WFB is responsible for, or is making, in its individual capacity, for which there would be personal liability of WFB), no recourse shall be had with respect to this Mortgage or such other agreements against WFB or against any institution or person which becomes a successor trustee or co-trustee or any officer, director, trustee, servant or direct or indirect parent or controlling Person or Persons of any of them, and (ii) none of WFB, Owner Participant, Loan Trustee and any officer, director, trustee, servant, employee, agent or direct or indirect parent or controlling Person or Persons of any of them (other than Owner Trustee in its trust capacity) shall have any personal liability for any amounts payable or other obligation owed hereunder, under the Participation Agreement or any of the other Operative Agreements or under the Equipment Notes except as expressly provided herein, in the Lease, or in the Participation Agreement; provided, that nothing contained in this (ss.) 2.03(a) shall be construed to limit the exercise and enforcement in accordance with the terms of this Mortgage or such other agreements of rights and remedies against the Trust Estate. These provisions are not intended as any release or discharge of the indebtedness represented by the Equipment Notes and this Mortgage, but are intended only as a covenant not to sue Owner Participant, WFB, or WTC, except as expressly provided herein or in the Participation Agreement, for a deficiency with respect to such indebtedness, the indebtedness represented by this Mortgage and the Equipment Notes to remain in full force and effect as 2002 EETC - Mortgage (LL) (11) 10 Mortgage N__TZ fully as though these provisions were not contained in this Mortgage. Owner Trustee hereby acknowledges that the Note Holders have expressly reserved all their rights and remedies against the Collateral, including the right, in the event of a default in the payment of all or part of the Original Amount of interest on, Make-Whole Amount, if any, or any other amount due with respect to any Equipment Note within the periods provided for in (ss.) 4.02(b), or upon the existence of any other Mortgage Event of Default, to foreclose upon this Mortgage, or to receive the proceeds from the Collateral and otherwise to enforce any other right under this Mortgage. Nothing in this (ss.) 2.03(a) shall (x) release Owner Participant from personal liability, or constitute a covenant not to sue Owner Participant, for any breach by it of any of its covenants, representations or warranties contained in the Participation Agreement or for any of the payments it has agreed to make pursuant to the Participation Agreement or (y) release Owner Trustee or constitute a covenant not to sue Owner Trustee for any breach by it of any representations, warranties or covenants of Owner Trustee contained in the Operative Agreements or (z) release WFB from personal liability, or constitute a covenant not to sue WFB for any breach by it of any representations, warranties or covenants of WFB made in its individual capacity in the Operative Agreements. (b) If (i) all or any part of the Trust Estate becomes the property of, or Owner Trustee or Owner Participant becomes, a debtor subject to the reorganization provisions of the Bankruptcy Code, (ii) pursuant to such reorganization provisions, including (ss.) 1111(b) of the Bankruptcy Code, WFB or Owner Participant is required, by reason of WFB or Owner Participant being held to have recourse liability to any Note Holder or Loan Trustee, directly or indirectly (other than the express recourse liability of WFB or Owner Participant under the Participation Agreement, the Lease or this Mortgage or by separate agreement), to make payment on account of any amount payable as principal of, Make-Whole Amount, if any, interest or other amounts on the Equipment Notes or under this Mortgage, and (iii) any Note Holder or Loan Trustee actually receives any Excess Amount (as hereinafter defined) which reflects any payment by WFB or Owner Participant on account of clause (ii) above, then such Note Holder or Loan Trustee, as the case may be, shall promptly refund to WFB or Owner Participant (whichever shall have made such payment) such Excess Amount. For purposes of this (ss.) 2.03(b), "Excess Amount" means the amount by which such payment exceeds the amount that would have been received by a Note Holder or Loan Trustee if WFB or Owner Participant had not become subject to the recourse liability referred to in clause (ii) above. Nothing contained in this (ss.) 2.03(b) shall prevent a Note Holder or Loan Trustee from 2002 EETC - Mortgage (LL) (11) 11 Mortgage N__TZ enforcing any personal recourse obligation (and retaining the proceeds thereof) of WFB or Owner Participant under the Participation Agreement or this Mortgage (and any exhibits or annexes hereto or thereto) or by separate agreement or from retaining any amount paid by Owner Participant under (ss.) 2.14 or (ss.) 4.03. 2.04. METHOD OF PAYMENT. (a) The Original Amount of, interest on, Make-Whole Amount, if any, and other amounts due under each Equipment Note or hereunder will be payable in Dollars by wire transfer of immediately available funds not later than 11:00 a.m., New York City time, on the due date of payment to Loan Trustee at the Corporate Trust Office for distribution among the Note Holders in the manner provided herein. Owner Trustee shall not have any responsibility for the distribution of such payment to any Note Holder. Notwithstanding the foregoing or any provision in any Equipment Note to the contrary, Loan Trustee will use reasonable efforts to pay or cause to be paid, if so directed in writing by any Note Holder (with a copy to Owner Trustee), all amounts paid by Owner Trustee hereunder and under such holder's Equipment Note or Equipment Notes to such holder or a nominee therefor (including all amounts distributed pursuant to (ss.) 3 of this Mortgage) by transferring, or causing to be transferred, by wire transfer of immediately available funds in Dollars, prior to 2:00 p.m., New York City time, on the due date of payment, to an account maintained by such holder with a bank located in the continental United States, the amount to be distributed to such holder, for credit to the account of such holder maintained at such bank. If Loan Trustee shall fail to make any such payment as provided in the immediately preceding sentence after its receipt of funds at the place and prior to the time specified above, WTC agrees to compensate such holders for loss of use of funds at the Debt Rate until such payment is made and Loan Trustee shall be entitled to any interest earned on such funds until such payment is made. Any payment made hereunder shall be made without any presentment or surrender of any Equipment Note, except that, in the case of the final payment in respect of any Equipment Note, such Equipment Note shall be surrendered to Loan Trustee for cancellation promptly after such payment. Notwithstanding any other provision of this Mortgage to the contrary, Loan Trustee shall not be required to make, or cause to be made, wire transfers as aforesaid prior to the first Business Day on which it is practicable for Loan Trustee to do so in view of the time of day when the funds to be so transferred were received by it if such funds were received after 12:30 p.m., New York City time, at the place of payment. Prior to the due presentment for registration of transfer of any Equipment Note, Owner Trustee and Loan Trustee shall deem and treat the 2002 EETC - Mortgage (LL) (11) 12 Mortgage N__TZ Person in whose name any Equipment Note is registered on the Equipment Note Register as the absolute owner and holder of such Equipment Note for the purpose of receiving payment of all amounts payable with respect to such Equipment Note and for all other purposes, and none of Owner Trustee or Loan Trustee shall be affected by any notice to the contrary. So long as any signatory to the Participation Agreement or nominee thereof shall be a registered Note Holder, all payments to it shall be made to the account of such Note Holder specified in Schedule I thereto and otherwise in the manner provided in or pursuant to the Participation Agreement unless it shall have specified some other account or manner of payment by notice to Loan Trustee consistent with this (ss.) 2.04. (b) Loan Trustee, as agent for Owner Trustee, shall exclude and withhold at the appropriate rate from each payment of Original Amount of, interest on, Make-Whole Amount, if any, and other amounts due hereunder or under each Equipment Note (and such exclusion and withholding shall constitute payment in respect of such Equipment Note) any and all United States withholding taxes applicable thereto as required by Law. Loan Trustee agrees to act as such withholding agent and, in connection therewith, whenever any present or future United States taxes or similar charges are required to be withheld with respect to any amounts payable hereunder or in respect of the Equipment Notes, to withhold such amounts (and such withholding shall constitute payment in respect of such Equipment Note) and timely pay the same to the appropriate authority in the name of and on behalf of the Note Holders, that it will file any necessary United States withholding tax returns or statements when due, and that as promptly as possible after the payment thereof it will deliver to each Note Holder (with a copy to Owner Trustee and Lessee) appropriate receipts showing the payment thereof, together with such additional documentary evidence as any such Note Holder may reasonably request from time to time. If a Note Holder which is a Non-U.S. Person has furnished to Loan Trustee a properly completed and currently effective U.S. Internal Revenue Service Form W-8BEN (or such successor form or forms as may be required by the United States Treasury Department) during the calendar year in which the payment hereunder or under the Equipment Note(s) held by such holder is made (but prior to the making of such payment), or in either of the two preceding calendar years, and has not notified Loan Trustee of the withdrawal or inaccuracy of such form prior to the date of such payment (and Loan Trustee has no reason to know that any information set forth in such form is inaccurate), Loan Trustee shall withhold only the amount, if any, required by Law (after taking into account any applicable exemptions properly claimed by 2002 EETC - Mortgage (LL) (11) 13 Mortgage N__TZ the Note Holder) to be withheld from payments hereunder or under the Equipment Notes held by such holder in respect of United States federal income tax (and such withholding shall constitute payment in respect of such Equipment Note). If a Note Holder (x) which is a Non-U.S. Person has furnished to Loan Trustee a properly completed and currently effective U.S. Internal Revenue Service Form W-8ECI in duplicate (or such successor certificate, form or forms as may be required by the United States Treasury Department as necessary in order to avoid withholding of United States federal income tax), during the calendar year in which the payment is made (but prior to the making of such payment), and has not notified Loan Trustee of the withdrawal or inaccuracy of such certificate or form prior to the date of such payment (and Loan Trustee has no reason to know that any information set forth in such form is inaccurate) or (y) which is a U.S. Person has furnished to Loan Trustee a properly completed and currently effective U.S. Internal Revenue Service Form W-9, if applicable, prior to a payment hereunder or under the Equipment Notes held by such holder, no amount shall be withheld from payments in respect of United States federal income tax. If any Note Holder has notified Loan Trustee that any of the foregoing forms or certificates is withdrawn or inaccurate, or if such holder has not filed a form claiming an exemption from United States withholding tax or if the Code or the regulations thereunder or the administrative interpretation thereof are at any time after the date hereof amended to require such withholding of United States federal income taxes from payments under the Equipment Notes held by such holder, Loan Trustee agrees to withhold from each payment due to the relevant Note Holder withholding taxes at the appropriate rate under Law and will, on a timely basis as more fully provided above, deposit such amounts with an authorized depository and make such returns, statements, receipts and other documentary evidence in connection therewith as required by applicable Law. Neither the Owner Trustee nor the Owner Participant shall have any liability for the failure of the Loan Trustee to withhold taxes in the manner provided for herein or for any false, inaccurate, or untrue evidence provided by any Note Holder hereunder. 2.05. APPLICATION OF PAYMENTS. In the case of each Equipment Note (and, subject to the provisions of (ss.) 3) each payment of Original Amount, Make- Whole Amount, if any, and interest or other amounts due thereon shall be applied: First: to the payment of accrued interest on such Equipment Note (as well as any interest on any overdue Original Amount, any overdue Make- 2002 EETC - Mortgage (LL) (11) 14 Mortgage N__TZ Whole Amount, if any, and to the extent permitted by Law, any overdue interest and any other overdue amounts thereunder) to the date of such payment; Second: to the payment of the Original Amount of such Equipment Note (or a portion thereof) then due thereunder; Third: to the payment of Make-Whole Amount, if any, and any other amount due hereunder or under such Equipment Note; and Fourth: the balance, if any, remaining thereafter, to any payments of the portions of Original Amount of such Equipment Note remaining unpaid (provided, that such Equipment Note shall not be subject to redemption except as provided in (ss.) 2.10, (ss.) 2.12, and (ss.) 2.13). The amounts paid pursuant to clause "Fourth" above shall be applied to the payment of installments of Original Amount of such Equipment Note in the inverse order of their normal maturity. 2.06. TERMINATION OF INTEREST IN COLLATERAL. No Note Holder or any other Mortgage Indemnitee shall, as such, have any further interest in, or other right with respect to, the Collateral when and if the Original Amount of, Make-Whole Amount, if any, and interest on and other amounts due under all Equipment Notes held by such Note Holder and all other sums then due and payable to such Note Holder, such Mortgage Indemnitee or Loan Trustee hereunder (including under the third paragraph of (ss.) 2.02) and under the other Operative Agreements by Owner Trustee and Lessee (collectively, the "Secured Obligations") shall have been paid in full. 2.07. REGISTRATION, TRANSFER AND EXCHANGE OF EQUIPMENT NOTES. Loan Trustee shall keep a register (the "Equipment Note Register") in which Loan Trustee shall provide for the registration of Equipment Notes and the registration of transfers of Equipment Notes. No such transfer shall be given effect unless and until registration hereunder shall have occurred. The Equipment Note Register shall be kept at the Corporate Trust Office of Loan Trustee. Loan Trustee is hereby appointed "Equipment Note Registrar" for the purpose of registering Equipment Notes and transfers of Equipment Notes as herein provided. A holder of any Equipment Note intending to exchange such Equipment Note shall surrender such Equipment Note to Loan Trustee at the Corporate Trust Office, together with a written request from the registered holder thereof for the issuance of a new Equipment Note, specifying, in the case of a surrender for transfer, the name and address of the new holder or holders. Upon surrender for registration of transfer of any Equipment Note, Owner 2002 EETC - Mortgage (LL) (11) 15 Mortgage N__TZ Trustee shall execute, and Loan Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Equipment Notes of a like aggregate Original Amount and of the same series. At the option of the Note Holder, Equipment Notes may be exchanged for other Equipment Notes of any authorized denominations of a like aggregate Original Amount, upon surrender of the Equipment Notes to be exchanged to Loan Trustee at the Corporate Trust Office. Whenever any Equipment Notes are so surrendered for exchange, Owner Trustee shall execute, and Loan Trustee shall authenticate and deliver, the Equipment Notes which the Note Holder making the exchange is entitled to receive. All Equipment Notes issued upon any registration of transfer or exchange of Equipment Notes (whether under this (ss.) 2.07 or under (ss.) 2.08 or otherwise under this Mortgage) shall be the valid obligations of Owner Trustee evidencing the same respective obligations, and entitled to the same security and benefits under this Mortgage, as the Equipment Notes surrendered upon such registration of transfer or exchange. Every Equipment Note presented or surrendered for registration of transfer, shall (if so required by Loan Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to Loan Trustee duly executed by the Note Holder or such holder's attorney duly authorized in writing, and Loan Trustee shall require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act, and the securities Laws of any applicable state. Loan Trustee shall make a notation on each new Equipment Note of the amount of all payments of Original Amount previously made on the old Equipment Note or Equipment Notes with respect to which such new Equipment Note is issued and the date to which interest on such old Equipment Note or Equipment Notes has been paid. Interest shall be deemed to have been paid on such new Equipment Note to the date on which interest shall have been paid on such old Equipment Note, and all payments of the Original Amount marked on such new Equipment Note, as provided above, shall be deemed to have been made thereon. Owner Trustee shall not be required to exchange any surrendered Equipment Notes as provided above during the ten-day period preceding the due date of any payment on such Equipment Note. Owner Trustee shall in all cases deem the Person in whose name any Equipment Note shall have been issued and registered as the absolute owner and holder of such Equipment Note for the purpose of receiving payment of all amounts payable by Owner Trustee with respect to such Equipment Note and for all purposes until a notice stating otherwise is received from Loan Trustee and such change is reflected on the Equipment Note Register. Loan Trustee will promptly notify Owner Trustee, Owner Participant and Lessee of each registration of a transfer of an Equipment Note. Any such transferee of an Equipment Note, by its acceptance of an Equipment Note, agrees to the provisions of the Participation Agreement applicable to Note 2002 EETC - Mortgage (LL) (11) 16 Mortgage N__TZ Holders, including (ss.ss.) 6.5, 7.5, 7.6, and 10, and shall be deemed to have represented and warranted (except as provided above), and covenanted, to the parties to the Participation Agreement as to the matters represented, warranted and covenanted as provided in the Participation Agreement. Subject to compliance by the Note Holder and its transferee (if any) of the requirements set forth in this (ss.) 2.07, Loan Trustee and Owner Trustee shall use all reasonable efforts to issue new Equipment Notes upon transfer or exchange within 10 Business Days of the date an Equipment Note is surrendered for transfer or exchange. 2.08. MUTILATED, DESTROYED, LOST, OR STOLEN EQUIPMENT NOTES. If any Equipment Note shall become mutilated, destroyed, lost or stolen, Owner Trustee shall, upon the written request of the holder of such Equipment Note, execute and Loan Trustee shall authenticate and deliver in replacement thereof a new Equipment Note of the same series, payable in the same Original Amount dated the same date and captioned as issued in connection with the Aircraft. If the Equipment Note being replaced has become mutilated, such Equipment Note shall be surrendered to Loan Trustee and a photocopy thereof shall be furnished to Owner Trustee. If the Equipment Note being replaced has been destroyed, lost or stolen, the holder of such Equipment Note shall furnish to Owner Trustee, Owner Participant and Loan Trustee such security or indemnity as may be required by them to save Owner Trustee, Owner Participant and Loan Trustee harmless and evidence satisfactory to Owner Trustee, Owner Participant and Loan Trustee of the destruction, loss or theft of such Equipment Note and of the ownership thereof. If a "qualified institutional buyer" of the type referred to in paragraph (a)(1)(i)(A), (B), (D) or (E) of Rule 144A under the Securities Act (a "QIB") is the holder of any such destroyed, lost or stolen Equipment Note, then the written indemnity of such QIB, signed by an authorized officer thereof, in favor of, delivered to and in form reasonably satisfactory to Lessee, Owner Participant, Owner Trustee and Loan Trustee shall be accepted as satisfactory indemnity and security and no further indemnity or security shall be required as a condition to the execution and delivery of such new Equipment Note. Subject to compliance by the Note Holder of the requirements set forth in this (ss.) 2.08, Loan Trustee and Owner Trustee shall use all reasonable efforts to issue new Equipment Notes within 10 Business Days of the date of the written request therefor from the Note Holder. 2002 EETC - Mortgage (LL) (11) 17 Mortgage N__TZ 2.09. PAYMENT OF EXPENSES ON TRANSFER; CANCELLATION. (a) No service charge shall be made to a Note Holder for any registration of transfer or exchange of Equipment Notes, but Loan Trustee, as Equipment Note Registrar, may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Equipment Notes. (b) Loan Trustee shall cancel all Equipment Notes surrendered for replacement, redemption, transfer, exchange, payment or cancellation, shall destroy the canceled Equipment Notes and shall deliver to Owner Trustee, upon request, its certification to such effect. 2.10. MANDATORY REDEMPTIONS OF EQUIPMENT NOTES. (a) On the date on which Lessee is required pursuant to (ss.) 10.1.2 of the Lease to make payment for an Event of Loss with respect to the Aircraft, all of the Equipment Notes shall be redeemed in whole at a redemption price equal to 100% of the unpaid Original Amount thereof, together with all accrued interest thereon to the date of redemption and all other amounts payable hereunder or under the Participation Agreement to the Note Holders but without Make-Whole Amount. (b) If the Lease is terminated with respect to the Aircraft by Lessee pursuant to (ss.) 9 or (ss.) 17.3 thereof and Lessee shall not have assumed all of the obligations of Owner Trustee hereunder pursuant to (ss.) 2.11 hereof and (ss.) 11.6 of the Participation Agreement, on the date the Lease is so terminated all the Equipment Notes shall be redeemed in whole at a redemption price equal to 100% of the unpaid Original Amount thereof, together with accrued interest thereon to the date of redemption and all other amounts payable hereunder or under the Participation Agreement and all other Operative Agreements to the Note Holders plus Make-Whole Amount, if any. 2.11. LESSEE'S ASSUMPTION OF EQUIPMENT NOTES. If, in accordance with (ss.) 17.3.6 of the Lease and (ss.) 11.6 of the Participation Agreement, Lessee elects to assume Owner Trustee's obligations hereunder, under the Equipment Notes, and under the other Operative Agreements by a supplement to this Mortgage reasonably satisfactory to Mortgagee (which shall contain (a) provisions substantially similar to (ss.ss.) 6, 7, 8, 10, 11 and 12 of the Lease, and (b) other provisions necessary or advisable to effectuate such assumption), then, upon delivery of such supplement, Guarantor's delivery of a guarantee of the Equipment Notes and other amounts owing to the Note Holders and the other 2002 EETC - Mortgage (LL) (11) 18 Mortgage N__TZ Mortgage Indemnitees substantially in the form of the Guarantee, Lessee's counsel's delivery of an opinion to the effect that such assumption has been duly and validly effected, and compliance with all other requirements of (ss.) 11.6 of the Participation Agreement and (ss.) 1(j) of the Note Purchase Agreement, Owner Trustee shall be released and discharged from any further obligations hereunder and under the Equipment Notes and all other Operative Documents, and Owner Participant shall be released and discharged from any further obligations under the Participation Agreement and any other Operative Document to which it is a party, except with respect to any obligations that accrued before the release date. 2.12. VOLUNTARY REDEMPTIONS OF EQUIPMENT NOTES. All (but not less than all) of the Equipment Notes may be redeemed at the option of Owner Trustee in connection with a transaction described in, and subject to the terms and conditions of, (ss.) 11 of the Participation Agreement, upon at least 30 days' revocable written notice to Loan Trustee and the Note Holders. In these circumstances, the Equipment Notes shall be redeemed in whole at a redemption price equal to 100% of the unpaid Original Amount thereof, together with accrued interest thereon to the date of redemption and all other amounts payable hereunder or under the Participation Agreement and a Make-Whole Amount, if any. 2.13. REDEMPTIONS; NOTICE OF REDEMPTION. (a) Neither any redemption of any Equipment Note nor any purchase by Owner Trustee of any Equipment Note may be made except to the extent and in the manner expressly permitted by this Mortgage. No purchase of any Equipment Note may be made by Loan Trustee. (b) Upon receipt of notice thereof, notice of redemption or purchase with respect to the Equipment Notes shall be given by Loan Trustee by first-class mail, postage prepaid, mailed not less than 25 nor more than 60 days prior to the applicable redemption date, to each Note Holder of such Equipment Notes to be redeemed or purchased, at such Note Holder's address appearing in the Equipment Note Register; provided, that, in the case of a redemption to be made pursuant to (ss.) 2.10(b) or (ss.) 2.12, such notice shall be revocable and shall be deemed revoked if the Lease does not in fact terminate on the specified termination date or if such refinancing does not occur on the date specified in the notice thereof, as the case may be. All notices of redemption shall state: (1) the redemption date, (2) the applicable basis for determining the redemption price, (3) that on the redemption date, the redemption price will become due and payable upon each such Equipment Note, and that, if any such Equipment 2002 EETC - Mortgage (LL) (11) 19 Mortgage N__TZ Notes are then outstanding, interest on such Equipment Notes shall cease to accrue on and after such redemption date, and (4) the place or places where such Equipment Notes are to be surrendered for payment of the redemption price. (c) On or before the redemption date, Owner Trustee (or any person on behalf of Owner Trustee) shall, to the extent an amount equal to the redemption price for the Equipment Notes to be redeemed or purchased on the redemption date shall not then be held in the Collateral, deposit or cause to be deposited with Loan Trustee by 12:00 noon on the redemption date in immediately available funds the redemption price of the Equipment Notes to be redeemed or purchased. (d) Notice of redemption or purchase having been given as aforesaid (and not deemed revoked as contemplated in the proviso to (ss.) 2.13(b)), the Equipment Notes to be redeemed or purchased shall, on the redemption date, become due and payable at the Corporate Trust Office of Loan Trustee or at any office or agency maintained for such purposes pursuant to (ss.) 2.07, and from and after such redemption date (unless there shall be a default in the payment of the redemption price) any such Equipment Notes then outstanding shall cease to bear interest. Upon surrender of any such Equipment Note for redemption or purchase in accordance with said notice, such Equipment Note shall be redeemed at the redemption price. If any Equipment Note called for redemption or purchase shall not be so paid upon surrender thereof for redemption, the principal amount thereof shall, until paid, continue to bear interest from the applicable redemption date at the interest rate in effect for such Equipment Note as of such redemption date. 2.14. OPTION TO PURCHASE EQUIPMENT NOTES. Either Owner Trustee or Owner Participant may, upon the events and subject to the terms and conditions and for the price set forth in this (ss.) 2.14, purchase all but not less than all of the Equipment Notes outstanding hereunder, and each Note Holder agrees that it will, upon such events and subject to such terms and conditions and upon receipt of such price, sell, assign, transfer and convey to such purchaser or its nominee (without recourse or warranty of any kind except as to its title to the Equipment Notes and except against Liens on such Equipment Notes arising by, through or under such holder), all of the right, title and interest of such Note Holder in and to the Collateral, this Mortgage and the Equipment Notes held by it, and such purchaser or its nominee shall assume all of such holder's obligations under the Participation Agreement and hereunder. 2002 EETC - Mortgage (LL) (11) 20 Mortgage N__TZ Such option to purchase the Equipment Notes may be exercised by Owner Trustee or Owner Participant upon any of the following events, and, in any such event, the purchase price thereof shall equal for each Equipment Note the aggregate unpaid Original Amount thereof, plus accrued and unpaid interest thereon to but not including the date of purchase and all other amounts (other than the Make-Whole Amount, except as provided in the next sentence) then payable hereunder or under the Participation Agreement to the holder thereof. Such option to purchase the Equipment Notes may be exercised: (i) upon a Mortgagee Event or (ii) if a Lease Event of Default exists or (iii) upon either the Equipment Notes becoming due and payable pursuant to (ss.) 4.04(b) hereof or the Loan Trustee taking action or notifying the Owner Trustee or the Owner Participant that it intends to take action to foreclose the Lien of this Mortgage or otherwise commence the exercise of remedies under this Mortgage or the Lease, provided, that if such option is exercised pursuant to clause (ii) at a time when a Lease Event of Default has existed for less than 120 days, the purchase price thereof shall equal the price provided in the preceding sentence plus the Make-Whole Amount, if any. Such option to purchase the Equipment Notes may be exercised by Owner Trustee or Owner Participant giving written notice of its irrevocable election of such option to Loan Trustee, which notice shall specify a date for such purchase not more than 30 days or less than 15 days after the date of such notice. Loan Trustee shall not exercise any of the remedies hereunder or, without the consent of Owner Trustee or Owner Participant, under the Lease, during the period from the time that a notice of exercise by Owner Participant of such option is given until the date on which such purchase is required to occur pursuant to the terms of the preceding sentence. If Owner Trustee or Owner Participant on or before the date of such purchase shall so request, the Note Holders will comply with all the provisions of (ss.) 2.07 to enable new Equipment Notes to be issued to Owner Trustee or Owner Participant or its nominee in such denominations as Owner Trustee or Owner Participant shall request. All taxes, charges and expenses required pursuant to (ss.) 2.09 in connection with the issuance of such new Equipment Note shall be borne by Owner Participant. 2.15. SUBORDINATION. (a) Owner Trustee and, by acceptance of its Equipment Notes of any Series, each Note Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Note Holder of such Series, including any payment or distribution of 2002 EETC - Mortgage (LL) (11) 21 Mortgage N__TZ cash, property or securities after the commencement of a proceeding of the type referred to in (ss.) 4.02(g), except as expressly provided in ss. 3. (b) By the acceptance of its Equipment Notes of any Series (other than Series A), each Note Holder of such Series agrees that if such Note Holder, in its capacity as a Note Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to receive under this (ss.) 2.15 or (ss.) 3, it will hold any amount so received in trust for the Senior Holder (as defined in (ss.) 2.15(c)) and will forthwith turn over such payment to Loan Trustee in the form received to be applied as provided in (ss.) 3. (c) As used in this (ss.) 2.15, the term "Senior Holder" shall mean (i) the Note Holders of Series A until the Secured Obligations in respect of Series A Equipment Notes have been paid in full, and (ii) after the Secured Obligations in respect of Series A Equipment Notes have been paid in full, the Note Holders of Series B until the Secured Obligations in respect of Series B Equipment Notes have been paid in full. 3. RECEIPT, DISTRIBUTION, AND APPLICATION OF INCOME 3.01. BASIC RENT DISTRIBUTION. Except as otherwise provided in (ss.) 3.03, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent and any payment received by Loan Trustee pursuant to (ss.) 4.03 shall be promptly distributed in the following order of priority: First, (i) so much of such installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of Original Amount and interest and other amounts (as well as any interest on any overdue Original Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series A Equipment Notes shall be distributed to the Note Holders of Series A ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Equipment Note bears to the aggregate amount of the payments then due under all Series A Equipment Notes; and (ii) after giving effect to paragraph (i) above, so much of such installment or payment remaining as shall be required to pay in full the aggregate amount of the payment or payments of Original Amount and interest and other amounts (as well as any interest on any overdue Original Amount 2002 EETC - Mortgage (LL) (11) 22 Mortgage N__TZ and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due under all Series B Equipment Notes shall be distributed to the Note Holders of Series B ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Equipment Note bears to the aggregate amount of the payments then due under all Series B Equipment Notes; and Second, the balance, if any, of such installment remaining thereafter shall be distributed to Owner Trustee; provided, that if a Mortgage Event of Default exists, then such balance shall not be distributed as provided in this clause "Second" but shall be held by Loan Trustee as part of the Collateral and invested in accordance with (ss.) 5.09 until whichever of the following shall first occur: (i) all Mortgage Events of Default shall have been cured or waived, in which event such balance shall be distributed as provided in this clause "Second" without reference to this proviso, (ii) (ss.) 3.03 shall be applicable, in which event such balance shall be distributed in accordance with the provisions of (ss.) 3.03, or (iii) the 120th day after the receipt of such payment in which case such payment shall be distributed as provided in this clause "Second" without reference to this proviso. 3.02. EVENT OF LOSS; REPLACEMENT; VOLUNTARY TERMINATION; REFINANCING. Except as otherwise provided in (ss.) 3.03, any payments received by Loan Trustee (i) with respect to the Aircraft as the result of an Event of Loss, (ii) pursuant to a voluntary termination of the Lease pursuant to (ss.) 9 or (ss.) 17.3 thereof, or (iii) in connection with a refinancing of the Equipment Notes pursuant to (ss.) 11 of the Participation Agreement shall be applied to redemption of the Equipment Notes and to all other amounts payable to Loan Trustee or any Note Holder hereunder or under the Participation Agreement by applying such funds in the following order of priority: First, (a) to reimburse Loan Trustee and the Note Holders for any reasonable costs or expenses incurred in connection with such redemption for which they are entitled to reimbursement, or indemnity by Lessee, under the Operative Agreements and then (b) to pay any other amounts then due to Loan Trustee, the Note Holders and the other Mortgage Indemnitees under this Mortgage, the Participation Agreement or the Equipment Notes; Second, (i) to pay the amounts specified in paragraph (i) of clause "Third" of (ss.) 3.03 plus Make-Whole Amount, if any, then due and payable in respect of the Series A Equipment Notes; and 2002 EETC - Mortgage (LL) (11) 23 Mortgage N__TZ (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "Third" of (ss.) 3.03 plus Make-Whole Amount, if any, then due and payable in respect of the Series B Equipment Notes; and Third, as provided in clause "Fourth" of (ss.) 3.03, provided, that if a Replacement Airframe or Replacement Engine shall be substituted for the Airframe or Engine subject to such Event of Loss as provided in (ss.) 10 of the Lease and in accordance with (ss.) 5.06 hereof, any insurance, condemnation or similar proceeds which result from such Event of Loss and are paid over to Loan Trustee shall be held by Loan Trustee as permitted by (ss.) 6.04 hereof (provided, that such moneys shall be invested as provided in (ss.) 5.09 hereof) as additional security for the obligations of Lessee under the Lessee Operative Agreements and, unless otherwise applied pursuant to the Lease, such proceeds (and any related investment earnings) shall be released to Lessee at Lessee's written request upon the release of such Airframe or Engine subject to such Event of Loss and the replacement thereof as provided in the Lease. 3.03. PAYMENTS AFTER EVENT OF DEFAULT. Except as otherwise provided in (ss.) 3.04, all payments received and amounts held or realized by Loan Trustee (including any amounts realized by Loan Trustee from the exercise of any remedies pursuant to (ss.) 15 of the Lease or (ss.) 4 hereof) after both a Mortgage Event of Default exists and the Equipment Notes shall have become due and payable pursuant to (ss.) 4.04(b) hereof, as well as all payments or amounts then held by Loan Trustee as part of the Collateral, shall be promptly distributed by Loan Trustee in the following order of priority: First, so much of such payments or amounts as shall be required to (i) reimburse Loan Trustee for any compensation, tax (except to the extent resulting from a failure of the Loan Trustee to withhold taxes pursuant to (ss.) 2.04(b) hereof), expense or other loss (including all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Collateral (all such property being herein called the "Mortgaged Property") pursuant to (ss.) 4.05(b)) incurred by Loan Trustee (to the extent not previously reimbursed), the expenses of any sale, taking or other proceeding, reasonable attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by Loan Trustee or the Note Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by Loan Trustee or any Note Holder, liquidated or otherwise, upon such Mortgage Event of Default shall be applied by Loan Trustee as between itself and the Note Holders in 2002 EETC - Mortgage (LL) (11) 24 Mortgage N__TZ reimbursement of such expenses and any other expenses for which Loan Trustee or the Note Holders are entitled to reimbursement under any Operative Agreement and (ii) to pay all amounts payable to the other Mortgage Indemnitees hereunder and under the Participation Agreement and the Lease; and in the case the aggregate amount to be so distributed is insufficient to pay as aforesaid in clauses (i) and (ii), then ratably, without priority of one over the other, in proportion to the amounts owed each hereunder; Second, so much of such payments or amounts remaining as shall be required to reimburse the then existing or prior Note Holders for payments made pursuant to (ss.) 5.03 (to the extent not previously reimbursed) shall be distributed to such then existing or prior Note Holders ratably, without priority of one over the other, in accordance with the amount of the payment or payments made by each such then existing or prior Note Holder pursuant to said (ss.) 5.03; Third, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Original Amount of all Series A Equipment Notes, and the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Amount, which shall not be payable) and all other Secured Obligations in respect of the Series A Equipment Notes (other than Make-Whole Amount, if any) to the date of distribution, shall be distributed to the Note Holders of Series A, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Original Amount of all Series A Equipment Notes held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Amount, if any) to the date of distribution, bears to the aggregate unpaid Original Amount of all Series A Equipment Notes held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Amount, if any) to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Original Amount of all Series B Equipment Notes, and the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Amount, which shall not be payable) and all other Secured Obligations in respect of the Series B Equipment Notes (other than Make-Whole Amount, if any) to the date of distribution, shall be distributed to the Note Holders of Series B, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Original Amount of all 2002 EETC - Mortgage (LL) (11) 25 Mortgage N__TZ Series B Equipment Notes held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Amount, if any) to the date of distribution, bears to the aggregate unpaid Original Amount of all Series B Equipment Notes held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Amount, if any) to the date of distribution; and Fourth, the balance, if any, of such payments or amounts remaining thereafter shall be distributed to Owner Trustee. No Make-Whole Amount shall be due and payable on the Equipment Notes as a consequence of the acceleration of the Equipment Notes as a result of a Mortgage Event of Default. 3.04. CERTAIN PAYMENTS. (a) Any payments received by Loan Trustee for which no provision as to the application thereof is made in this Mortgage and for which such provision is made in the Lease, the Participation Agreement or any other Operative Agreement shall be applied forthwith to the purpose for which such payment was made in accordance with the terms of the Lease, the Participation Agreement or such other Operative Agreement, as the case may be. (b) Notwithstanding anything to the contrary in this (ss.) 3, Loan Trustee will distribute promptly upon receipt any indemnity payment received by it from Owner Trustee or Lessee in respect of WTC, any Note Holder, or any other Mortgage Indemnitee, in each case whether pursuant to (ss.) 9 of the Participation Agreement or as Supplemental Rent (other than clauses (2), (3), (4), and (5) of the definition thereof), directly to the Person entitled thereto. Any payment received by Loan Trustee as Supplemental Rent pursuant to clauses (2), (3), (4), or (5) of the definition thereof under the third paragraph of (ss.) 2.02 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. (c) Notwithstanding anything to the contrary contained in (ss.) 3, any amounts received by Loan Trustee which constitute Excluded Payments shall be distributed promptly upon receipt by Loan Trustee directly to the Person or Persons entitled thereto. (d) Notwithstanding any provision of this Mortgage to the contrary, any amounts held by Loan Trustee pursuant to the terms of the Lease [or any Permitted Sublease assignment] shall be held by Loan Trustee as security for 2002 EETC - Mortgage (LL) (11) 26 Mortgage N__TZ the obligations of Lessee under the Lessee Operative Agreements and, if and when required by the Lease, paid or applied in accordance with the applicable provisions of the Lease. 3.05. OTHER PAYMENTS. Any payments received by Loan Trustee for which no provision as to the application thereof is made in the Lease, the Participation Agreement, elsewhere in this Mortgage or in any other Operative Agreement shall be distributed by Loan Trustee to the extent received or realized at any time (i) prior to the payment in full of all Secured Obligations, in the order of priority specified in (ss.) 3.01 subject to the proviso thereto, and (ii) after payment in full of all Secured Obligations, in the following order of priority: First, to the extent payments or amounts described in clause "First" of (ss.) 3.03 are otherwise obligations of Lessee under the Operative Agreements or for which Lessee is obligated to indemnify against thereunder, in the manner provided in clause "First" of (ss.) 3.03, and Second, in the manner provided in clause "Fourth" of (ss.) 3.03. Further, and except as otherwise provided in (ss.ss.) 3.02, 3.03, and 3.04, all payments received and amounts realized by Loan Trustee under the Lease or otherwise with respect to the Aircraft (including all amounts realized upon the sale or re-lease of the Aircraft after the termination of the Lease with respect thereto), to the extent received or realized at any time after payment in full of all Secured Obligations shall be distributed by Loan Trustee in the order of priority specified in clause (ii) of the immediately preceding sentence of this (ss.) 3.05. 3.06. PAYMENTS TO OWNER TRUSTEE. Any amounts distributed hereunder by Loan Trustee to Owner Trustee shall be paid to Owner Trustee (within the time limits contemplated by (ss.) 2.04(a)) by wire transfer of funds of the type received by Loan Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from Owner Trustee to Loan Trustee from time to time. Owner Trustee hereby notifies Loan Trustee that unless and until Loan Trustee receives notice to the contrary from Owner Trustee, all amounts to be distributed to Owner Trustee pursuant to clause "Second" of (ss.) 3.01 shall be distributed by wire transfer of funds of the type received by Loan Trustee to Owner Participant's account (within the time limits contemplated by (ss.) 2.04(a)) specified in Schedule I to the Participation Agreement. 2002 EETC - Mortgage (LL) (11) 27 Mortgage N__TZ 3.07. APPLICATION OF PAYMENTS UNDER GUARANTEE. All payments received by Loan Trustee pursuant to the Guarantee shall be distributed forthwith by Loan Trustee in the same order of priority, and in the same manner, as it would have distributed the payment in respect of which such payment under the Guarantee was received. 4. COVENANTS OF OWNER TRUSTEE; MORTGAGE EVENTS OF DEFAULT; REMEDIES 4.01. COVENANTS OF OWNER TRUSTEE. Owner Trustee hereby covenants and agrees (the covenants and agreements in clause (b) below being made only by WFB) as follows: (a) Owner Trustee will duly and punctually pay the Original Amount of, Make-Whole Amount, if any, and interest on and other amounts due under the Equipment Notes and hereunder in accordance with the terms of the Equipment Notes and this Mortgage and all amounts, if any, payable by it to the Note Holders under the Participation Agreement or (ss.) 9 of the Lease; (b) WFB will not, directly or indirectly, cause or permit to exist a Lessor Lien attributable to it in its individual capacity with respect to the Aircraft or any other portion of the Trust Estate; will promptly, at its own expense, take such action as may be necessary to duly discharge such Lessor Lien attributable to it in its individual capacity; and will make restitution to the Trust Estate for any actual diminution of the assets of the Trust Estate resulting from such Lessor Liens attributable to it in its individual capacity; (c) if Owner Trustee shall have Actual Knowledge of a Mortgage Default or an Event of Loss, Owner Trustee will give prompt written notice of such Mortgage Default or Event of Loss to Loan Trustee, each Note Holder, Lessee and Owner Participant; (d) Owner Trustee will furnish to Loan Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates and other instruments furnished to Owner Trustee under the Lease, including a copy of each report or notice received pursuant to (ss.) 9.1 and (ss.) E of Annex D of the Lease to the extent that the same shall not have been furnished to Loan Trustee pursuant to the Lease; (e) except pursuant to the Operative Agreements or with the consent of Loan Trustee (acting pursuant to instructions given in accordance 2002 EETC - Mortgage (LL) (11) 28 Mortgage N__TZ with (ss.) 9.01), Owner Trustee will not contract for, create, incur, assume or suffer to exist any Debt, and will not guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance of any obligation or capability of so doing, or otherwise), endorse or otherwise be or become contingently liable, directly or indirectly, in connection with the Debt of any other person; and (f) Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Operative Agreements. 4.02. MORTGAGE EVENT OF DEFAULT. "Mortgage Event of Default" means any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or come about or be effected by operation of Law or pursuant to or in compliance with any judgment, decree, or order of any court or any order, rule or regulation of any administrative or governmental body): (a) any Lease Event of Default (provided, that any such Lease Event of Default caused solely by a failure of Lessee to pay to Owner Trustee or Owner Participant when due any amount that is included in the definition of Excluded Payments shall not constitute a Mortgage Event of Default unless notice is given by Owner Participant to Loan Trustee that such failure shall constitute a Mortgage Event of Default); or (b) the failure of Owner Trustee to pay when due any payment of Original Amount of, interest on, Make-Whole Amount, if any, or other amount due and payable under any Equipment Note or hereunder (other than any such failure arising by virtue of a tax withheld pursuant to (ss.) 2.04(b) or as a result of a Lease Default) and such failure shall have continued unremedied for five Business Days in the case of any payment of Original Amount or interest or Make-Whole Amount, if any, thereon and, in the case of any other amount, for ten Business Days after Owner Trustee and Owner Participant receive written demand from Loan Trustee or any Note Holder; or (c) any Lien required to be discharged by WFB pursuant to ss. 4.01(b) hereof or WFB or Owner Trustee pursuant to (ss.) 7.2.1 of the Participation Agreement, or by Owner Participant pursuant to (ss.) 7.2.1 of the Participation Agreement shall remain undischarged for a period of 30 days after 2002 EETC - Mortgage (LL) (11) 29 Mortgage N__TZ Owner Trustee and Owner Participant shall have received written notice from Loan Trustee or any Note Holder of such Lien; or (d) any representation or warranty made by Owner Participant or Owner Trustee herein, in the Participation Agreement or in any certificate furnished by Owner Participant or Owner Trustee to Loan Trustee or any Note Holder in connection with the transactions contemplated by the Operative Agreements or by any Person guaranteeing or supporting the obligations of Owner Participant under the Operative Agreements in any related guarantee or support agreement (an "OP Guarantor") shall prove to have been false or incorrect when made in any material respect and continues to be material and adverse to the interests of Loan Trustee or the Note Holders, and if such misrepresentation is capable of being corrected and if such correction is being sought diligently, such misrepresentation shall not have been corrected within 60 days (or, without affecting (ss.) 4.02(f) hereof, in the case of the representations made in (ss.) 6.2.6 of the Participation Agreement as to the citizenship of WFB or of Owner Participant, respectively, as soon as is reasonably practicable but in any event within 60 days) following notice thereof from Loan Trustee or any Note Holder to Owner Trustee and Owner Participant or an OP Guarantor, as the case may be; or (e) other than as provided in (c) above or (f) below, any failure by Owner Trustee or Owner Participant to observe or perform any other covenant or obligation of Owner Trustee or Owner Participant, as the case may be, for the benefit of Loan Trustee or the Note Holders contained in the Participation Agreement, (ss.) 4.2.1 of the Trust Agreement, the Equipment Notes or this Mortgage or any failure of an OP Guarantor to observe or perform any covenant or obligation of such Person contained in its guarantee or support agreement which is not remedied within a period of 60 days after notice thereof has been given to Owner Trustee, Owner Participant or an OP Guarantor, as the case may be; or (f) if at any time when the Aircraft is registered under the laws of the United States, Owner Participant shall not be a Citizen of the United States, and as the result thereof the registration of the Aircraft under the Federal Aviation Act, and regulations then applicable thereunder, shall cease to be effective; provided, that no Mortgage Event of Default shall be deemed to have occurred under this paragraph (f) unless such circumstances continue unremedied for more than 60 days after Owner Participant has Actual Knowledge of the state of facts that resulted in such ineffectiveness and of such loss of citizenship; or 2002 EETC - Mortgage (LL) (11) 30 Mortgage N__TZ (g) at any time either (i) the commencement of an involuntary case or other proceeding in respect of Owner Participant, Owner Trustee or the Trust Estate under the federal bankruptcy Laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar Law in the United States or seeking the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of Owner Participant, an OP Guarantor, Owner Trustee, the Trust or the Trust Estate or for all or substantially all of its property, or seeking the winding-up or liquidation of its affairs and the continuation of any such case or other proceeding undismissed and unstayed for a period of 60 consecutive days; or (ii) the commencement by Owner Participant, Owner Trustee, the Trust or the Trust Estate of a voluntary case or proceeding under the federal bankruptcy Laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar Law in the United States, or the consent by Owner Participant, an OP Guarantor, Owner Trustee, the Trustee or the Trust Estate to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of Owner Participant, such OP Guarantor, Owner Trustee, the Trust, or the Trust Estate or for all or substantially all of its property, or the making by Owner Participant, an OP Guarantor, Owner Trustee, the Trust or the Trust Estate of any assignment for the benefit of creditors or Owner Participant, an OP Guarantor or Owner Trustee shall take any action to authorize any of the foregoing; provided, that an event referred to in this (ss.) 4.02(g) with respect to Owner Participant or an OP Guarantor shall not constitute a Mortgage Event of Default if within 30 days of the commencement of the case or proceeding a final non-appealable order, judgment or decree shall be entered in such case or proceeding by a court or a trustee, custodian, receiver or liquidator, to the effect that no part of the Trust Estate (except for Owner Participant's beneficial interest therein) and no right, title or interest under the Collateral shall be included in, or be subject to, any declaration or adjudication of, or proceedings with respect to, the bankruptcy, insolvency or liquidation of Owner Participant or such OP Guarantor referred to in this (ss.) 4.02(g). 4.03. CERTAIN RIGHTS. Loan Trustee shall give the Note Holders, Owner Trustee and Owner Participant prompt written notice of any Mortgage Event of Default of which Loan Trustee has Actual Knowledge and shall give the Note Holders, Owner Trustee and Owner Participant not less than ten Business Days' prior written notice of the date (the "Enforcement Date") on or after which Loan Trustee may commence and consummate the exercise of any remedy or remedies described in (ss.) 4.04, 4.05, or 4.06 hereof, or the exercise of any 2002 EETC - Mortgage (LL) (11) 31 Mortgage N__TZ remedy or remedies pursuant to the provisions of (ss.) 15 of the Lease. If a Mortgage Event of Default exists, Owner Trustee shall have the following rights hereunder, any of which may be exercised directly by Owner Participant. If as a result of the occurrence of a Mortgage Event of Default in respect of the nonpayment by Lessee of Basic Rent due under the Lease, Loan Trustee shall have insufficient funds so as to make any payment of the Original Amount and interest on any Equipment Note on the day it becomes due and payable, Owner Trustee or Owner Participant may, but shall not be obligated to, pay Loan Trustee prior to the Enforcement Date, in the manner provided in (ss.) 2.05, for application in accordance with (ss.) 3.01, an amount equal to the portion of the Original Amount and interest (including interest, if any, on any overdue payments of such portion of Original Amount and interest) then due and payable on the Equipment Notes, and, unless Owner Trustee or Owner Participant has cured Mortgage Events of Default in respect of payments of Basic Rent on each of the six immediately preceding Basic Rent payment dates, or Owner Trustee has cured 12 previous Mortgage Events of Default in respect of payments of Basic Rent, such payment by Owner Trustee or Owner Participant shall, solely for purposes of this Mortgage be deemed to cure any Mortgage Event of Default which would otherwise have arisen on account of the nonpayment by Lessee of such, installment of Basic Rent (but not any other existing Mortgage Default). If any Mortgage Event of Default (other than in respect of the nonpayment of Basic Rent by Lessee) which can be cured has occurred, Owner Trustee or Owner Participant may, but shall not be obligated to, cure such Mortgage Event of Default prior to the Enforcement Date as is necessary to accomplish the observance or performance of the defaulted covenant, condition or agreement. Except as hereinafter in this (ss.) 4.03 provided, Owner Trustee (or Owner Participant, as the case may be) shall not, as a result of exercising the right to cure any such Mortgage Event of Default, obtain any Lien on any of the Mortgaged Property or any Rent payable under the Lease for or on account of costs or expenses incurred in connection with the exercise of such right, nor shall any claim of Owner Trustee (or Owner Participant, as the case may be) against Lessee or any other party for the repayment of such costs or expenses impair the prior right and security interest of Loan Trustee in and to the Mortgaged Property. Upon any payment by Owner Trustee or Owner Participant pursuant to the first or second preceding paragraphs of this (ss.) 4.03, Owner Trustee or Owner Participant, as the case may be, shall be subrogated to the rights of Loan Trustee and the Note Holders in respect of the Basic Rent 2002 EETC - Mortgage (LL) (11) 32 Mortgage N__TZ which was overdue at the time of such payment and interest payable by Lessee on account of its being overdue and any Supplemental Rent in respect of the reimbursement of amounts paid by Owner Trustee or Owner Participant pursuant to the immediately preceding paragraph (but in either case shall have no rights as a secured party hereunder), and thereafter, Owner Trustee or Owner Participant, as the case may be, shall be entitled to receive such overdue Basic Rent or Supplemental Rent, as the case may be, and interest thereon (in each case as long as the application thereof shall not give rise to a Mortgage Event of Default hereunder) upon receipt thereof by Loan Trustee (and shall be entitled to bring an action against Lessee to enforce such payment); provided, that (i) if the Original Amount and interest on the Equipment Notes shall have become due and payable pursuant to (ss.) 4.04(b), such subrogation shall, until the Secured Obligations shall have been paid in full, be subordinate to the rights of Loan Trustee, the Note Holders and the Mortgage Indemnitees in respect of such payment of overdue Basic Rent, Supplemental Rent, and such interest and (ii) Owner Trustee or Owner Participant, as the case may be, shall not otherwise attempt or be entitled to seek to recover any such amount paid by it on behalf of Lessee pursuant to this (ss.) 4.03 except by demanding of Lessee payment of such amount, or by commencing an action at law against Lessee and obtaining and enforcing a judgment against Lessee for the payment of such amount or taking appropriate action in a pending action at law against Lessee (provided, that at no time while a Mortgage Event of Default exists shall any such demand be made or shall any such action be commenced (or continued) and any amounts nevertheless received by Owner Trustee in respect thereof shall be held in trust for the benefit of, and promptly paid to, Loan Trustee for distribution as provided in (ss.) 3.03). Neither Owner Trustee nor Owner Participant shall have the right to cure any Lease Default except as specified in this (ss.) 4.03. 4.04. REMEDIES. (a) Subject to the provisions of (ss.) 2.14, if a Mortgage Event of Default exists, then and in every such case Loan Trustee may, subject to the following paragraph of this (ss.) 4.04(a), exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this (ss.) 4 and shall have and may exercise all of the rights and remedies of a secured party under the Uniform Commercial Code and, if such Mortgage Event of Default is also a Lease Event of Default, any and all of the remedies pursuant to (ss.) 15 of the Lease and may take possession of all or any part of the properties covered or intended to be covered by the Lien created hereby or pursuant hereto and may exclude Owner Participant, Owner Trustee and Lessee and all persons claiming 2002 EETC - Mortgage (LL) (11) 33 Mortgage N__TZ under any of them wholly or partly therefrom, provided, that Loan Trustee shall give Owner Trustee and Owner Participant 20 days' prior written notice of its intention to sell the Aircraft. The Owner Participant may bid at the sale and become the purchaser. Without limiting any of the foregoing, it is understood and agreed that Loan Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Anything in this Mortgage to the contrary notwithstanding, Loan Trustee shall not be entitled to exercise any remedy hereunder as a result of a Mortgage Event of Default which arises solely by reason of one or more events or circumstances which constitute a Lease Event of Default unless Loan Trustee as security assignee of Owner Trustee shall have declared the Lease in default and exercised or concurrently be exercising one or more of the remedies provided for in (ss.) 15 of the Lease to terminate the Lease or take possession or sell the Aircraft; provided, that such requirement to exercise one or more of such remedies under the Lease shall not apply in circumstances where Loan Trustee is, and has been, for a continuous period in excess of 60 days or such other period as may be specified in (ss.) 1110(a)(1)(A) of the Bankruptcy Code (such 60-day or other period being the "Section 1110 Period"), involuntarily stayed or prohibited by applicable law or court order from exercising such remedies under the Lease (a "Continuous Stay Period"); provided, further, that the requirement to exercise one or more of such remedies under the Lease shall nonetheless be applicable during a Continuous Stay Period subsequent to the expiration of the Section 1110 Period to the extent that the continuation of such Continuous Stay Period subsequent to the expiration of the Section 1110 Period (A) results from an agreement by the trustee or the debtor-in-possession in such proceeding during the Section 1110 Period with the approval of the relevant court to perform the Lease in accordance with (ss.) 1110(a)(1)(A) of the Bankruptcy Code and such trustee or debtor-in-possession continues to perform as required by (ss.) 1110(a)(1)(A-B) of the Bankruptcy Code or (B) is an extension of the Section 1110 Period with the consent of Loan Trustee pursuant to (ss.) 1110(b) of the Bankruptcy Code [or (C) results from Lessee's assumption during the Section 1110 Period with the approval of the relevant court of the Lease pursuant to (ss.) 365 of the Bankruptcy Code] or (D) is the consequence of Loan Trustee's own failure to give any requisite notice to any Person. If the applicability of Section 1110 to the Aircraft is being contested by Lessee in judicial proceedings, the Owner Trustee shall have the right (without affecting in any way any rights or remedy of Loan Trustee hereunder) to participate in such proceedings. 2002 EETC - Mortgage (LL) (11) 34 Mortgage N__TZ It is expressly understood and agreed that, subject only to the immediately preceding paragraph, the inability, described in such paragraph, of Loan Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstances prevent Loan Trustee from exercising any or all of its rights, powers and remedies under this Mortgage, including this (ss.) 4. (b) If a Mortgage Event of Default exists, then and in every such case Loan Trustee may (and shall, upon receipt of a written demand therefor from a Majority in Interest of Note Holders), subject to ((ss.)) 4.03, at any time, by delivery of written notice or notices to Owner Trustee and Owner Participant, declare all the Equipment Notes to be due and payable, whereupon the unpaid Original Amount of all Equipment Notes then outstanding, together with accrued but unpaid interest thereon (without Make-Whole Amount) and other amounts due thereunder, shall immediately become due and payable without presentment, demand, protest or notice, all of which are hereby waived; provided, that if a Mortgage Event of Default referred to in clause (g) of (ss.) 4.02 hereof shall have occurred or a Lease Event of Default under (ss.) 14.5 of the Lease shall have occurred, then and in every such case the unpaid Original Amount of all Equipment Notes then outstanding, together with accrued but unpaid interest thereon (without Make-Whole Amount) and other amounts due thereunder, shall immediately become due and payable without presentment, demand, protest or notice, all of which are hereby waived. This (ss.) 4.04(b), however, is subject to the condition that, if at any time after the Original Amount of the Equipment Notes shall have become so due and payable, and before any judgment or decree for the payment of the money so due, or any thereof, shall be entered, all overdue payments of interest upon the Equipment Notes and all other amounts payable under the Equipment Notes (except the Original Amount of the Equipment Notes which by such declaration shall have become payable) shall have been duly paid, and every Mortgage Default shall have been cured, then and in every such case a Majority in Interest of Note Holders may (but shall not be obligated to), by written instrument filed with Loan Trustee, rescind and annul Loan Trustee's declaration and its consequences; but no such rescission or annulment shall extend to or affect any subsequent Mortgage Default or impair any right consequent thereon. Any acceleration pursuant to this (ss.) 4.04(b) shall be automatically rescinded and any related declaration of an Event of Default annulled in the event that the Owner Trustee shall have cured, in accordance with (ss.) 4.03 hereof, the Mortgage Event of Default that resulted in such acceleration or declaration. (c) Any Note Holder shall be entitled, at any sale pursuant to (ss.) 15 of the Lease or this (ss.) 4.04, to credit against any purchase price bid at such sale 2002 EETC - Mortgage (LL) (11) 35 Mortgage N__TZ by such holder all or any part of the unpaid obligations owing to such Note Holder and secured by the Lien of this Mortgage (but only to the extent that such purchase price would have been paid to such Note Holder pursuant to (ss.) 3 if such purchase price were paid in cash and the foregoing provisions of this (ss.) 4.04(c) were not given effect). (d) In the event of any sale of the Collateral, or any part thereof, pursuant to any judgment or decree of any court or otherwise in connection with the enforcement of any of the terms of this Mortgage, the unpaid Original Amount of all Equipment Notes then outstanding, together with accrued interest thereon (without the Make-Whole Amount), and other amounts due thereunder, shall immediately become due and payable without presentment, demand, protest or notice, all of which are hereby waived. (e) Notwithstanding anything contained herein, so long as the Pass-Through Trustee under any Pass-Through Trust Agreement or the Subordination Agent on its behalf is a Note Holder, Loan Trustee will not be authorized or empowered to acquire title to any Mortgaged Property or take any action with respect to any Mortgaged Property so acquired by it if such acquisition or action would cause any Trust to fail to qualify as a "grantor trust" for federal income tax purposes. 4.05. RETURN OF AIRCRAFT, ETC. (a) If a Mortgage Event of Default exists, subject to (ss.) 4.03 and ss. 4.04, at the request of Loan Trustee, Owner Trustee shall promptly execute and deliver to Loan Trustee such instruments of title and other documents as Loan Trustee may deem necessary or advisable to enable Loan Trustee or an agent or representative designated by Loan Trustee, at such time or times and place or places as Loan Trustee may specify, to obtain possession of all or any part of the Mortgaged Property included in the Collateral to which Loan Trustee shall at the time be entitled hereunder. If Owner Trustee shall for any reason fail to execute and deliver such instruments and documents after such request by Loan Trustee, Loan Trustee may (i) obtain a judgment conferring on Loan Trustee the right to immediate possession and requiring Owner Trustee to execute and deliver such instruments and documents to Loan Trustee, to the entry of which judgment Owner Trustee hereby specifically consents to the fullest extent permitted by applicable law, and (ii) pursue all or part of such Mortgaged Property wherever it may be found and, if a Lease Event of Default exists, may enter any of the premises of Lessee wherever such Mortgaged Property may be or be supposed to be and search for such Mortgaged Property and take possession of and remove such Mortgaged Property. All expenses of 2002 EETC - Mortgage (LL) (11) 36 Mortgage N__TZ obtaining such judgment or of pursuing, searching for and taking such property shall, until paid, be secured by the Lien of this Mortgage. (b) Upon every such taking of possession, Loan Trustee may, from time to time, at the expense of the Mortgaged Property, make all such expenditures for maintenance, use, operation, storage, insurance, leasing, control, management, disposition, modifications or alterations to and of the Mortgaged Property, as it may deem proper. In each such case, Loan Trustee shall have the right to maintain, use, operate, store, insure, lease, control, manage, dispose of, modify or alter the Mortgaged Property and to carry on the business and to exercise all rights and powers of Owner Trustee relating to the Mortgaged Property, as Loan Trustee shall deem best, including the right to enter into any and all such agreements with respect to the maintenance, use, operation, storage, insurance, leasing, control, management, disposition, modification or alteration of the Mortgaged Property or any part thereof as Loan Trustee may determine, and Loan Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Mortgaged Property and every part thereof, except Excluded Payments, without prejudice, however, to the right of Loan Trustee under any provision of this Mortgage to collect and receive all cash held by, or required to be deposited with, Loan Trustee hereunder. Such tolls, rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the maintenance, use, operation, storage, insurance, leasing, control, management, disposition, improvement, modification or alteration of the Mortgaged Property and of conducting the business thereof, and to make all payments which Loan Trustee may be required or may elect to make, if any, for taxes, assessments, insurance or other proper charges upon the Mortgaged Property or any part thereof (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of Owner Trustee), and all other payments which Loan Trustee may be required or authorized to make under any provision of this Mortgage, as well as just and reasonable compensation for the services of Loan Trustee, and of all persons properly engaged and employed by Loan Trustee with respect hereto. 4.06. REMEDIES CUMULATIVE. Each and every right, power and remedy given to Loan Trustee specifically or otherwise in this Mortgage shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at Law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as 2002 EETC - Mortgage (LL) (11) 37 Mortgage N__TZ often and in such order as may be deemed expedient by Loan Trustee, and the exercise, or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by Loan Trustee in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of Owner Trustee or Lessee or to be an acquiescence therein. 4.07. DISCONTINUANCE OF PROCEEDINGS. In case Loan Trustee shall have instituted any proceeding to enforce any right, power or remedy under this Mortgage by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to Loan Trustee, then and in every such case Owner Trustee, Loan Trustee and Lessee shall, subject to any determination in such proceedings, be restored to their former positions and rights hereunder with respect to the Mortgaged Property, and all rights, remedies and powers of Owner Trustee, Loan Trustee or Lessee shall continue as if no such proceedings had been instituted. 4.08. WAIVER OF PAST DEFAULTS. Upon written instruction from a Majority in Interest of Note Holders, Loan Trustee shall waive any past Mortgage Default hereunder and its consequences and upon any such waiver such Mortgage Default shall cease to exist and any Mortgage Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Mortgage, but no such waiver shall extend to any subsequent or other Mortgage Default or impair any right consequent thereon; provided, that in the absence of written instructions from all the Note Holders, Loan Trustee shall not waive any Mortgage Default (i) in the payment of the Original Amount, Make-Whole Amount, if any, and interest and other amounts due under any Equipment Note then outstanding, or (ii) in respect of a covenant or provision hereof which, under (ss.) 9, cannot be modified or amended without the consent of each Note Holder. 4.09. APPOINTMENT OF RECEIVER. Loan Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be Loan Trustee or any successor or nominee thereof) for all or any part of the Mortgaged Property, whether such receivership be incidental to a proposed sale of the Mortgaged Property or the taking of possession thereof or otherwise, and Owner Trustee hereby consents to the appointment of such a receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Mortgaged 2002 EETC - Mortgage (LL) (11) 38 Mortgage N__TZ Property shall be entitled to exercise all the rights and powers of Loan Trustee with respect to the Mortgaged Property. 4.10. LOAN TRUSTEE AUTHORIZED TO EXECUTE BILLS OF SALE, ETC. Subject to the provisions of this Mortgage, the Owner Trustee irrevocably appoints Loan Trustee the true and lawful attorney-in-fact of Owner Trustee which appointment is coupled with an interest in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Mortgage, whether pursuant to foreclosure or power of sale, assignments and other instruments as may be necessary or appropriate, with full power of substitution, Owner Trustee hereby ratifying and confirming all that such attorney or any substitute shall do by virtue hereof in accordance with applicable law. Nevertheless, if so requested by Loan Trustee or any purchaser, Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to Loan Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. 4.11. RIGHTS OF NOTE HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Mortgage, the right of any Note Holder to receive payment of principal of, any Make-Whole Amount on, and interest on an Equipment Note on or after the respective due dates expressed in such Equipment Note, or to bring suit for the enforcement of any such payment on or after such respective dates in accordance with the terms hereof, shall not be impaired or affected without the consent of such Note Holder. 5. DUTIES OF LOAN TRUSTEE 5.01. NOTICE OF EVENT OF DEFAULT. If Loan Trustee shall have Actual Knowledge of a Mortgage Default arising from a failure to pay Rent, Loan Trustee shall give prompt written notice thereof to Owner Trustee, Owner Participant, Lessee, and each Note Holder. Subject to the terms of (ss.ss.) 2.14, 4.03, 4.04, 4.08, 5.02, and 5.03, Loan Trustee shall take such action, or refrain from taking such action, with respect to such Mortgage Default (including with respect to the exercise of any rights or remedies hereunder) as Loan Trustee shall be instructed in writing by a Majority in Interest of Note Holders. Subject to the provisions of (ss.) 5.03, if Loan Trustee shall not have received instructions as above provided within 20 days after mailing notice of such Mortgage Default to the Note Holders, Loan Trustee may, subject to instructions thereafter received pursuant to the preceding provisions of this 2002 EETC - Mortgage (LL) (11) 39 Mortgage N__TZ (ss.) 5.01, take such action, or refrain from taking such action, but shall be under no duty to take or refrain from taking any action, with respect to such Mortgage Default as it shall determine advisable in the best interests of the Note Holders. If Loan Trustee shall at any time declare the Lease to be in default pursuant to (ss.) 14 thereof or shall elect to foreclose or otherwise enforce this Mortgage, Loan Trustee shall forthwith notify Owner Participant, the Note Holders, Owner Trustee and Lessee. For all purposes of this Mortgage, in the absence of Actual Knowledge on the part of Loan Trustee, Owner Trustee or Owner Participant, Loan Trustee, Owner Trustee or Owner Participant, as the case may be, shall not be deemed to have knowledge of a Mortgage Default (except, in the case of Loan Trustee, the failure of Lessee to pay any installment of Basic Rent within one Business Day after the same shall become due, if any portion of such installment was then required to be paid to Loan Trustee, which failure shall constitute knowledge of a Mortgage Default) unless notified in writing by Lessee, Owner Trustee, Owner Participant or one or more Note Holders. 5.02. ACTION UPON INSTRUCTIONS; CERTAIN RIGHTS AND LIMITATIONS. (a) Subject to the terms of (ss.ss.) 2.14, 4.03, 4.04(a) and (b), 4.08, 5.01, and 5.03, upon the written instructions at any time and from time to time of a Majority in Interest of Note Holders, Loan Trustee shall, subject to the terms of this (ss.) 5.02, take such of the following actions as may be specified in such instructions: (i) give such notice or direction or exercise such right, remedy or power hereunder as shall be specified in such instructions; (ii) give such notice or direction or exercise such right, remedy or power under the Lease, the Participation Agreement, the Purchase Agreement, the Purchase Agreement Assignment, the Engine Warranty Assignment or any other part of the Collateral as shall be specified in such instructions; and (iii) approve as satisfactory to Loan Trustee all matters required by the terms of the Lease to be satisfactory to Owner Trustee, it being understood that without the written instructions of a Majority in Interest of Note Holders, Loan Trustee shall not approve any such matter as satisfactory to Loan Trustee; provided, that anything contained in this Mortgage, the Lease or the other Operative Agreements to the contrary notwithstanding, but subject to the next paragraph hereof: (1) Owner Trustee or Owner Participant may, without the consent of Loan Trustee, demand, collect, sue for or otherwise obtain all amounts included in Excluded Payments from Lessee or the Guarantor, exercise any election or option or make any decision or determination or give or receive any notice, consent, waiver or approval in respect of any Excluded 2002 EETC - Mortgage (LL) (11) 40 Mortgage N__TZ Payment and seek legal or equitable remedies to require Lessee or the Guarantor to maintain the insurance coverage referred to in (ss.) 11 of the Lease; provided, that the rights referred to in this clause (1) shall not be deemed to include the exercise of any remedies provided for in (ss.) 15 of the Lease other than the right to proceed by appropriate court action, either at law or in equity, to enforce payment by Lessee or the Guarantor of such amounts included in Excluded Payments or performance by Lessee or the Guarantor of such insurance covenant, or to recover damages for the breach thereof or for specific performance of any covenant of Lessee or the Guarantor; (2) unless a Mortgage Event of Default and a Mortgagee Event exists and except as provided in clause (4) below, Loan Trustee shall not, without the consent of Owner Trustee, which consent shall not be withheld or delayed if no right or interest of Owner Trustee or Owner Participant shall be diminished or impaired thereby, (i) enter into, execute or deliver amendments or modifications in respect of any of the provisions of the Lease[, any assigned Permitted Sublease or any Permitted Sublease assignment], or enter into, execute or deliver waivers or consents in respect of any of the provisions of the Lease, or (ii) approve any accountants, engineers, appraisers or counsel as satisfactory to render services for or issue opinions to Owner Trustee pursuant to the Operative Agreements; provided, that, whether or not a Mortgage Event of Default exists, no amendment, modification, waiver or consent in respect of the Lease shall affect the amount or timing of, or the right to enforce payment of, any Excluded Payment; (3) whether or not a Mortgage Default exists, Owner Trustee and Owner Participant shall have the right, in addition to that of Loan Trustee, (i) to receive from Lessee all notices, certificates, reports, filings, opinions of counsel and other documents and all information which any thereof is permitted or required to give or furnish to Owner Trustee or Lessor pursuant to any Operative Agreement (including pursuant to (ss.) 9.3 of the Participation Agreement), (ii) to exercise inspection rights pursuant to ss. 12 of the Lease, (iii) to retain all rights with respect to insurance maintained for its own account which (ss.) 11.2(b) of the Lease specifically confers on Lessor or Owner Participant, (iv) to exercise, to the extent necessary to enable it to exercise its rights under (ss.) 4.03 hereof, the rights of Lessor under (ss.) 15.3 of the Lease, and (v) to give notices of default under (ss.) 15 of the Lease; (4) whether or not a Mortgage Default exists, Owner Trustee shall have the right to the exclusion of Loan Trustee to adjust Rent and Stipulated Loss Values and other amounts as provided in (ss.) 3.2.1 of the Lease and to select counsel with respect to any opinion relating to tax matters to be delivered solely to Owner Participant; 2002 EETC - Mortgage (LL) (11) 41 Mortgage N__TZ (5) whether or not a Mortgage Default exists, Owner Trustee may, without the consent of Loan Trustee, solicit and make bids with respect to the Aircraft under (ss.) 9 of the Lease in respect of a termination of the Lease by Lessee pursuant to (ss.) 9 thereof; and (6) so long as no Mortgage Event of Default exists, except as provided in clauses (2) and (3) above, all rights of the "Lessor" under the Lease shall be exercised by Owner Trustee to the exclusion of Loan Trustee including the right to (i) exercise all rights with respect to Lessee's use and operation, modification, or maintenance of the Aircraft and any Engine which the Lease specifically confers on Lessor (including the right to seek legal or equitable remedies to require Lessee or the Guarantor to perform the covenants and agreements contained in (ss.ss.) 6, 7, 8, 10, and 12 of the Lease), and (ii) consent to and approve any assignment pursuant to (ss.) 13 of the Lease; provided, that the foregoing shall not (x) limit (A) any rights separately granted to Loan Trustee under the Operative Agreements or (B) the right of Loan Trustee to receive any funds to be delivered to the "Lessor" under the Lease (except with respect to Excluded Payments) and under the Purchase Agreement or (y) confer upon Owner Trustee the right to adversely affect the validity or enforceability of the Lien of this Mortgage. Notwithstanding anything to the contrary contained herein, Loan Trustee shall have the right, to the exclusion of Owner Trustee and Owner Participant, (A) to declare the Lease to be in default under (ss.) 15 thereof, and (B) subject only to the provisions of (ss.ss.) 4.03, 4.04(a) and (b), and 2.14 hereof, to exercise the remedies set forth in such (ss.) 15 (other than in connection with Excluded Payments) at any time that a Lease Event of Default exists. Lessee will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Collateral as specified by Lessee pursuant to (ss.) 7.1.3 of the Participation Agreement or as may be specified from time to time in written instructions of a Majority in Interest of Note Holders (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the form of such continuation statement so to be filed). Loan Trustee will furnish to each Note Holder (and, during the continuation of a Mortgagee Event, to Owner Trustee and Owner Participant), promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates and other instruments furnished to Loan Trustee under the Lease or hereunder, including a copy of any Termination Notice (as defined in the Lease) and a copy of each report or notice received pursuant to (ss.) 9.1 and ss. E of Annex D of the Lease, respectively, to the extent that the same shall not have been furnished to such Note Holder pursuant hereto or to the Lease. 2002 EETC - Mortgage (LL) (11) 42 Mortgage N__TZ (b) If any Lease Event of Default exists and Owner Trustee shall not have cured fully such Lease Event of Default under and in accordance with (ss.) 4.03, on request of a Majority in Interest of Note Holders, Loan Trustee shall declare the Lease to be in default pursuant to (ss.) 15 thereof and exercise those remedies specified by such Note Holders. Loan Trustee agrees to provide to the Note Holders, Owner Trustee, Owner Participant and Lessee concurrently with such declaration by Loan Trustee, notice of such declaration by Loan Trustee. 5.03. INDEMNIFICATION. Loan Trustee shall not be under any obligation to take any action under this Mortgage and nothing herein or therein shall require Loan Trustee to expend or risk its own funds or otherwise incur the risk of any financial liability in the performance of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it (the written indemnity of any Note Holder who is a QIB (or a Note Holder who has all of its obligations guaranteed by a QIB), signed by an authorized officer thereof, in favor of, delivered to and in form reasonably satisfactory to Loan Trustee shall be accepted as reasonable assurance of adequate indemnity). Loan Trustee shall not be required to take any action under (ss.) 4, (ss.) 5.01 (other than the first sentence thereof), or (ss.) 5.02, nor shall any other provision of this Mortgage or any other Operative Agreement be deemed to impose a duty on Loan Trustee to take any action, if Loan Trustee shall have been advised by counsel that such action is contrary to the terms hereof or of the Lease or is otherwise contrary to Law. 5.04. NO DUTIES EXCEPT AS SPECIFIED IN MORTGAGE OR INSTRUCTIONS. Loan Trustee shall not have any duty or obligation to use, operate, store, lease, control, manage, sell, dispose of or otherwise deal with the Aircraft or any other part of the Collateral, or to otherwise take or refrain from taking any action under, or in connection with, this Mortgage or any part of the Collateral, except as expressly provided by the terms of this Mortgage or as expressly provided, in written instructions from Note Holders as provided in this Mortgage; and no implied duties or obligations shall be read into this Mortgage against Loan Trustee. WTC agrees that it will at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under (ss.) 7.01), promptly take such action as may be necessary duly to discharge all Liens on any part of the Collateral which result from claims against it in its individual capacity not related to the ownership of the Aircraft or the administration of the Collateral or any other transaction pursuant to this Mortgage or any document included in the Collateral. 2002 EETC - Mortgage (LL) (11) 43 Mortgage N__TZ 5.05. NO ACTION EXCEPT UNDER LEASE, MORTGAGE, OR INSTRUCTIONS. Owner Trustee and Loan Trustee agree that they will not use, operate, store, lease, control, manage, sell, dispose of or otherwise deal with the Aircraft or any other part of the Collateral except (i) as required or permitted by the terms of the Lease or the Participation Agreement or (ii) in accordance with the powers granted to, or the authority conferred upon, Owner Trustee and Loan Trustee pursuant to this Mortgage and in accordance with the express terms hereof. 5.06. REPLACEMENT AIRFRAMES AND REPLACEMENT ENGINES. At any time an Airframe or Engine is to be replaced under or pursuant to (ss.) 10 of the Lease by a Replacement Airframe or Replacement Engine, if no Lease Event of Default exists, Owner Trustee shall direct Loan Trustee to execute and deliver to Owner Trustee an appropriate instrument releasing such Airframe or Engine as appropriate from the Lien of this Mortgage and Loan Trustee shall execute and deliver such instrument as aforesaid, but only upon compliance by Lessee with the applicable provisions of (ss.) 10 of the Lease and upon receipt by or deposit with Loan Trustee of the following: (1) A written request from Owner Trustee, requesting such release specifically describing the Airframe or Engine(s) so to be released. (2) A certificate signed by a duly authorized officer of Lessee stating the following: A. With respect to the Replacement of any Airframe: (i) a description of the Airframe which shall be identified by manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe to be received (including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number) as consideration for the Airframe to be released; (iii) that on the date of the Mortgage supplement relating to the Replacement Airframe Owner Trustee will be the legal owner of such Replacement Airframe free and clear of all Liens except as are permitted by ss. 6 of the Lease, that such Replacement Airframe will on such date be in good working order and condition, and that such Replacement Airframe has been or, substantially concurrently with such withdrawal, will be duly registered in the name of Owner Trustee under 2002 EETC - Mortgage (LL) (11) 44 Mortgage N__TZ the Federal Aviation Act or under the law then applicable to the registration of the Airframe and that an airworthiness certificate has been duly issued under the Federal Aviation Act (or such other applicable law) with respect to such Replacement Airframe, and that such registration and certificate is in full force and effect, and that Lessee will have the full right and authority to use such Replacement Airframe; (iv) the existence of the insurance required by (ss.) 11 of the Lease with respect to such Replacement Airframe and the payment of all premiums then due thereon; (v) that the Replacement Airframe is of the same or an improved model as the Airframe requested to be released from this Mortgage and otherwise complies with the requirements of the Lease and all other Operative Agreements; (vi) the fair market value and utility (without regard to hours and cycles until overhaul) of the Replacement Airframe as of the date of such certificate (which shall be not less than the then fair market value and utility (without regard to hours and cycles until overhaul) of the Airframe requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease)); (vii) the fair market value of the Airframe immediately prior to the date the Airframe suffered an Event of Loss (assuming such Airframe was in the condition and repair required to be maintained under the Lease), (viii) that no Lease Default exists which has not been waived, that each of the conditions specified in (ss.) 10.3.1 of the Lease with respect to the Replacement Airframe shall have been satisfied and that Lessee will not be in default, by the making and granting of the request for release and the addition of a Replacement Airframe, in the performance of any of the terms and covenants of the Lease; and (ix) that the release of the Airframe so to be released will not be in contravention of any of the provisions of this Mortgage; or B. with respect to the replacement of any Engine: (i) a description of the Engine which shall be identified by manufacturer's serial number; 2002 EETC - Mortgage (LL) (11) 45 Mortgage N__TZ (ii) a description of the Replacement Engine (including the manufacturer's name and serial number) as consideration for the Engine to be released; (iii) that on the date of the Mortgage supplement relating to the Replacement Engine Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except as are permitted by (ss.) 6 of the Lease, that such Replacement Engine will on such date be in good working order and condition and that such Replacement Engine is substantially the same as the Engine to be released (or an improved model), (iv) the fair market value, utility (without regard to hours and cycles until overhaul) and modification and remaining manufacturers warranty status of the Replacement Engine as of the date of such certificate (which value shall not be less than the then fair market value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease)); (v) the fair market value of the Engine to be released (immediately prior to any Event of Loss suffered by such Engine and assuming that such Engine was in the condition and repair required to be maintained under the Lease); (vi) that each of the conditions specified in (ss.) 10.3.1 of the Lease with respect to such Replacement Engine have been satisfied and that Lessee will not be in default, by the making and granting of the request for release and the addition of the Replacement Engine, in the performance of any of the terms and covenants of the Lease; and (vii) that the release of the Engine so to be released will not be in contravention of any of the provisions of this Mortgage. (3) (a) The appropriate instruments (i) transferring to Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to Owner Trustee the benefit of all manufacturer's and vendor's warranties generally available with respect to such Replacement Airframe or Replacement Engine, and a Mortgage supplement subjecting such Replacement Airframe or Replacement Engine and any related warranty rights to the Lien of this Mortgage. 2002 EETC - Mortgage (LL) (11) 46 Mortgage N__TZ (b) With respect to the replacement of any Engine, such Uniform Commercial Code financing statements covering the Lien created by this Mortgage as deemed necessary or desirable by counsel for Loan Trustee to protect the Lien under the Mortgage in the Replacement Engine. (4) A certificate from either an aircraft engineer (who may be an employee of Lessee) or a firm of independent aircraft appraisers selected by Lessee confirming the accuracy of the information set forth in clause (2)A(vi) of this (ss.) 5.06. (5) The opinion of counsel satisfactory to Loan Trustee, stating that: (i) the certificates, opinions, and other instruments or property which have been or are therewith delivered to and deposited with Loan Trustee conform to the requirements of this Mortgage and the Lease and, upon the basis of such application, the property so sold or disposed of may be lawfully released from the Lien of this Mortgage and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Mortgage and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Mortgage, as the case may be, have been duly filed for recordation pursuant to the Federal Aviation Act or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the right, title, estate and interest of Owner Trustee to and the Lien of this Mortgage on such Replacement Aircraft or Replacement Engine. 5.07. MORTGAGE SUPPLEMENTS FOR REPLACEMENTS. If a Replacement Airframe or Replacement Engine is being substituted as contemplated by (ss.) 10 of the Lease, Owner Trustee and Loan Trustee agree for the benefit of the Note Holders and Lessee, subject to fulfillment of the conditions precedent and compliance by Lessee with its obligations set forth in ss. 10 of the Lease and the requirements of (ss.) 5.06 hereof with respect to such Replacement Airframe or Replacement Engine, to execute and deliver a Lease supplement and a Mortgage supplement, as applicable, as contemplated by (ss.) 10 of the Lease. 5.08. EFFECT OF REPLACEMENT. In the event of the substitution of an Airframe or of a Replacement Engine pursuant to (ss.) 10 of the Lease, (a) all 2002 EETC - Mortgage (LL) (11) 47 Mortgage N__TZ provisions of this Mortgage relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced, and (b) the provisions of this Mortgage shall no longer be applicable to the Airframe or Engine or Engines being replaced, which shall be released from the Lien of this Mortgage. 5.09. INVESTMENT OF AMOUNTS HELD BY LOAN TRUSTEE. Any amounts held by Loan Trustee as assignee of Owner Trustee's rights to hold money for security pursuant to (ss.) 4.4.1 of the Lease shall be held in accordance with the terms of such (ss.) 4.4.1 and Loan Trustee agrees, for the benefit of Lessee, to perform the duties of Owner Trustee under such (ss.) 4.4.1. Any amounts held by Loan Trustee pursuant to the proviso to the first sentence of (ss.) 3.01, pursuant to (ss.) 3.02, or pursuant to any provision of any other Operative Agreement providing for amounts to be held by Loan Trustee which are not distributed pursuant to the other provisions of (ss.) 3 shall be invested by Loan Trustee from time to time in Cash Equivalents as directed by Lessee (or, if a Lease Event of Default exists, by Owner Trustee) so long as Loan Trustee may acquire the same using its best efforts. All Cash Equivalents shall either be (a) registered in the name of, payable to the order of, or specially endorsed to, Loan Trustee or (b) credited to an Eligible Account. Unless otherwise expressly provided in this Mortgage, any income realized as a result of any such investment, net of Loan Trustee's reasonable fees and expenses in making such investment, shall be held and applied by Loan Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. Loan Trustee shall not be liable for any loss resulting from any investment required to be made by it under this Mortgage other than by reason of its willful misconduct or gross negligence or negligence in the handling of funds, and any such investment may be sold (without regard to its maturity) by Loan Trustee without instructions whenever such sale is necessary to make a distribution required by this Mortgage. 6. OWNER TRUSTEE AND LOAN TRUSTEE 6.01. ACCEPTANCE OF TRUSTS AND DUTIES. Loan Trustee accepts the duties hereby created and applicable to it and agrees to perform the same but only upon the terms of this Mortgage and agrees to receive and disburse all 2002 EETC - Mortgage (LL) (11) 48 Mortgage N__TZ money constituting part of the Collateral in accordance with the terms hereof. WFB and WTC shall not be answerable or accountable under any circumstances, except (i) for their own willful misconduct or gross negligence (other than for the handling of funds, for which the standard of accountability shall be willful misconduct or negligence), (ii) in the case of Loan Trustee, as provided in the fourth sentence of (ss.) 2.04(a) and the last sentence of (ss.) 5.04, and (iii) for liabilities that may result, in the case of Owner Trustee, from the inaccuracy of any representation or warranty of WFB expressly made in its individual capacity in the Participation Agreement or in (ss.) 4.01(b) or (ss.) 6.03 (or in any certificate furnished to Loan Trustee or any Note Holder in connection with the transactions contemplated by the Operative Agreements) or, in the case of WTC, from the inaccuracy of any representation or warranty of WTC in the Participation Agreement or expressly made hereunder. Neither Owner Trustee nor Loan Trustee shall be liable for any action or inaction of the other or of Owner Participant. 6.02. ABSENCE OF DUTIES. In the case of Loan Trustee, except in accordance with written instructions furnished pursuant to (ss.) 5.01 or (ss.) 5.02, and except as provided in, and without limiting the generality of, (ss.) 5.03 and (ss.) 5.04, and, in the case of Owner Trustee, except as provided in (ss.) 4.01(b) hereof or (ss.) 13 of the Participation Agreement, Owner Trustee and Loan Trustee shall have no duty (i) to see to any registration of the Aircraft or any recording or filing of the Lease or of this Mortgage or any other document, or to see to the maintenance of any such registration, recording or filing, (ii) to see to any insurance on the Aircraft or to effect or maintain any such insurance, whether or not Lessee shall be in default with respect thereto, (iii) to see to the payment or discharge of any Lien of any kind against any part of the Trust Estate or the Collateral, (iv) to confirm, verify or inquire into the failure to receive any financial statements from Lessee, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of Lessee's covenants under the Lease [or any of the Permitted Sublessee's covenants under any assigned Permitted Sublease] with respect to the Aircraft. Owner Participant shall not have any duty or responsibility hereunder, including any of the duties mentioned in clauses (i) through (v) above; provided, that nothing contained in this sentence shall limit any obligations of Owner Participant under the Participation Agreement or relieve Owner Participant from any restriction under (ss.) 4.03. 6.03. NO REPRESENTATIONS OR WARRANTIES AS TO AIRCRAFT OR DOCUMENTS. NEITHER LOAN TRUSTEE NOR WTC NOR OWNER TRUSTEE NOR WFB NOR OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE AND EACH HEREBY EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS 2002 EETC - Mortgage (LL) (11) 49 Mortgage N__TZ TO THE TITLE, AIRWORTHINESS, VALUE, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, QUALITY, DURABILITY, OPERATION, MERCHANTABILITY. OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, except that WFB warrants that on the Delivery Date (i) Owner Trustee shall have received whatever interest was conveyed to it by Lessee, and (ii) the Aircraft shall be free and clear of Lessor Liens attributable to WFB. Neither WFB nor Owner Trustee nor Loan Trustee nor WTC makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Mortgage, the Trust Agreement, the Participation Agreement, the Equipment Notes, the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Warranty Assignment, the Engine Consent and Agreement, or the Guarantee, or as to the correctness of any statement contained in any thereof, except for the representations and warranties of WFB and of Loan Trustee, in each case expressly made in this Mortgage or in the Participation Agreement. The Note Holders and Owner Participant make no representation or warranty hereunder whatsoever. 6.04. NO SEGREGATION OF MONEY; NO INTEREST. Any money paid to or retained by Loan Trustee pursuant to any provision hereof and not then required to be distributed to the Note Holders, Lessee or Owner Trustee as provided in (ss.) 3 need not be segregated in any manner except to the extent required by law or (ss.) 10.9 and (ss.) 11.5 of the Lease and (ss.) 5.09 hereof, and may be deposited under such general conditions as may be prescribed by law, and Loan Trustee shall not be liable for any interest thereon (except that Loan Trustee shall invest all money held as directed by Lessee so long as no Lease Default exists (or in the absence of such direction, by the Majority In Interest of Note Holders) in Cash Equivalents either registered in the name of Loan Trustee or credited to an Eligible Account of the type described in clause (1) of the definition thereof; provided, that any payments received, or applied hereunder, by Loan Trustee shall be accounted for by Loan Trustee so that any portion thereof paid or applied pursuant hereto shall be identifiable as to the source thereof. 6.05. RELIANCE; AGREEMENTS; ADVICE OF COUNSEL. Neither Owner Trustee nor Loan Trustee shall incur any liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. Owner Trustee 2002 EETC - Mortgage (LL) (11) 50 Mortgage N__TZ and Loan Trustee may accept a copy of a resolution of the Board of Directors of any party to the Participation Agreement, certified by the Secretary or an Assistant Secretary thereof as duly adopted and in full force and effect, as conclusive evidence that such resolution has been duly adopted and that the same is in full force and effect. As to the aggregate unpaid Original Amount of Equipment Notes outstanding as of any date, Owner Trustee may for all purposes hereof rely on a certificate signed by any Vice President or other authorized corporate trust officer of Loan Trustee. As to any fact or matter relating to Lessee the manner of ascertainment of which is not specifically described herein, Owner Trustee and Loan Trustee may for all purposes hereof rely on a certificate, signed by a duly authorized officer of Lessee, as to such fact or matter, and such certificate shall constitute full protection to Owner Trustee and Loan Trustee for any action taken or omitted to be taken by them in good faith in reliance thereon. Loan Trustee shall assume, and shall be fully protected in assuming that Owner Trustee is authorized by the Trust Agreement to enter into this Mortgage and to take all action to be taken by it pursuant to the provisions hereof, and shall not inquire into the authorization of Owner Trustee with respect thereto. In the administration of the trusts hereunder, Owner Trustee and Loan Trustee each may execute any of the trusts or powers hereof and perform its powers and duties hereunder directly or through agents or attorneys and may at the expense of the Collateral, consult with counsel, accountants and other skilled persons to be selected and retained by it, and Owner Trustee and Loan Trustee shall not be liable for anything done, suffered or omitted in good faith by them in accordance with the written advice or written opinion of any such counsel, accountants or other skilled persons. 6.06. CAPACITY IN WHICH ACTING. Owner Trustee acts hereunder solely as trustee as herein and in the Trust Agreement provided, and not in its individual capacity, except as otherwise expressly provided herein, in the Trust Agreement and in the Participation Agreement. 6.07. COMPENSATION. Loan Trustee shall be entitled to certain indemnities and compensation, including expenses and disbursements (including the reasonable fees and expenses of counsel), for all services rendered hereunder (which indemnities and compensation shall be set forth on a separate fee agreement between Loan Trustee and Lessee). Loan Trustee agrees that it shall have no right against the Note Holders, Owner Trustee or Owner Participant for any fee as compensation for its services as trustee under this Mortgage. 2002 EETC - Mortgage (LL) (11) 51 Mortgage N__TZ 6.08. INSTRUCTIONS FROM NOTE HOLDERS. In the administration of the trusts created hereunder, Loan Trustee shall have the right to seek instructions from a Majority in Interest of Note Holders should any provision of this Mortgage appear to conflict with any other provision herein or should Loan Trustee's duties or obligations hereunder be unclear, and Loan Trustee shall incur no liability in refraining from acting until it receives such instructions. Loan Trustee shall be fully protected for acting in accordance with any instructions received under this (ss.) 6.08. 7. INDEMNIFICATION OF LOAN TRUSTEE BY OWNER TRUSTEE 7.01. SCOPE OF INDEMNIFICATION. Owner Trustee hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, except as otherwise provided in (ss.) 2.03 or (ss.) 2.04(b), to assume liability for, and does hereby indemnify, protect, save and keep harmless Loan Trustee and WTC, and their successors, assigns, agents and servants, from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by WTC on or measured by any compensation received by WTC for its services under this Mortgage), claims, actions, suits, costs, expenses or disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever, which may be imposed on, incurred by or asserted against Loan Trustee or WTC (whether or not also indemnified against by any other Person under any other document) in any way relating to or arising out of this Mortgage or any other Operative Agreement to which it is a party or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, purchase, acceptance, non-acceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including latent or other defects, whether or not discoverable, and any claim for patent, trademark, or copyright infringement), or in any way relating to or arising out of the administration of the Collateral or the action or inaction of Loan Trustee or WTC hereunder, to the extent not reimbursed by Lessee. Notwithstanding the foregoing, neither Loan Trustee nor WTC shall be entitled to any indemnification for any Expenses to the extent relating to or arising from its willful misconduct or gross negligence (or negligence in the case of handling funds) in the performance of its duties hereunder or resulting from the inaccuracy of any representation or warranty of WTC referred to in (ss.) 6.03, or as provided in (ss.) 6.01 or in the last sentence of (ss.) 5.04, or as otherwise excluded by the terms of (ss.) 9.1 and (ss.) 9.3 of the Participation Agreement from Lessee's indemnities under such sections. In addition, if necessary, Loan Trustee and WTC shall be entitled to indemnification from the Collateral for 2002 EETC - Mortgage (LL) (11) 52 Mortgage N__TZ any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this (ss.) 7.01 to the extent not reimbursed by Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same Loan Trustee and WTC shall have a prior Lien on the Collateral. Without limiting the foregoing, Loan Trustee agrees that, prior to seeking indemnification from the Collateral, it will demand, and diligently pursue in good faith (but with no duty to exhaust all legal remedies therefor), indemnification available to Loan Trustee from Lessee under the Lease or the Participation Agreement. 8. SUCCESSOR AND SEPARATE TRUSTEES 8.01. NOTICE OF SUCCESSOR OWNER TRUSTEE. In the case of any appointment of a successor to the institution acting as Owner Trustee pursuant to the Trust Agreement (including upon any merger, conversion, consolidation, or sale of substantially all of the corporate trust business of the institution acting as Owner Trustee pursuant to the Trust Agreement), the successor institution shall give prompt written notice thereof to Loan Trustee, Lessee, and the Note Holders. 8.02. RESIGNATION OF LOAN TRUSTEE; APPOINTMENT OF SUCCESSOR. (a) The institution acting as Loan Trustee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to Lessee, Owner Trustee, Owner Participant and each Note Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Loan Trustee. In addition, a Majority in Interest of Note Holders may at any time (but only with the consent of Lessee, which consent shall not be unreasonably withheld, except that such consent shall not be necessary if a Lease Event of Default exists) remove the institution acting as Loan Trustee without cause by an instrument in writing delivered to Owner Trustee, Lessee, Owner Participant and Loan Trustee, and Loan Trustee shall promptly notify each Note Holder thereof in writing, such removal to be effective upon the acceptance of the trusteeship by a successor institution. In the case of the resignation or removal of the institution acting as Loan Trustee, a Majority in Interest of Note Holders may appoint a successor by an instrument signed by such holders, which successor, so long as no Lease Event of Default exists, shall be subject to Lessee's reasonable approval. If a successor shall not have been appointed within 30 days after such notice of resignation or removal, Loan Trustee, Owner Trustee, Owner Participant or any Note Holder may apply to any court of competent jurisdiction to appoint a successor to act until such 2002 EETC - Mortgage (LL) (11) 53 Mortgage N__TZ time, if any, as a successor shall have been appointed as above provided. The successor Loan Trustee so appointed by such court shall immediately and without further act be superseded by any successor appointed as above provided. (b) Any successor institution acting as Loan Trustee, however appointed, shall execute and deliver to Owner Trustee, the predecessor the institution acting as Loan Trustee and Lessee an instrument accepting such appointment and assuming the obligations of Loan Trustee under the Participation Agreement arising from and after the time of such appointment, and thereupon, without further act, such successor shall become vested with all the estates, properties, rights, powers, and duties of the predecessor hereunder in the trust hereunder applicable to it with like effect as if originally named Loan Trustee herein; but nevertheless upon the written request of such successor, such predecessor shall execute and deliver an instrument transferring to such successor, upon the trusts herein expressed applicable to it, all the estates, properties, rights, and powers of such predecessor as Loan Trustee, and such predecessor shall duly assign, transfer, deliver, and pay over to such successor all money or other property then held by such predecessor as Loan Trustee hereunder. (c) Any successor institution acting as Loan Trustee, however appointed, shall be a bank or trust company having its principal place of business in the Borough of Manhattan, City and State of New York; Wilmington, Delaware; Salt Lake City, Utah; Chicago, Illinois or Hartford, Connecticut and having (or whose obligations under the Operative Agreements are guaranteed by an affiliated entity having) a combined capital and surplus of at least $100,000,000, if there be such an institution willing, able and legally qualified to perform the duties of Loan Trustee hereunder upon reasonable or customary terms. (d) Any corporation into which the institution acting as Loan Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion, or consolidation to which the institution acting as Loan Trustee shall be a party, or any corporation to which substantially all the corporate trust business of the institution acting as Loan Trustee may be transferred, shall, subject to the terms of paragraph (c) of this (ss.) 8.02, be a successor Loan Trustee and Loan Trustee under this Mortgage without further act. 2002 EETC - Mortgage (LL) (11) 54 Mortgage N__TZ 8.03. APPOINTMENT OF ADDITIONAL AND SEPARATE TRUSTEES. (a) Whenever (i) Loan Trustee shall deem it necessary or desirable in order to conform to any law of any jurisdiction in which all or any part of the Collateral shall be situated or to make any claim or bring any suit with respect to or in connection with the Collateral, this Mortgage, any other Mortgage Agreement, the Equipment Notes or any of the transactions contemplated by the Participation Agreement, (ii) Loan Trustee shall be advised by counsel satisfactory to it that it is so necessary or prudent in the interests of the Note Holders (and Loan Trustee shall so advise Owner Trustee and Lessee), or (iii) Loan Trustee shall have been requested to do so by a Majority in Interest of Note Holders, then in any such case, Loan Trustee and, upon the written request of Loan Trustee, Owner Trustee, shall execute and deliver a supplement to this Mortgage and such other instruments as may from time to time be necessary or advisable either (1) to constitute one or more bank or trust companies or one or more persons approved by Loan Trustee, either to act jointly with Loan Trustee as additional trustee or trustees of all or any part of the Collateral, or to act as separate trustee or trustees of all or any part of the Collateral, in each case with such rights, powers, duties and obligations consistent with this Mortgage as may be provided in such supplement or other instruments as Loan Trustee or a Majority in Interest of Note Holders may deem necessary or advisable, or (2) to clarify, add to or subtract from the rights, powers, duties, and obligations theretofore granted any such additional and separate trustee, subject in each case to the remaining provisions of this (ss.) 8.03. If Owner Trustee shall not have taken any action requested of it under this (ss.) 8.03(a) that is permitted or required by its terms within 15 days after the receipt of a written request from Loan Trustee so to do, or if a Mortgage Event of Default exists, Loan Trustee may act under the foregoing provisions of this (ss.) 8.03(a) without the concurrence of Owner Trustee; and Owner Trustee hereby irrevocably appoints (which appointment is coupled with an interest) Loan Trustee, its agent and attorney-in-fact to act for it under the foregoing provisions of this (ss.) 8.03(a) in either of such contingencies. Loan Trustee may, in such capacity, execute, deliver, and perform any such supplement, or any such instrument, as may be required for the appointment of any such additional or separate trustee or for the clarification of, addition to or subtraction from the rights, powers, duties or obligations theretofore granted to any such additional or separate trustee. In case any additional or separate trustee appointed under this (ss.) 8.03(a) shall die, become incapable of acting, resign or be removed, all the assets, property, rights, powers, trusts, duties and obligations of such additional or separate trustee shall revert to Loan Trustee until a successor additional or separate trustee is appointed as provided in this (ss.) 8.03(a). 2002 EETC - Mortgage (LL) (11) 55 Mortgage N__TZ (b) No additional or separate trustee shall be entitled to exercise any of the rights, powers, duties and obligations conferred upon Loan Trustee in respect of the custody, investment and payment of money and all money received by any such additional or separate trustee from or constituting part of the Collateral or otherwise payable under any Operative Agreement to Loan Trustee shall be promptly paid over by it to Loan Trustee. All other rights, powers, duties and obligations conferred or imposed upon any additional or separate trustee shall be exercised or performed by Loan Trustee and such additional or separate trustee jointly except to the extent that applicable Law of any jurisdiction in which any particular act is to be performed renders Loan Trustee incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations (including the holding of title to all or part of the Collateral in any such jurisdiction) shall be exercised and performed by such additional or separate trustee. No additional or separate trustee shall take any discretionary action except on the instructions of Loan Trustee or a Majority in Interest of Note Holders. No trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder, except that Loan Trustee shall be liable for the consequences of its lack of reasonable care in selecting, and Loan Trustee's own actions in acting with, any additional or separate trustee. Each additional or separate trustee appointed pursuant to this (ss.) 8.03 shall be subject to, and shall have the benefit of (ss.ss.) 4 through 8 and (ss.) 10 insofar as they apply to Loan Trustee. The powers of any additional or separate trustee appointed pursuant to this (ss.) 8.03 shall not in any case exceed those of Loan Trustee hereunder. (c) If at any time Loan Trustee shall deem it no longer necessary or desirable in order to conform to any such law or take any such action or shall be advised by such counsel that it is no longer so necessary or desirable in the interest of the Note Holders, or if Loan Trustee shall have been requested to do so in writing by a Majority in Interest of Note Holders, Loan Trustee and, upon the written request of Loan Trustee, Owner Trustee, shall execute and deliver a supplement hereto and all other instruments and agreements necessary or proper to remove any additional or separate trustee. Loan Trustee may act on behalf of Owner Trustee under this (ss.) 8.03(c) when and to the extent it could so act under (ss.) 8.03(a). 9. SUPPLEMENT AND AMENDMENTS 9.01. INSTRUCTIONS OF MAJORITY; LIMITATIONS. 2002 EETC - Mortgage (LL) (11) 56 Mortgage N__TZ (a) Except as provided in ss. 5.02, and except with respect to Excluded Payments, Owner Trustee agrees it shall not enter into any amendment of or supplement to the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Warranty Assignment, or the Guarantee, or execute and deliver any written waiver or modification of, or consent under, the terms of the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Warranty Assignment, or the Guarantee, unless such supplement, amendment, waiver, modification, or consent is consented to in writing by Loan Trustee and a Majority in Interest of Note Holders. Anything to the contrary contained herein notwithstanding, without the necessity of the consent of any of the Note Holders or Loan Trustee, (i) any Excluded Payments payable to Owner Participant may be modified, amended, changed or waived in such manner as shall be agreed to by Owner Participant and Lessee and (ii) Owner Trustee and Lessee may enter into amendments of or additions to the Lease to modify (ss.) 5 (except to the extent that such amendment would affect the rights or exercise of remedies under (ss.) 15 of the Lease), (ss.) 9, or (ss.) 17 of the Lease so long as such amendments, modifications and changes do not and would not affect the time of, or reduce the amount of, Rent payments until after the payment in full of all Secured Obligations or otherwise adversely affect the Note Holders. (b) Without limiting the provisions of (ss.) 9.01(a) and subject to (ss.) 5.02(a)(2)(i), Loan Trustee agrees with the Note Holders that it shall not enter into any amendment, waiver, or modification of, or supplement or consent to, this Mortgage, the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Warranty Assignment, the Guarantee, or the Participation Agreement, or any other agreement included in the Collateral, unless such supplement, amendment, waiver, modification, or consent is consented to in writing by a Majority in Interest of Note Holders, but upon the written request of a Majority in Interest of Note Holders, Loan Trustee shall from time to time enter into any such supplement or amendment, or execute and deliver any such waiver, modification, or consent, as may be specified in such request and as may be (in the case of any such amendment, supplement, or modification), to the extent such agreement is required, agreed to by Owner Trustee and Lessee or, as may be appropriate, the Airframe Manufacturer or the Engine Manufacturer; provided, that, without the consent of each holder of an affected Equipment Note then outstanding and of each Liquidity Provider, no such amendment of or supplement to this Mortgage, the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Warranty Assignment, the Guarantee, or the Participation Agreement or waiver or modification of the terms of, or consent under, any thereof, shall (i) modify any of the provisions of 2002 EETC - Mortgage (LL) (11) 57 Mortgage N__TZ this (ss.) 9.01, of (ss.) 2, 3, 4.02, 4.03, 4.04, 5.02, or 5.06 hereof, of (ss.) 13.3, 14 (except to add a Lease Event of Default), or 16 of the Lease, ss. 15.1 of the Participation Agreement, the definitions of "Event of Default", "Default", "Lease Event of Default", "Lease Default", "Majority in Interest of Note Holders", "Make-Whole Amount" or "Note Holder", or the percentage of Note Holders required to take or approve any action hereunder, (ii) reduce the amount, or change the time of payment or method of calculation of any amount, of Original Amount, Make-Whole Amount, if any, or interest with respect to any Equipment Note, or alter or modify the provisions of (ss.) 3 with respect to the order of priorities in which distribution thereunder shall be made as among the Note Holders, Owner Trustee and Lessee, (iii) reduce, modify or amend any indemnities in favor of Loan Trustee, the Mortgage Indemnitees or the Note Holders, (iv) consent to any change in this Mortgage or the Lease which would permit redemption of Equipment Notes earlier than permitted under (ss.) 2.10 or 2.12 hereof or the purchase of the Equipment Notes other than as permitted by (ss.) 2.14 hereof, (v) modify any of the provisions of (ss.) 3.2.1(e) of the Lease, or modify, amend, or supplement the Lease or consent to any assignment of the Lease, in either case releasing Lessee from its obligations in respect of the of Basic Rent, Stipulated Loss Value, Termination Value, or any purchase price (including the EBO Price) for the Aircraft or altering the absolute and unconditional character of the obligations of Lessee to pay Rent as set forth in (ss.) 3 and (ss.) 16 of the Lease or (vi) permit the creation of any Lien on the Collateral or any part thereof other than Permitted Liens or deprive any Note Holder of the benefit of the Lien of this Mortgage on the Collateral, except as provided in connection with the exercise of remedies under (ss.) 4. So long as no Lease Event of Default exists, without the consent of Lessee no amendment or supplement to this Mortgage or waiver or modification of the terms hereof shall adversely affect Lessee. (c) At any time after the Delivery Date, Owner Trustee and Loan Trustee may enter into one or more agreements supplemental hereto without the consent of any Note Holder for any of the following purposes: (i) (a) to cure any defect or inconsistency herein or in the Equipment Notes, or to make any change not inconsistent with the provisions hereof (provided that such change does not adversely affect the interests of any Note Holder in its capacity solely as Note Holder) or (b) to cure any ambiguity or correct any mistake; (ii) to evidence the succession of another party as Owner Trustee in accordance with the terms of the Trust Agreement or to evidence the succession of a new trustee hereunder pursuant hereto, the removal of the trustee hereunder or the appointment of any co-trustee or co-trustees or any separate or additional trustee or trustees; (iii) to convey, transfer, assign, mortgage or pledge any property to or with Loan Trustee or to make any other provisions with respect to matters or questions arising hereunder so long as such action shall not 2002 EETC - Mortgage (LL) (11) 58 Mortgage N__TZ adversely affect the interests of the Note Holders in its capacity solely as Note Holder; (iv) to correct or amplify the description of any property at any time subject to the Lien of this Mortgage or better to assure, convey and confirm unto Loan Trustee any property subject or required to be subject to the Lien of this Mortgage, the Airframe or Engines or any Replacement Airframe or Replacement Engine: (v) to add to the covenants of Owner Trustee for the benefit of the Note Holders, or to surrender any rights or power herein conferred upon Owner Trustee, Owner Participant or Lessee; (vi) to add to the rights of the Note Holders; and (vii) to include on the Equipment Notes any legend as may be required by law. 9.02. TRUSTEES PROTECTED. If, in the opinion of the institution acting as Owner Trustee under the Trust Agreement or the institution acting as Loan Trustee hereunder, any document required to be executed by it pursuant to the terms of (ss.) 9.01 adversely affects any right, duty, immunity or indemnity with respect to such institution under this Mortgage or the Lease, such institution may in its discretion decline to execute such document. 9.03. DOCUMENTS MAILED TO NOTE HOLDERS. Promptly after the execution by Owner Trustee or Loan Trustee of any document entered into pursuant to (ss.) 9.01, Loan Trustee shall mail, by first class mail, postage prepaid, a copy thereof to Lessee and to each Note Holder at its address last set forth in the Equipment Note Register, but the failure of Loan Trustee to mail such copies shall not impair or affect the validity of such document. 9.04. NO REQUEST NECESSARY FOR LEASE SUPPLEMENT OR MORTGAGE SUPPLEMENT. No written request or consent of Loan Trustee, the Note Holders or Owner Participant pursuant to (ss.) 9.01 shall be required to enable Owner Trustee to enter into any Lease supplement specifically required by the terms of the Lease or to execute and deliver a Mortgage supplement specifically required by the terms hereof. 9.05. NOTICES TO LIQUIDITY PROVIDER . Any request made to any Note Holder for consent to any amendment or supplement to this Agreement or the Equipment Notes pursuant to this (ss.) 9 shall be promptly furnished by Loan Trustee to each Liquidity Provider. 10. MISCELLANEOUS 2002 EETC - Mortgage (LL) (11) 59 Mortgage N__TZ 10.01. TERMINATION OF MORTGAGE. Upon (or at any time after) payment in full of the Original Amount of, Make-Whole Amount, if any, and interest on and all other amounts due under all Equipment Notes and provided that there shall then be no other Secured Obligations due to the Mortgage Indemnitees, the Note Holders and Loan Trustee hereunder or under the Participation Agreement, Owner Trustee shall direct Loan Trustee to execute and deliver to or as directed in writing by Owner Trustee an appropriate instrument releasing the Aircraft and the Engines from the Lien of this Mortgage and releasing the Lease, the Guarantee, the Purchase Agreement, the Purchase Agreement Assignment with the Consent and Agreement attached thereto, and the Engine Warranty Assignment with the Engine Consent and Agreement attached thereto from the assignment and pledge thereof hereunder and Loan Trustee shall execute and deliver such instrument as aforesaid and give written notice thereof to Lessee; provided, that this Mortgage and the trusts created hereby shall earlier terminate and this Mortgage shall be of no further force or effect upon any sale or other final disposition by Loan Trustee of all property constituting part of the Collateral and the final distribution by Loan Trustee of all money or other property or proceeds constituting part of the Collateral in accordance with the terms hereof. Except as aforesaid otherwise provided, this Mortgage and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. 10.02. NO LEGAL TITLE TO COLLATERAL IN NOTE HOLDERS. No holder of a Equipment Note shall have legal title to any part of the Collateral. No transfer, by operation of law or otherwise, of any Equipment Note or other right, title and interest of any Note Holder in and to the Collateral or hereunder shall operate to terminate this Mortgage or entitle such holder or any successor or transferee of such holder to an accounting or to the transfer to it of any legal title to any part of the Collateral. 10.03. SALE OF AIRCRAFT BY LOAN TRUSTEE IS BINDING. Any sale or other conveyance of the Collateral, or any part thereof (including any part thereof or interest therein), by Loan Trustee made pursuant to the terms of this Mortgage shall bind the Note Holders and shall be effective to transfer or convey all right, title and interest of Loan Trustee, Owner Trustee, Owner Participant and such holders in and to such Collateral or part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by Loan Trustee. 10.04. MORTGAGE BENEFITS SPECIFIED PERSONS ONLY. Nothing in this Mortgage, whether express or implied, shall be construed to give any person 2002 EETC - Mortgage (LL) (11) 60 Mortgage N__TZ other than Owner Trustee, Loan Trustee, Owner Participant, Lessee, the Note Holders, and the other Mortgage Indemnitees, any legal or equitable right, remedy, or claim under or in respect of this Mortgage. 10.05. NOTICES. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Mortgage to be made, given, furnished, or filed shall be made, given, furnished, or filed, and shall become effective, in the manner prescribed in (ss.) 14.7 of the Participation Agreement. 10.06. SEVERABILITY. Any provision of this Mortgage 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. Any such prohibition or unenforceability in any particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.07. NO ORAL MODIFICATION OR CONTINUING WAIVERS. No term or provision of this Mortgage or the Equipment Notes may be by Owner Trustee and Loan Trustee, in compliance with (ss.) 9.01. Any waiver of the terms hereof or of any Equipment Note shall be effective only in the specific instance and for the specific purpose given. 10.08. SUCCESSORS AND ASSIGNS. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Note Holder shall bind the successors and assigns of such holder. This Mortgage and the Collateral shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Mortgage to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby, thereby and by the Participation Agreement. Each Note Holder by its acceptance of a Equipment Note agrees to be bound by this Mortgage and all provisions of the Participation Agreement applicable to a Loan Participant or a Note Holder. 10.09. HEADINGS. The headings of the various sections herein and in the table of contents hereto are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. 2002 EETC - Mortgage (LL) (11) 61 Mortgage N__TZ 10.10. NORMAL COMMERCIAL RELATIONS. Anything contained in this Mortgage to the contrary notwithstanding, WFB, WTC, any Participant or any bank or other Affiliate of such Participant may conduct any banking or other financial transactions, and have banking or other commercial relationships, with Lessee, fully to the same extent as if this Mortgage were not in effect, including the making of loans or other extensions of credit to Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. 10.11. GOVERNING LAW; COUNTERPART FORM. THIS MORTGAGE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. THIS MORTGAGE IS BEING DELIVERED IN THE STATE OF NEW YORK. This Mortgage may be executed by the parties hereto in separate counterparts (or upon separate signature pages bound together into one or more counterparts), each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 10.12. VOTING BY NOTE HOLDERS. All votes of the Note Holders shall be governed by a vote of a Majority in Interest of Note Holders, except as otherwise provided herein. 10.13. BANKRUPTCY. It is the intention of the parties that Owner Trustee, as lessor under the Lease (and Loan Trustee as assignee of Owner Trustee hereunder), shall be entitled to the benefits of Section 1110 with respect to the right to take possession of the Aircraft, Airframe, Engines and Parts as provided in the Lease in the event of a proceeding under Chapter 11 of the Bankruptcy Code in which Lessee is a debtor, and in any instance where more than one construction is possible of the terms and conditions hereof or any other pertinent Operative Agreement, each such party agrees that a construction which would preserve such benefits shall control over any construction which would not preserve such benefits. 10.14. NO ACTION CONTRARY TO LESSEE'S RIGHTS UNDER THE LEASE. Notwithstanding any of the provisions of this Mortgage or the Trust Agreement to the contrary, neither Loan Trustee nor Owner Trustee will take any action contrary to Lessee's rights under the Lease, including the right to possession and use of, and the quiet enjoyment of, the Aircraft, except in accordance with provisions of the Lease. 2002 EETC - Mortgage (LL) (11) 62 Mortgage N__TZ IN WITNESS WHEREOF, Owner Trustee and Loan Trustee have executed this Trust Indenture and Mortgage N___TZ. WELLS FARGO BANK NORTHWEST, N.A., not in its individual capacity (except as expressly provided herein) but solely as trustee, as Owner Trustee By: ---------------------------------- Name: Title: WILMINGTON TRUST COMPANY, as Loan Trustee By: ---------------------------------- Name: Title: SCHEDULE I ORIGINAL AMOUNT, INTEREST RATE, AND AMORTIZATION A ____% Equipment Notes due ______, 20__ $__________ B ____% Equipment Notes due ______, 20__ $__________ 2002 EETC - Mortgage (LL)(11) Mortgage N_TZ A-2 Equipment Notes Amortization Series A Aircraft N___TZ Percentage of Original Payment Date Amount to be Paid - ------------ ------------------- 2002 EETC - Mortgage (LL)(11) Mortgage N_TZ A-3 Equipment Notes Amortization Series B Aircraft N___TZ Percentage of Original Payment Date Amount to be Paid - ------------ ------------------- 2002 EETC - Mortgage (LL)(11) Mortgage N_TZ A-4 EXHIBIT A AIRCRAFT DESCRIPTION The Aircraft is a Boeing model 737-800 aircraft, consisting of (1) an airframe bearing FAA registration no. N___TZ and manufacturer's serial no. __________, (2) two CFM International model CFM56-7B27 engines (each of which has 750 or more rated takeoff horsepower or its equivalent), bearing manufacturer's serial nos. __________ and __________, and (3) all appliances, parts, instruments, appurtenances, accessories, furnishings, and other equipment or property incorporated in such airframe and engines. 2002 EETC - Mortgage (LL)(11) Mortgage N_TZ EXHIBIT B THIS EQUIPMENT NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS EQUIPMENT NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS IS AVAILABLE. WELLS FARGO BANK NORTHWEST, N.A., AS OWNER TRUSTEE UNDER TRUST AGREEMENT N___TZ DATED AS OF __________ 1, 200_ Series 2002-1_ Equipment Note due ___________ [1], 20__, issued in connection with the Boeing model 737-800 aircraft bearing United States registration mark N___TZ No. ____ ________________, 200_ $_____________________ Interest Rate Maturity Date ------------- ------------- _______% ________________, 20__ Wells Fargo Bank Northwest, N.A., not in its individual capacity but solely as trustee (in such capacity, the "Owner Trustee") under Trust Agreement N___TZ (as supplemented or amended from time to time, the "Trust Agreement"), dated as of __________ 1, 200_, between [Owner Participant] and Owner Trustee, hereby promises to pay to __________________, or the registered assignee thereof, the principal sum of $___________ (the "Original Amount"), together with interest at the Debt Rate on the unpaid balance of the Original Amount (calculated on the basis of a 360-day year of twelve 30-day months from the date hereof until paid in full). The Original Amount of this Equipment Note shall be payable in installments on the dates set forth in Schedule I hereto equal to the corresponding percentage of the Original Amount of this Equipment Note set forth in Schedule I hereto. Accrued but unpaid interest shall be due and payable in quarterly installments commencing __________, 200_, and on each [February 20], [May 20], [August 20] and [November 20] thereafter, to and including __________, 20__. Notwithstanding the foregoing, the final payment made on this Equipment Note shall be an amount sufficient to discharge in full the unpaid Original Amount and all accrued and unpaid interest on, and any other amounts due under, this Equipment Note. If any date on which a payment under this Equipment Note becomes due and payable is not a Business Day, then such payment shall not be made on such scheduled date but shall be made on the following Business Day, and if such 2002 EETC - Mortgage (LL)(11) Mortgage N_TZ payment is made on such following Business Day, no interest shall accrue on the amount of such payment during such extension. The "Mortgage" is Trust Indenture and Mortgage N___TZ, dated as of __________, 200_, between Owner Trustee and Wilmington Trust Company, as trustee (the "Loan Trustee"), as amended or supplemented from time to time. All terms used in this Equipment Note, if defined in the Mortgage and not in this Equipment Note, have the same meanings as in the Mortgage. This Equipment Note shall bear interest, payable on demand, at the Past-Due Rate (calculated on the basis of a 360-day year of twelve 30-day months) on any overdue Original Amount, any overdue Make-Whole Amount, and (to the extent permitted by applicable Law) any overdue interest and any other amounts payable hereunder which are overdue, in each case for the period that it is overdue. Amounts shall be overdue if not paid when due (whether at stated maturity, by acceleration, or otherwise). The interest rate borne by this Equipment Note shall be subject to adjustments to the extent, and under the circumstances, specified by the Registration Rights Agreement. All payments of Original Amount, interest, Make-Whole Amount (if any), and other amounts (if any) to be made by Owner Trustee hereunder and under the Mortgage or the Participation Agreement shall be payable only from the income and proceeds from the Trust Estate to the extent included in the Collateral and only to the extent that Owner Trustee has sufficient income or proceeds from the Trust Estate (to the extent included in the Collateral) to enable Loan Trustee to make such payments in accordance with (ss.) 2.03 and (ss.) 3 of the Mortgage, and each holder hereof, by its acceptance of this Equipment Note, agrees (1) that it will look solely to the income and proceeds from the Collateral to the extent available for distribution to the holder hereof as above provided, and (2) that neither Owner Participant nor Owner Trustee nor Loan Trustee is personally liable or liable in any manner extending to any assets other than the Collateral to the holder hereof for any amounts payable or any liability under this Equipment Note or, except as provided in the Mortgage or in the Participation Agreement, for any liability under the Mortgage or the Participation Agreement; provided, that nothing herein contained shall limit, restrict, or impair Loan Trustee's right (subject to the terms of the Mortgage) to accelerate the maturity of this Equipment Note, if a Mortgage Event of Default exists, in accordance with (ss.) 4.04(b) of the Mortgage, to bring suit and obtain a judgment against Owner Trustee on this Equipment Note for purposes of realizing upon the Collateral, and to exercise all rights and remedies provided under the Mortgage or otherwise realize upon the Collateral. An Equipment Note Register shall be maintained at Loan Trustee's Corporate Trust Office (or at the office of any successor) for the purpose of 2002 EETC - Mortgage (LL)(11) Mortgage N_TZ registering transfers and exchanges of Equipment Notes, in the manner provided in (ss.) 2.07 of the Mortgage. The Original Amount and interest and other amounts due hereunder shall be payable in Dollars in immediately available funds at Loan Trustee's Corporate Trust Office, or as otherwise provided in the Mortgage. Each such payment shall be made without any presentment or surrender of this Equipment Note, except that this Equipment Note shall be surrendered for cancellation promptly after any final payment. The holder hereof, by its acceptance of this Equipment Note, agrees that (except as otherwise provided in the Mortgage) each payment received by it hereunder shall be applied, first, to pay accrued interest on this Equipment Note (as well as any interest on any overdue Original Amount, any overdue Make-Whole Amount, or (to the extent permitted by Law) any overdue interest and other amounts hereunder) to the date of such payment, second, to pay the Original Amount of this Equipment Note then due, third, to pay any Make-Whole Amount and any other amount due hereunder or under the Mortgage, and fourth, the balance, if any, remaining thereafter, to pay installments of the Original Amount of this Equipment Note remaining unpaid in the inverse order of their normal maturity. This Equipment Note is one of the Equipment Notes referred to in the Mortgage which have been or are to be issued by Owner Trustee pursuant to the terms of the Mortgage. The Collateral is held by Loan Trustee as security, in part, for the Equipment Notes. The provisions of this Equipment Note are subject to the Mortgage. Reference is made to the Mortgage and the Participation Agreement which contain a complete statement of (1) the rights and obligations of the holder of this Equipment Note, and the nature and extent of the security for this Equipment Note, (2) the rights and obligations of the holders of any other Equipment Notes executed and delivered under the Mortgage, and the nature and extent of the security for any other Equipment Notes executed and delivered under the Mortgage, and (3) the terms and conditions of the Trust created by the Mortgage, to all of which terms and conditions in the Mortgage and the Participation Agreement each holder hereof agrees by its acceptance of this Equipment Note. As provided in the Mortgage and subject to certain limitations therein set forth, this Equipment Note is exchangeable for a like aggregate Original Amount of Equipment Notes of different authorized denominations, as requested by the holder surrendering it. Before this Equipment Note is duly presented for registration of transfer, Owner Trustee and Loan Trustee shall treat the person in whose name this Equipment Note is registered as the owner hereof for all purposes, whether or 2002 EETC - Mortgage (LL)(11) Mortgage N_TZ not this Equipment Note is overdue, and neither Owner Trustee nor Loan Trustee shall be affected by notice to the contrary. This Equipment Note is subject to redemption as provided in (ss.) 2.10, (ss.) 2.12, and (ss.) 2.13 of the Mortgage, but not otherwise. This Equipment Note is also subject to assumption by Lessee as provided in (ss.) 2.11 of the Mortgage, and to exchange and to purchase by Owner Participant or Owner Trustee as provided in (ss.) 2.14 of the Mortgage, but not otherwise. [The indebtedness evidenced by this Equipment Note is, to the extent and in the manner provided in the Mortgage, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Mortgage) in respect of Series A Equipment Notes, and this Equipment Note is issued subject to such provisions. The holder of this Equipment Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs Loan Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Mortgage, and (c) appoints Loan Trustee his attorney-in-fact for such purpose.]* The holder of this Equipment Note, by accepting the same, also agrees to be subject to the transfer restrictions set forth in (ss.) 2.07 of the Mortgage. Unless the certificate of authentication hereon has been executed by or on behalf of Loan Trustee by manual signature, this Equipment Note shall not be entitled to any benefit under the Mortgage or be valid or obligatory for any purpose. THIS EQUIPMENT NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. * * * - ----------------------------- * To be inserted for each Equipment Note other than any Series A Equipment Note. 2002 EETC - Mortgage (LL)(11) Mortgage N_TZ IN WITNESS WHEREOF, Owner Trustee has executed this Equipment Note. WELLS FARGO BANK NORTHWEST, N.A., not in its individual capacity but solely as trustee, Owner Trustee By: ------------------------------------ Name: Title: 2002 EETC - Mortgage (LL)(11) Mortgage N_TZ LOAN TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Equipment Notes referred to in the Mortgage (as defined in the foregoing Equipment Note). WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Loan Trustee By: ------------------------------------- Name: Title: 2002 EETC - Mortgage (LL)(11) Mortgage N_TZ Schedule I to Equipment Note Equipment Note Amortization --------------------------- Percentage of Original Payment Date Amount to be Paid ------------ ---------------------- [see Schedule I to Mortgage which is inserted upon issuance] 2002 EETC - Mortgage (LL)(11) Mortgage N_TZ EX-4.2 4 file003.txt WILMINGTON TRUST TRUST INDENTURE - -------------------------------------------------------------------------------- TRUST INDENTURE AND MORTGAGE [N___TZ] [OWNED AIRCRAFT] Dated as of _______ __, ____ Between AMERICAN TRANS AIR, INC., Owner and WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly stated herein, but solely as Mortgagee, Mortgagee - -------------------------------------------------------------------------------- Equipment Notes Covering One Boeing model 737-800 aircraft bearing United States registration no. N___TZ and manufacturer's serial no. _____, including two CFM International model CFM56-7B27 engines bearing manufacturer's serial nos. _____ and _____ . - -------------------------------------------------------------------------------- 2002 EETC - Mortgage (Owned) (10) TABLE OF CONTENTS
Page GRANTING CLAUSE...................................................................................................1 ARTICLE I DEFINITIONS............................................................................................5 ARTICLE II THE EQUIPMENT NOTES...................................................................................5 SECTION 2.01. Form of Equipment Notes...................................................................5 SECTION 2.02. Issuance and Terms of Equipment Notes....................................................11 SECTION 2.03. [Intentionally Omitted]..................................................................14 SECTION 2.04. Method of Payment........................................................................14 SECTION 2.05. Application of Payments..................................................................16 SECTION 2.06. Termination of Interest in Collateral....................................................17 SECTION 2.07. Registration Transfer and Exchange of Equipment Notes....................................17 SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Equipment Notes.....................................19 SECTION 2.09. Payment of Expenses on Transfer; Cancellation............................................19 SECTION 2.10. Mandatory Redemptions of Equipment Notes.................................................20 SECTION 2.11. Voluntary Redemptions of Equipment Notes.................................................20 SECTION 2.12. Redemptions; Notice of Redemption........................................................20 SECTION 2.13. Subordination............................................................................21 ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF PAYMENTS...................................................22 SECTION 3.01. Basic Distributions......................................................................22 SECTION 3.02. Event of Loss; Replacement; Optional Redemption..........................................22 SECTION 3.03. Payments After Event of Default..........................................................23 SECTION 3.04. Certain Payments.........................................................................25 SECTION 3.05. Other Payments...........................................................................26 SECTION 3.06. Application of Payments Under Guarantee..................................................26 ARTICLE IV COVENANTS OF THE OWNER...............................................................................26 SECTION 4.01. Liens....................................................................................26 SECTION 4.02. Possession, Operation and Use, Registration and Markings.................................27 SECTION 4.03. Inspection...............................................................................33 SECTION 4.04. Replacement and Pooling of Parts, Alterations, Modifications and Additions; Substitution of Engines ..............................................33 SECTION 4.05. Loss, Destruction or Requisition.........................................................37 SECTION 4.06. Insurance................................................................................42 SECTION 4.07. Merger of Owner..........................................................................43
2002 EETC - Mortgage (Owned) (10) TABLE OF CONTENTS (Continued)
Page ---- ARTICLE V EVENTS OF DEFAULT; REMEDIES OF MORTGAGEE..............................................................44 SECTION 5.01. Event of Default.........................................................................44 SECTION 5.02. Remedies.................................................................................46 SECTION 5.03. Return of Aircraft, Etc..................................................................48 SECTION 5.04. Remedies Cumulative......................................................................49 SECTION 5.05. Discontinuance of Proceedings............................................................49 SECTION 5.06. Waiver of Past Defaults..................................................................49 SECTION 5.07. Appointment of Receiver..................................................................50 SECTION 5.08. Mortgagee Authorized to Execute Bills of Sale, Etc.......................................50 SECTION 5.09. Rights of Note Holders to Receive Payment................................................50 ARTICLE VI DUTIES OF THE MORTGAGEE..............................................................................51 SECTION 6.01. Notice of Event of Default...............................................................51 SECTION 6.02. Action Upon Instructions; Certain Rights and Limitations.................................51 SECTION 6.03. Indemnification..........................................................................52 SECTION 6.04. No Duties Except as Specified in Trust Indenture or Instructions.........................52 SECTION 6.05. No Action Except Under Trust Indenture or Instructions...................................53 SECTION 6.06. Investment of Amounts Held by Mortgagee..................................................53 ARTICLE VII THE MORTGAGEE.......................................................................................54 SECTION 7.01. Acceptance of Trusts and Duties..........................................................54 SECTION 7.02. Absence of Duties........................................................................54 SECTION 7.03. No Representations or Warranties as to Aircraft or Documents.............................54 SECTION 7.04. No Segregation of Monies; No Interest....................................................55 SECTION 7.05. Reliance; Agreements; Advice of Counsel..................................................55 SECTION 7.06. Compensation.............................................................................56 SECTION 7.07. Instructions from Note Holders...........................................................56 ARTICLE VIII INDEMNIFICATION....................................................................................57 SECTION 8.01. Scope of Indemnification.................................................................57 ARTICLE IX SUCCESSOR AND SEPARATE TRUSTEES......................................................................57 SECTION 9.01. Resignation of Mortgagee; Appointment of Successor.......................................57 SECTION 9.02. Appointment of Additional and Separate Trustees..........................................58
ii 2002 EETC - Mortgage (Owned) (10) TABLE OF CONTENTS (Continued)
Page ---- ARTICLE X SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS................................60 SECTION 10.01. Instructions of Majority; Limitations...................................................60 SECTION 10.02. Mortgagee Protected.....................................................................61 SECTION 10.03. Documents Mailed to Note Holders........................................................62 SECTION 10.04. No Request Necessary for Mortgage Supplement............................................62 SECTION 10.05. Notices to Liquidity Provider...........................................................62 ARTICLE XI MISCELLANEOUS........................................................................................62 SECTION 11.01. Termination of Trust Indenture..........................................................62 SECTION 11.02. No Legal Title to Collateral in Note Holders............................................63 SECTION 11.03. Sale of Aircraft by Mortgagee Is Binding................................................63 SECTION 11.04. Trust Indenture for Benefit of Owner, Mortgagee, Note Holders and the other Mortgage Indemnitees ...................................................63 SECTION 11.05. Notices.................................................................................63 SECTION 11.06. Severability............................................................................64 SECTION 11.07. No Oral Modification or Continuing Waivers..............................................64 SECTION 11.08. Successors and Assigns..................................................................64 SECTION 11.09. Headings................................................................................65 SECTION 11.10. Normal Commercial Relations.............................................................65 SECTION 11.11 Governing Law; Counterpart Form.........................................................65 SECTION 11.12. Voting By Note Holders..................................................................65 SECTION 11.13. Bankruptcy..............................................................................65 ANNEX A Definitions ANNEX B Insurance EXHIBIT A Form of Trust Indenture and Mortgage Supplement SCHEDULE I Equipment Notes Amortization and Interest Rates
iii 2002 EETC - Mortgage (Owned) (10) TRUST INDENTURE AND MORTGAGE [N___TZ] TRUST INDENTURE AND MORTGAGE [N___TZ], dated as of ______________ __, ____ ("Trust Indenture"), between AMERICAN TRANS AIR, INC., an Indiana corporation ("Owner"), and WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity, except as expressly stated herein, but solely as Mortgagee hereunder (together with its successors hereunder, the "Mortgagee"). W I T N E S S E T H WHEREAS, all capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the parties hereto desire by this Trust Indenture, among other things, (i) to provide for the issuance by the Owner of the Equipment Notes and (ii) to provide for the assignment, mortgage and pledge by the Owner to the Mortgagee, as part of the Collateral hereunder, among other things, of all of the Owner's right, title and interest in and to the Aircraft and, except as hereinafter expressly provided, all payments and other amounts received hereunder in accordance with the terms hereof, as security for, among other things, the Owner's obligations to the Note Holders and the Mortgage Indemnitees; WHEREAS, all things have been done to make the Equipment Notes, when executed by the Owner and authenticated and delivered by the Mortgagee hereunder, the valid, binding and enforceable obligations of the Owner; and WHEREAS, all things necessary to make this Trust Indenture the valid, binding and legal obligation of the Owner for the uses and purposes herein set forth, in accordance with its terms, have been done and performed and have happened: GRANTING CLAUSE NOW, THEREFORE, THIS TRUST INDENTURE AND MORTGAGE WITNESSETH, that, to secure the prompt payment of the Original Amount of, interest on, Make-Whole Amount, if any, and all other amounts due with respect to, all Equipment Notes from time to time outstanding hereunder according to their tenor and effect and to secure the performance and observance by the Owner of all the agreements, covenants and provisions contained herein and in the Participation Agreement and in the Equipment Notes, for the benefit of the Note Holders and each of the Mortgage 2002 EETC - Mortgage (Owned) (10) Indemnitees, and in consideration of the premises and of the covenants herein contained, and of the acceptance of the Equipment Notes by the holders thereof, and for other good and valuable consideration the receipt and adequacy whereof are hereby acknowledged, the Owner has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Mortgagee, its successors in trust and assigns, for the security and benefit of, the Note Holders and each of the Mortgage Indemnitees, a first priority security interest in and mortgage lien on all right, title and interest of the Owner in, to and under the following described property, rights and privileges, whether now or hereafter acquired (which, collectively, together with all property hereafter specifically subject to the Lien of this Trust Indenture by the terms hereof or any supplement hereto, are included within, and are referred to as, the "Collateral"), to wit: (1) The Airframe which is one Boeing 737-800 aircraft with the FAA Registration number of N____TZ and the manufacturer's serial number of _____ and Engines, each of which is a CFM International model CFM56-7B27 engine with the manufacturer's serial numbers of _____ and _____, is of 750 or more rated takeoff horsepower or the equivalent of such horsepower (such Airframe and Engines more particularly described in the Mortgage Supplement executed and delivered as provided herein) as the same is now and will hereafter be constituted, whether now owned by the Owner or hereafter acquired, and in the case of such Engines, whether or not any such Engine shall be installed in or attached to the Airframe or any other airframe, together with (a) all Parts of whatever nature, which are from time to time included within the definitions of "Airframe" or "Engines", whether now owned or hereafter acquired, including all substitutions, renewals and replacements of and additions, improvements, accessions and accumulations to the Airframe and Engines (other than additions, improvements, accessions and accumulations which constitute appliances, parts, instruments, appurtenances, accessories, furnishings or other equipment excluded from the definition of Parts) and (b) all Aircraft Documents; (2) The Purchase Agreement (to the extent such Agreement relates to the Aircraft) and the Bills of Sale to the extent the same relate to continuing rights of the Owner in respect of any warranty, indemnity or agreement, express or implied, as to title, materials, workmanship, design or patent infringement or related matters with respect to the Airframe or the Engines (reserving to the Owner, however, all of the Owner's other rights and interest in and to the Purchase Agreement) together with all rights, powers, privileges, options and other benefits of the Owner in respect of such provisions (subject to such reservation) with respect to the Airframe or the Engines, including, without limitation, the right to make all waivers and agreements, to 2 2002 EETC - Mortgage (Owned) (10) give and receive all notices and other instruments or communications, and to take such action upon the occurrence of a default in respect of such provisions, including the commencement, conduct and consummation of legal, administrative or other proceedings, as shall be permitted thereby or by law, and to do any and all other things which the Owner is or may be entitled to do in respect of such provisions (subject to such reservation), subject, with respect to the Purchase Agreement, to the terms and conditions of the Consent and Agreement and the Engine Consent and Agreement; (3) All proceeds with respect to the requisition of title to or use of the Aircraft or any Engine by any Government Entity or from the sale or other disposition of the Aircraft, the Airframe, any Engine or other property described in any of these Granting Clauses by the Mortgagee pursuant to the terms of this Trust Indenture, and all insurance proceeds with respect to the Aircraft, the Airframe, any Engine or any part thereof, but excluding any insurance maintained by the Owner and not required under Section 4.06; (4) All rents, revenues and other proceeds collected by the Mortgagee pursuant to Section 5.03(b) and all monies and securities from time to time deposited or required to be deposited with the Mortgagee by or for the account of the Owner pursuant to any terms of this Trust Indenture held or required to be held by the Mortgagee hereunder; and (5) All proceeds of the foregoing; PROVIDED, HOWEVER, that notwithstanding any of the foregoing provisions, so long as no Event of Default shall have occurred and be continuing, (a) the Mortgagee shall not take or cause to be taken any action contrary to the Owner's or any Permitted Lessee's right hereunder to quiet enjoyment of the Airframe and Engines, and to possess, use, retain and control the Airframe and Engines and all revenues, income and profits derived therefrom, and (b) the Owner shall have the right, to the exclusion of the Mortgagee, with respect to the Purchase Agreement, to exercise in the Owner's name all rights and powers assigned hereunder under the Purchase Agreement (other than to amend, modify or waive any of the warranties or indemnities contained therein and assigned hereunder, except in the exercise of the Owner's reasonable business judgment) and to retain any recovery or benefit resulting from the enforcement of any warranty or indemnity under the Purchase Agreement; and provided further that, notwithstanding the occurrence or continuation of an Event of Default, the Mortgagee shall not enter into any amendment of the Purchase Agreement which would increase the obligations of the Owner thereunder. 3 2002 EETC - Mortgage (Owned) (10) TO HAVE AND TO HOLD all and singular the aforesaid property unto the Mortgagee, and its successors and assigns, in trust for the equal and proportionate benefit and security of the Note Holders and the Mortgage Indemnitees, except as provided in Section 2.13 and Article III hereof, without any preference, distinction or priority of any one Equipment Note over any other by reason of priority of time of issue, sale, negotiation, date of maturity thereof or otherwise for any reason whatsoever, and for the uses and purposes and in all cases and as to all property specified in paragraphs (1) through (5) inclusive above, subject to the terms and provisions set forth in this Trust Indenture. It is expressly agreed that anything herein contained to the contrary notwithstanding, the Owner shall remain liable under the Indenture Agreements to perform all of the obligations assumed by it thereunder, except to the extent prohibited or excluded from doing so pursuant to the terms and provisions thereof, and the Mortgagee, the Note Holders and the Mortgage Indemnitees shall have no obligation or liability under the Indenture Agreements by reason of or arising out of the assignment hereunder, nor shall the Mortgagee, the Note Holders or the Mortgage Indemnitees be required or obligated in any manner to perform or fulfill any obligations of the Owner under or pursuant to the Indenture Agreements, or, except as herein expressly provided, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. The Owner does hereby constitute the Mortgagee the true and lawful attorney of the Owner, irrevocably, granted for good and valuable consideration and coupled with an interest and with full power of substitution, and with full power (in the name of the Owner or otherwise) to ask for, require, demand and receive any and all monies and claims for monies (in each case including insurance and requisition proceeds) due and to become due under or arising out of the Indenture Agreements, and all other property which now or hereafter constitutes part of the Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or to take any action or to institute any proceedings which the Mortgagee may deem to be necessary or advisable in the premises; provided that the Mortgagee shall not exercise any such rights except upon the occurrence and during the continuance of an Event of Default hereunder. The Owner agrees that at any time and from time to time, upon the written request of the Mortgagee, the Owner will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents (including without limitation UCC continuation 4 2002 EETC - Mortgage (Owned) (10) statements) as the Mortgagee may reasonably deem necessary to perfect, preserve or protect the mortgage, security interests and assignments created or intended to be created hereby or to obtain for the Mortgagee the full benefits of the assignment hereunder and of the rights and powers herein granted. IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as follows: ARTICLE I DEFINITIONS Capitalized terms used but not defined herein shall have the respective meanings set forth or incorporated by reference, and shall be construed in the manner described, in Annex A hereto. ARTICLE II THE EQUIPMENT NOTES SECTION 2.01. FORM OF EQUIPMENT NOTES The Equipment Notes shall be substantially in the form set forth below: THIS EQUIPMENT NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS EQUIPMENT NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS IS AVAILABLE. 5 2002 EETC - Mortgage (Owned) (10) AMERICAN TRANS AIR, INC. SERIES [_____] EQUIPMENT NOTE DUE [____] ISSUED IN CONNECTION WITH THE BOEING MODEL 737-800 AIRCRAFT BEARING UNITED STATES REGISTRATION NUMBER N___TZ. No. ____ Date: [__________, ____] _______________________ INTEREST RATE MATURITY DATE [___________] [____________] AMERICAN TRANS AIR, INC., an Indiana corporation ("Owner"), hereby promises to pay to WILMINGTON TRUST COMPANY, as Subordination Agent under the Intercreditor Agreement, or the registered assignee thereof, the principal sum of $____________ (the "Original Amount"), together with interest on the amount of the Original Amount remaining unpaid from time to time (calculated on the basis of a year of 360 days comprised of twelve 30-day months) from the date hereof until paid in full at a rate per annum equal to the Debt Rate. The Original Amount of this Equipment Note shall be payable in installments on the dates set forth in Schedule I hereto equal to the corresponding percentage of the Original Amount of this Equipment Note set forth in Schedule I hereto. Accrued but unpaid interest shall be due and payable in quarterly installments commencing on ______ __, 200_, and thereafter on [February 20], [May 20], [August 20] and [November 20] of each year, to and including _______________. Notwithstanding the foregoing, the final payment made on this Equipment Note shall be in an amount sufficient to discharge in full the unpaid Original Amount and all accrued and unpaid interest on, and any other amounts due under, this Equipment Note. Notwithstanding anything to the contrary contained herein, whenever the date scheduled for any payment to be made hereunder or under the Trust Indenture shall not be a Business Day, then such payment shall not be due on such scheduled date but shall be due on the next succeeding Business Day with the same effect as if paid on the originally scheduled due date. For purposes hereof, the term "Trust Indenture" means the Trust Indenture and Mortgage [N____TZ] dated as of _______ __, ____, between the Owner and Wilmington Trust Company (the "Mortgagee"), as the same may be amended or supplemented from time to time. All other capitalized terms used in this Equipment Note and not defined herein shall have the respective meanings assigned in the Trust Indenture. This Equipment Note shall bear interest, payable on demand, at the Past Due Rate (calculated on the basis of a year of 360 days comprised of twelve 30-day months) on any overdue Original Amount, any overdue Make-Whole Amount, if any, and (to the extent permitted by applicable Law) any 6 2002 EETC - Mortgage (Owned) (10) overdue interest and any other amounts payable hereunder which are overdue, in each case for the period the same is overdue. Amounts shall be overdue if not paid when due (whether at stated maturity, by acceleration or otherwise). The interest rate borne by this Equipment Note shall be subject to adjustments to the extent, and under the circumstances, specified by the Registration Rights Agreement. There shall be maintained an Equipment Note Register for the purpose of registering transfers and exchanges of Equipment Notes at the Corporate Trust Office of the Mortgagee or at the office of any successor in the manner provided in Section 2.07 of the Trust Indenture. The Original Amount and interest and other amounts due hereunder shall be payable in Dollars in immediately available funds at the Corporate Trust Office of the Mortgagee, or as otherwise provided in the Trust Indenture. Each such payment shall be made on the date such payment is due and without any presentment or surrender of this Equipment Note, except that in the case of any final payment with respect to this Equipment Note, the Equipment Note shall be surrendered promptly thereafter to the Mortgagee for cancellation. The holder hereof, by its acceptance of this Equipment Note, agrees that, except as provided in the Trust Indenture, each payment of the Original Amount, Make-Whole Amount, if any, and interest received by it hereunder shall be applied, first, to the payment of accrued interest on this Equipment Note (as well as any interest on any overdue Original Amount, any overdue Make-Whole Amount, if any, or, to the extent permitted by Law, any overdue interest and other amounts hereunder) to the date of such payment, second, to the payment of the Original Amount of this Equipment Note then due, third, to the payment of Make-Whole Amount, if any, and any other amount due hereunder or under the Trust Indenture, and fourth, the balance, if any, remaining thereafter, to the payment of installments of the Original Amount of this Equipment Note remaining unpaid in the inverse order of their maturity. This Equipment Note is one of the Equipment Notes referred to in the Trust Indenture which have been or are to be issued by the Owner pursuant to the terms of the Trust Indenture. The Collateral is held by the Mortgagee as security, in part, for the Equipment Notes. The provisions of this Equipment Note are subject to the Trust Indenture. Reference is hereby made to the Trust Indenture and the Participation Agreement for a complete statement of the rights and obligations of the holder of, and the nature and extent of the security for, this Equipment Note and the rights and obligations of the holders of, and the nature and extent of the security for, any other 7 2002 EETC - Mortgage (Owned) (10) Equipment Notes executed and delivered under the Trust Indenture, as well as for a statement of the terms and conditions of the Trust created by the Trust Indenture, to all of which terms and conditions in the Trust Indenture and the Participation Agreement each holder hereof agrees by its acceptance of this Equipment Note. As provided in the Trust Indenture and subject to certain limitations therein set forth, this Equipment Note is exchangeable for a like aggregate Original Amount of Equipment Notes of different authorized denominations, as requested by the holder surrendering the same. Prior to due presentment for registration of transfer of this Equipment Note, the Owner and the Mortgagee shall treat the person in whose name this Equipment Note is registered as the owner hereof for all purposes, whether or not this Equipment Note be overdue, and neither the Owner nor the Mortgagee shall be affected by notice to the contrary. This Equipment Note is subject to redemption as provided in Sections 2.10, 2.11 and 2.12 of the Trust Indenture but not otherwise. In addition, this Equipment Note may be accelerated as provided in Section 5.02 of the Trust Indenture. [The indebtedness evidenced by this Equipment Note is, to the extent and in the manner provided in the Trust Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Trust Indenture) in respect of Series A Equipment Notes and this Equipment Note is issued subject to such provisions. The Note Holder of this Equipment Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Mortgagee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Trust Indenture and (c) appoints the Mortgagee his attorney-in-fact for such purpose.](1) Unless the certificate of authentication hereon has been executed by or on behalf of the Mortgagee by manual signature, this Equipment Note shall not be entitled to any benefit under the Trust Indenture or be valid or obligatory for any purpose. THIS EQUIPMENT NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. * * * - ----------------------- (1) This provision to appear in Series B Equipment Notes only. 8 2002 EETC - Mortgage (Owned) (10) IN WITNESS WHEREOF, the Owner has caused this Equipment Note to be executed in its corporate name by its officer thereunto duly authorized on the date hereof. AMERICAN TRANS AIR, INC. By:___________________________ Name: Title: 9 2002 EETC - Mortgage (Owned) (10) MORTGAGEE'S CERTIFICATE OF AUTHENTICATION This is one of the Equipment Notes referred to in the within-mentioned Trust Indenture. WILMINGTON TRUST COMPANY, as Mortgagee By:__________________________ Name: Title: SCHEDULE I EQUIPMENT NOTE AMORTIZATION Payment Date Percentage of Original Amount to Be Paid - ------------ ---------------------------------------- [SEE SCHEDULE I TO TRUST INDENTURE WHICH IS INSERTED UPON ISSUANCE] * * * 10 2002 EETC - Mortgage (Owned) (10) SECTION 2.02. ISSUANCE AND TERMS OF EQUIPMENT NOTES The Equipment Notes shall be dated the date of issuance thereof, shall be issued in two separate series consisting of Series A and Series B and in the maturities and principal amounts and shall bear interest as specified in Schedule I hereto. On the date thereof, each Equipment Note shall be issued to the Subordination Agent on behalf of the Pass Through Trustee under the Pass Through Trust Agreements. The Equipment Notes shall be issued in registered form only. The Equipment Notes shall be issued in denominations of $1,000 and integral multiples thereof, except that one Equipment Note of each Series may be in an amount that is not an integral multiple of $1,000. Each Equipment Note shall bear interest at the Debt Rate for the applicable Series of such Equipment Note (calculated on the basis of a year of 360 days comprised of twelve 30-day months) on the unpaid Original Amount thereof from time to time outstanding, payable in arrears on _____ __, ____, and on each [January 15], [April 15], [July 15] and [October 15] thereafter until maturity. The Original Amount of each Equipment Note shall be payable on the dates and in the installments equal to the corresponding percentage of the Original Amount as set forth in Schedule I hereto which shall be attached as Schedule I to the Equipment Notes. Notwithstanding the foregoing, the final payment made under each Equipment Note shall be in an amount sufficient to discharge in full the unpaid Original Amount and all accrued and unpaid interest on, and any other amounts due under, such Equipment Note. Each Equipment Note shall bear interest at the Past Due Rate (calculated on the basis of a year of 360 days comprised of twelve 30-day months) on any part of the Original Amount, Make-Whole Amount, if any, and, to the extent permitted by applicable Law, interest and any other amounts payable thereunder not paid when due for any period during which the same shall be overdue, in each case for the period the same is overdue. Amounts shall be overdue if not paid when due (whether at stated maturity, by acceleration or otherwise). Notwithstanding anything to the contrary contained herein, whenever the date scheduled for any payment to be made hereunder or under any Equipment Note shall not be a Business Day, then such payment shall not be due on such scheduled date but shall be due on the next succeeding Business Day with the same effect as if paid on the originally scheduled due date. The interest rate borne by the Equipment Notes shall be subject to adjustments to the extent, and under the circumstances, specified by the Registration Rights Agreement. The Owner agrees, without duplication, to pay to the Mortgagee for distribution in accordance with Section 3.04 hereof (1) all Expenses, Transaction Expenses, and all other amounts, liabilities, indemnities, and obligations (including any Make-Whole Amount) that Owner assumes or 11 2002 EETC - Mortgage (Owned) (10) becomes obligated to pay or agrees to pay under any Operative Agreement to or on behalf of Mortgagee or any other Person including indemnity payments under Section 7 of the Participation Agreement, but excluding any amount as to which Owner is obligated to pay a pro rata share pursuant to clause (5) of this definition, (2)(a) to the extent not payable (whether or not in fact paid) under Section 6(a) or Section 6(b), as applicable, of the Note Purchase Agreement (as originally in effect or amended with Mortgagee's consent), the fees payable to Liquidity Provider under Section 2.3 of each Liquidity Facility, multiplied by a fraction the numerator of which is the then-outstanding aggregate principal amount of all the series of Equipment Notes, and the denominator of which is the then-outstanding aggregate principal amount of all "Series A Equipment Notes" and "Series B Equipment Notes" (each as defined in the Note Purchase Agreement); (b) (x) the amount equal to interest on any Downgrade Advance (other than any Applied Downgrade Advance) payable under Section 3.7 of each Liquidity Facility minus Investment Earnings from such Downgrade Advance, multiplied by (y) the fraction specified in the foregoing clause (a); (c) (x) the amount equal to interest on any Non-Extension Advance (other than any Applied Non-Extension Advance) payable under Section 3.7 of each Liquidity Facility, multiplied by (y) the fraction specified in the forgoing clause (a); (d) if any payment default exists with respect to interest on any series of Equipment Notes, (x) an amount equal to interest on any Unpaid Advance, Applied Downgrade Advance, or Applied Non-Extension Advance payable under Section 3.7 of each Liquidity Facility plus any interest at the Past-Due Rate actually payable (whether or not in fact paid) by Owner in respect of the overdue scheduled interest on the Equipment Notes in respect of which such Unpaid Advance, Applied Downgrade Advance, or Applied Non-Extension Advance was made by the applicable Liquidity Provider multiplied by (y) a fraction the numerator of which is the sum of all then-overdue interest on the Equipment Notes (other than interest becoming due and payable solely as a result of acceleration of any Equipment Notes), and the denominator of which shall be the sum of all then-overdue interest on all "Series A Equipment Notes" and "Series B Equipment Notes" (each as defined in the Note Purchase Agreement) (other than interest becoming due and payable solely as a result of acceleration of any such "Equipment Notes"); and (e) Owner's pro rata share of any other amounts owed to Liquidity Provider by Subordination Agent as borrower under each Liquidity Facility (other than amounts due as repayment of advances thereunder or as interest on such advances), except to the extent payable pursuant to clause (a), (b), (c), or (d) above, (3) Owner's pro rata share of all compensation and reimbursement of expenses, disbursements, and advances payable by Owner under the Pass-Through Trust Agreements, (4) Owner's pro rata share of all compensation and reimbursement of expenses and disbursements (including payments of indemnities) payable to Subordination Agent under the Intercreditor Agreement, except with respect to 12 2002 EETC - Mortgage (Owned) (10) any income or franchise taxes incurred by Subordination Agent in connection with the transactions contemplated by the Intercreditor Agreement, (5) Owner's pro rata share of any amount payable under Section 7.1 (and, if attributable thereto, Section 7.5) of the Participation Agreement to any Pass-Through Indemnitee to the extent such amount relates to, results from, or arises out of or in connection with (a) the Pass-Through Agreements or the enforcement of any of the terms of any of the Pass-Through Agreements, (b) the offer, sale, or delivery of the Pass-Through Certificates or any interest therein or represented thereby, or (c) any breach of or failure to perform or observe, or any other noncompliance with, any covenant or agreement or other obligation to be performed by Owner under any Pass-Through Agreement, or the falsity of any representation or warranty of Owner in any Pass-Through Agreement, and (6) if Owner requests any amendment to any Operative Agreement or Pass-Through Agreement, Owner's pro rata share of all reasonable fees and expenses (including fees and disbursements of counsel) of Escrow Agents and Paying Agents in connection therewith payable by Pass-Through Trustees under the Escrow Agreements. As used herein, "Owner's pro rata share" means as of any time a fraction, the numerator of which is the then-outstanding principal balance of Equipment Notes, and the denominator of which is the aggregate then-outstanding principal balance of all "Equipment Notes" (as each such term is defined in each of the Operative Indentures). For purposes of this definition, "Applied Downgrade Advance", "Applied Non-Extension Advance", "Cash Collateral Account", "Downgrade Advance", "Final Advance", "Investment Earnings", "Non-Extension Advance", and "Unpaid Advance" have the same meanings as in each Liquidity Facility. The Equipment Notes shall be executed on behalf of the Owner by its President or one of its Vice Presidents, Assistant Vice Presidents or Assistant Secretaries or other authorized officer. Equipment Notes bearing the signatures of individuals who were at any time the proper officers of the Owner shall bind the Owner, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Equipment Notes or did not hold such offices at the respective dates of such Equipment Notes. The Owner may from time to time execute and deliver Equipment Notes with respect to the Aircraft to the Mortgagee for authentication upon original issue and such Equipment Notes shall thereupon be authenticated and delivered by the Mortgagee upon the written request of the Owner signed by a Vice President or Assistant Vice President or other authorized officer of the Owner; provided, however, that each such request shall specify the aggregate Original Amount of all Equipment Notes to be authenticated hereunder on original issue with respect to the Aircraft. No Equipment Note shall be secured by or entitled to any benefit under this Trust Indenture or be valid or obligatory for any purposes, unless there appears on such Equipment Note a certificate of authentication in the form provided for 13 2002 EETC - Mortgage (Owned) (10) herein executed by the Mortgagee by the manual signature of one of its authorized officers and such certificate upon any Equipment Notes be conclusive evidence, and the only evidence, that such Equipment Note has been duly authenticated and delivered hereunder. The aggregate Original Amount of the Equipment Notes issued hereunder shall not exceed ____________________. SECTION 2.03. [INTENTIONALLY OMITTED] SECTION 2.04. METHOD OF PAYMENT (a) The Original Amount of, interest on, Make-Whole Amount, if any, and other amounts due under each Equipment Note or hereunder will be payable in Dollars by wire transfer of immediately available funds not later than 11:00 a.m., New York City time, on the due date of payment to the Mortgagee at the Corporate Trust Office for distribution among the Note Holders in the manner provided herein. The Owner shall not have any responsibility for the distribution of such payment to any Note Holder. Notwithstanding the foregoing or any provision in any Equipment Note to the contrary, the Mortgagee will use reasonable efforts to pay or cause to be paid, if so directed in writing by any Note Holder (with a copy to the Owner), all amounts paid by the Owner hereunder and under such holder's Equipment Note or Equipment Notes to such holder or a nominee therefor (including all amounts distributed pursuant to Article III of this Trust Indenture) by transferring, or causing to be transferred, by wire transfer of immediately available funds in Dollars, prior to 2:00 p.m., New York City time, on the due date of payment, to an account maintained by such holder with a bank located in the continental United States the amount to be distributed to such holder, for credit to the account of such holder maintained at such bank. If the Mortgagee shall fail to make any such payment as provided in the immediately foregoing sentence after its receipt of funds at the place and prior to the time specified above, the Mortgagee, in its individual capacity and not as trustee, agrees to compensate such holders for loss of use of funds at Debt Rate until such payment is made and the Mortgagee shall be entitled to any interest earned on such funds until such payment is made. Any payment made hereunder shall be made without any presentment or surrender of any Equipment Note, except that, in the case of the final payment in respect of any Equipment Note, such Equipment Note shall be surrendered to the Mortgagee for cancellation promptly after such payment. Notwithstanding any other provision of this Trust Indenture to the contrary, the Mortgagee shall not be required to make, or cause to be made, wire transfers as aforesaid prior to the first Business Day on which it is practicable for the Mortgagee to do so in view of the time of day when the funds to be so transferred were received by it if 14 2002 EETC - Mortgage (Owned) (10) such funds were received after 12:00 noon, New York City time, at the place of payment. Prior to the due presentment for registration of transfer of any Equipment Note, the Owner and the Mortgagee shall deem and treat the Person in whose name any Equipment Note is registered on the Equipment Note Register as the absolute owner and holder of such Equipment Note for the purpose of receiving payment of all amounts payable with respect to such Equipment Note and for all other purposes, and none of the Owner or the Mortgagee shall be affected by any notice to the contrary. So long as any signatory to the Participation Agreement or nominee thereof shall be a registered Note Holder, all payments to it shall be made to the account of such Note Holder specified in Schedule I thereto and otherwise in the manner provided in or pursuant to the Participation Agreement unless it shall have specified some other account or manner of payment by notice to the Mortgagee consistent with this Section 2.04. (b) The Mortgagee, as agent for the Owner, shall exclude and withhold at the appropriate rate from each payment of Original Amount of, interest on, Make-Whole Amount, if any, and other amounts due hereunder or under each Equipment Note (and such exclusion and withholding shall constitute payment in respect of such Equipment Note) any and all United States withholding taxes applicable thereto as required by Law. The Mortgagee agrees to act as such withholding agent and, in connection therewith, whenever any present or future United States taxes or similar charges are required to be withheld with respect to any amounts payable hereunder or in respect of the Equipment Notes, to withhold such amounts (and such withholding shall constitute payment in respect of such Equipment Note) and timely pay the same to the appropriate authority in the name of and on behalf of the Note Holders, that it will file any necessary United States withholding tax returns or statements when due, and that as promptly as possible after the payment thereof it will deliver to each Note Holder (with a copy to the Owner) appropriate receipts showing the payment thereof, together with such additional documentary evidence as any such Note Holder may reasonably request from time to time. If a Note Holder which is a Non-U.S. Person has furnished to the Mortgagee a properly completed, accurate and currently effective U.S. Internal Revenue Service Form W-8BEN (or such successor form or forms as may be required by the United States Treasury Department) during the calendar year in which the payment hereunder or under the Equipment Note(s) held by such holder is made (but prior to the making of such payment), or in either of the two preceding calendar years, and has not notified the Mortgagee of the withdrawal or inaccuracy of such form prior to the date of such payment (and the Mortgagee has no reason to believe that any information set forth in such form is inaccurate), the Mortgagee shall withhold only the amount, if any, 15 2002 EETC - Mortgage (Owned) (10) required by Law (after taking into account any applicable exemptions properly claimed by the Note Holder) to be withheld from payments hereunder or under the Equipment Notes held by such holder in respect of United States federal income tax (and such withholding shall constitute payment in respect of such Equipment Note). If a Note Holder (x) which is a Non-U.S. Person has furnished to the Mortgagee a properly completed, accurate and currently effective U.S. Internal Revenue Service Form W-8ECI in duplicate (or such successor certificate, form or forms as may be required by the United States Treasury Department as necessary in order to properly avoid withholding of United States federal income tax), for each calendar year in which a payment is made (but prior to the making of any payment for such year), and has not notified the Mortgagee of the withdrawal or inaccuracy of such certificate or form prior to the date of such payment (and the Mortgagee has no reason to believe that any information set forth in such form is inaccurate) or (y) which is a U.S. Person has furnished to the Mortgagee a properly completed, accurate and currently effective U.S. Internal Revenue Service Form W-9, if applicable, prior to a payment hereunder or under the Equipment Notes held by such holder, no amount shall be withheld from payments in respect of United States federal income tax. If any Note Holder has notified the Mortgagee that any of the foregoing forms or certificates is withdrawn or inaccurate, or if such holder has not filed a form claiming an exemption from United States withholding tax or if the Code or the regulations thereunder or the administrative interpretation thereof is at any time after the date hereof amended to require such withholding of United States federal income taxes from payments under the Equipment Notes held by such holder, the Mortgagee agrees to withhold from each payment due to the relevant Note Holder withholding taxes at the appropriate rate under Law and will, on a timely basis as more fully provided above, deposit such amounts with an authorized depository and make such returns, statements, receipts and other documentary evidence in connection therewith as required by Law. Owner shall not have any liability for the failure of the Mortgagee to withhold taxes in the manner provided for herein or for any false, inaccurate or untrue evidence provided by any Note Holder hereunder. SECTION 2.05. APPLICATION OF PAYMENTS In the case of each Equipment Note, each payment of Original Amount, Make-Whole Amount, if any, and interest due thereon shall be applied: First: to the payment of accrued interest on such Equipment Note (as well as any interest on any overdue Original Amount, any overdue Make-Whole Amount, if any, and to the extent permitted by Law, any 16 2002 EETC - Mortgage (Owned) (10) overdue interest and any other overdue amounts thereunder) to the date of such payment; Second: to the payment of the Original Amount of such Equipment Note (or a portion thereof) then due thereunder; Third: to the payment of Make-Whole Amount, if any, and any other amount due hereunder or under such Equipment Note; and Fourth: the balance, if any, remaining thereafter, to the payment of the Original Amount of such Equipment Note remaining unpaid (provided that such Equipment Note shall not be subject to redemption except as provided in Sections 2.10, 2.11 and 2.12 hereof). The amounts paid pursuant to clause "Fourth" above shall be applied to the installments of Original Amount of such Equipment Note in the inverse order of their normal maturity. SECTION 2.06. TERMINATION OF INTEREST IN COLLATERAL No Note Holder or any other Mortgage Indemnitee shall, as such, have any further interest in, or other right with respect to, the Collateral when and if the Original Amount of, Make-Whole Amount, if any, and interest on and other amounts due under all Equipment Notes held by such Note Holder and all other sums then due and payable to such Note Holder, such Mortgage Indemnitee or the Mortgagee hereunder (including, without limitation, under the third paragraph of Section 2.02 hereof) and under the other Operative Agreements by the Owner (collectively, the "Secured Obligations") shall have been paid in full. SECTION 2.07. REGISTRATION TRANSFER AND EXCHANGE OF EQUIPMENT NOTES The Mortgagee shall keep a register (the "Equipment Note Register") in which the Mortgagee shall provide for the registration of Equipment Notes and the registration of transfers of Equipment Notes. No such transfer shall be given effect unless and until registration hereunder shall have occurred. The Equipment Note Register shall be kept at the Corporate Trust Office of the Mortgagee. The Mortgagee is hereby appointed "Equipment Note Registrar" for the purpose of registering Equipment Notes and transfers of Equipment Notes as herein provided. A holder of any Equipment Note intending to exchange such Equipment Note shall surrender such Equipment Note to the Mortgagee at the Corporate Trust Office, together with a written request from the registered holder thereof for the issuance of a new Equipment Note, specifying, in the case of a surrender for transfer, the name and address of the new holder or holders. Upon surrender for registration of transfer of any 17 2002 EETC - Mortgage (Owned) (10) Equipment Note, the Owner shall execute, and the Mortgagee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Equipment Notes of a like aggregate Original Amount and of the same Series. At the option of the Note Holder, Equipment Notes may be exchanged for other Equipment Notes of any authorized denominations of a like aggregate Original Amount and of the same Series, upon surrender of the Equipment Notes to be exchanged to the Mortgagee at the Corporate Trust Office. Whenever any Equipment Notes are so surrendered for exchange, the Owner shall execute, and the Mortgagee shall authenticate and deliver, the Equipment Notes which the Note Holder making the exchange is entitled to receive. All Equipment Notes issued upon any registration of transfer or exchange of Equipment Notes (whether under this Section 2.07 or under Section 2.08 hereof or otherwise under this Trust Indenture) shall be the valid obligations of the Owner evidencing the same respective obligations, and entitled to the same security and benefits under this Trust Indenture, as the Equipment Notes surrendered upon such registration of transfer or exchange. Every Equipment Note presented or surrendered for registration of transfer, shall (if so required by the Mortgagee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Mortgagee duly executed by the Note Holder or such holder's attorney duly authorized in writing, and the Mortgagee shall require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act, and the securities Laws of any applicable state. The Mortgagee shall make a notation on each new Equipment Note of the amount of all payments of Original Amount previously made on the old Equipment Note or Equipment Notes with respect to which such new Equipment Note is issued and the date to which interest on such old Equipment Note or Equipment Notes has been paid. Interest shall be deemed to have been paid on such new Equipment Note to the date on which interest shall have been paid on such old Equipment Note, and all payments of the Original Amount marked on such new Equipment Note, as provided above, shall be deemed to have been made thereon. The Owner shall not be required to exchange any surrendered Equipment Notes as provided above during the ten-day period preceding the due date of any payment on such Equipment Note. The Owner shall in all cases deem the Person in whose name any Equipment Note shall have been issued and registered as the absolute owner and holder of such Equipment Note for the purpose of receiving payment of all amounts payable by the Owner with respect to such Equipment Note and for all purposes until a notice stating otherwise is received from the Mortgagee and such change is reflected on the Equipment Note Register. The Mortgagee will promptly notify the Owner of each registration of a transfer of an Equipment Note. Any such transferee of an Equipment Note, by its acceptance of an Equipment Note, agrees to the provisions of this Indenture and the Participation Agreement applicable to Note Holders, including Sections 5.3, 5.4 18 2002 EETC - Mortgage (Owned) (10) and 8.1 thereof and shall be deemed to have covenanted to the parties to the Participation Agreement as to the matters covenanted by the original Note Holder in the Participation Agreement. Subject to compliance by the Note Holder and its transferee (if any) of the requirements set forth in this Section 2.07, Mortgagee and Owner shall use all reasonable efforts to issue new Equipment Notes upon transfer or exchange within ten Business Days of the date an Equipment Note is surrendered for transfer or exchange. SECTION 2.08. MUTILATED, DESTROYED, LOST OR STOLEN EQUIPMENT NOTES If any Equipment Note shall become mutilated, destroyed, lost or stolen, the Owner shall, upon the written request of the holder of such Equipment Note, execute and the Mortgagee shall authenticate and deliver in replacement thereof a new Equipment Note of the same Series payable in the same Original Amount dated the same date and captioned as issued in connection with the Aircraft. If the Equipment Note being replaced has become mutilated, such Equipment Note shall be surrendered to the Mortgagee and a photocopy thereof shall be furnished to the Owner. If the Equipment Note being replaced has been destroyed, lost or stolen, the holder of such Equipment Note shall furnish to the Owner and the Mortgagee such security or indemnity as may be required by them to save the Owner and the Mortgagee harmless and evidence satisfactory to the Owner and the Mortgagee of the destruction, loss or theft of such Equipment Note and of the ownership thereof. If a "qualified institutional buyer" of the type referred to in paragraph (a)(1)(i)(A), (B), (D) or (E) of Rule 144A under the Securities Act (a "QIB") is the holder of any such destroyed, lost or stolen Equipment Note, then the written indemnity of such QIB, signed by an authorized officer thereof, in favor of, delivered to and in form reasonably satisfactory Owner and the Mortgagee shall be accepted as satisfactory indemnity and security and no further indemnity or security shall be required as a condition to the execution and delivery of such new Equipment Note. Subject to compliance by the Note Holder with the requirements set forth in this Section 2.08, Mortgagee and Owner shall use all reasonable efforts to issue new Equipment Notes within ten Business Days of the date of the written request therefor from the Note Holder. SECTION 2.09. PAYMENT OF EXPENSES ON TRANSFER; CANCELLATION (a) No service charge shall be made to a Note Holder for any registration of transfer or exchange of Equipment Notes, but the Mortgagee, as Equipment Note Registrar, may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Equipment Notes. 19 2002 EETC - Mortgage (Owned) (10) (b) The Mortgagee shall cancel all Equipment Notes surrendered for replacement, redemption, transfer, exchange, payment or cancellation and shall destroy the canceled Equipment Notes. SECTION 2.10. MANDATORY REDEMPTIONS OF EQUIPMENT NOTES On the date on which the Owner is required pursuant to Section 4.05 hereof to make payment for an Event of Loss with respect to the Airframe, all of the Equipment Notes shall be redeemed in whole at a redemption price equal to 100% of the unpaid Original Amount thereof, together with all accrued interest thereon to the date of redemption and all other Secured Obligations owed or then due and payable to the Note Holders but without Make-Whole Amount. SECTION 2.11. VOLUNTARY REDEMPTIONS OF EQUIPMENT NOTES All (but not less than all) of the Equipment Notes may be redeemed by the Owner upon at least 30 days' revocable prior written notice to the Mortgagee and the Note Holders, and the Equipment Notes shall be redeemed in whole at a redemption price equal to 100% of the unpaid Original Amount thereof, together with accrued interest thereon to the date of redemption and all other Secured Obligations owed or then due and payable to the Note Holders plus Make-Whole Amount, if any. Simultaneously with such redemption, the Owner shall also pay all other Secured Obligations (if any) owed to the Mortgagee and the Mortgage Indemnitee. SECTION 2.12. REDEMPTIONS; NOTICE OF REDEMPTION (a) No redemption of any Equipment Note may be made except to the extent and in the manner expressly permitted by this Trust Indenture. No purchase of any Equipment Note may be made by the Mortgagee. (b) Notice of redemption with respect to the Equipment Notes shall be given by the Mortgagee by first-class mail, postage prepaid, mailed not less than 25 nor more than 60 days prior to the applicable redemption date, to each Note Holder of such Equipment Notes to be redeemed, at such Note Holder's address appearing in the Equipment Note Register; provided that such notice shall be revocable by written notice from the Owner to Mortgagee given not later than three days prior to the redemption date. All notices of redemption shall state: (1) the redemption date, (2) the applicable basis for determining the redemption price, (3) that on the redemption date, the redemption price will become due and payable upon each such Equipment Note, and that, if any such Equipment Notes are then outstanding, interest on such Equipment Notes shall cease to accrue on and after such redemption 20 2002 EETC - Mortgage (Owned) (10) date, and (4) the place or places where such Equipment Notes are to be surrendered for payment of the redemption price. (c) On or before the redemption date, the Owner (or any person on behalf of the Owner) shall, to the extent an amount equal to the redemption price for the Equipment Notes to be redeemed on the redemption date shall not then be held by the Mortgagee, deposit or cause to be deposited with the Mortgagee by 12:30 p.m. New York City time on the redemption date in immediately available funds the redemption price of the Equipment Notes to be redeemed. (d) Notice of redemption having been given and not revoked as aforesaid, the Equipment Notes to be redeemed shall, on the redemption date, become due and payable at the Corporate Trust Office of the Mortgagee or at any office or agency maintained for such purposes pursuant to Section 2.07, and from and after such redemption date (unless there shall be a default in the payment of the redemption price) any such Equipment Notes then outstanding shall cease to bear interest. Upon surrender of any such Equipment Note for redemption in accordance with said notice, such Equipment Note shall be redeemed at the redemption price. If any Equipment Note called for redemption shall not be so paid upon surrender thereof for redemption, the principal amount thereof shall, until paid, continue to bear interest from the applicable redemption date at the interest rate in effect for such Equipment Note as of such redemption date. SECTION 2.13. SUBORDINATION (a) The Owner and, by acceptance of its Equipment Notes of any Series, each Note Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Note Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in Section 5.01(vi) hereof, except as expressly provided in Article III hereof. (b) By the acceptance of its Equipment Notes of any Series (other than Series A), each Note Holder of such Series agrees that in the event that such Note Holder, in its capacity as a Note Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to receive under this Section 2.13 or Article III hereof, it will hold any amount so received in trust for the Senior Holder (as defined in Section 2.13(c) hereof) and will forthwith turn over such payment to the Mortgagee in the form received to be applied as provided in Article III hereof. 21 2002 EETC - Mortgage (Owned) (10) (c) As used in this Section 2.13, the term "Senior Holder" shall mean, (i) the Note Holders of Series A until the Secured Obligations in respect of Series A Equipment Notes have been paid in full and (ii) after the Secured Obligations in respect of Series A Equipment Notes have been paid in full, the Note Holders of Series B until the Secured Obligations in respect of Series B Equipment Notes have been paid in full. ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF PAYMENTS SECTION 3.01. BASIC DISTRIBUTIONS Except as otherwise provided in Section 3.03 hereof, each periodic payment of principal or interest on the Equipment Notes received by the Mortgagee shall be promptly distributed in the following order of priority: (i) so much of such payment as shall be required to pay in full the aggregate amount of the payment or payments of Original Amount and interest (as well as any interest on any overdue Original Amount and, to the extent permitted by Law, on any overdue interest) then due under all Series A Equipment Notes shall be distributed to the Note Holders of Series A ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Equipment Note bears to the aggregate amount of the payments then due under all Series A Equipment Notes; and (ii) after giving effect to paragraph (i) above, so much of such payment remaining as shall be required to pay in full the aggregate amount of the payment or payments of Original Amount and interest (as well as any interest on any overdue Original Amount and, to the extent permitted by Law, on any overdue interest) then due under all Series B Equipment Notes shall be distributed to the Note Holders of Series B ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Equipment Note bears to the aggregate amount of the payments then due under all Series B Equipment Notes. SECTION 3.02. EVENT OF LOSS; REPLACEMENT; OPTIONAL REDEMPTION Except as otherwise provided in Section 3.03 hereof, any payments received by the Mortgagee (i) with respect to the Airframe or the Airframe and one or more Engines as the result of an Event of Loss or (ii) pursuant to an optional redemption of the Equipment Notes pursuant to Section 2.11 hereof 22 2002 EETC - Mortgage (Owned) (10) shall be applied to redemption of the Equipment Notes and to all other Secured Obligations by applying such funds in the following order of priority: First, (a) to reimburse the Mortgagee and the Note Holders for any reasonable costs or expenses incurred in connection with such redemption for which they are entitled to reimbursement, or indemnity by Owner, under the Operative Agreements and then (b) to pay any other amounts then due (except as provided in clause "Second" below) to the Mortgagee, the Note Holders and the other Mortgage Indemnitees under this Trust Indenture (other than the amounts specified in clause "Second" below), the Participation Agreement or the Equipment Notes; Second, (i) to pay the amounts specified in paragraph (i) of clause "Third" of Section 3.03 hereof plus Make-Whole Amount, if any, then due and payable in respect of the Series A Equipment Notes; and (ii) after giving effect to paragraph (i) above, to pay the amounts specified in paragraph (ii) of clause "Third" of Section 3.03 hereof plus Make-Whole Amount, if any, then due and payable in respect of the Series B Equipment Notes; and Third, as provided in clause "Fourth" of Section 3.03 hereof; provided, however, that if a Replacement Airframe or Replacement Engine shall be substituted for the Airframe or Engine subject to such Event of Loss as provided in Section 4.05 hereof, any insurance, condemnation or similar proceeds which result from such Event of Loss and are paid over to the Mortgagee shall be held by the Mortgagee as permitted by Section 7.04 hereof (provided that such moneys shall be invested as provided in Section 6.06 hereof) as additional security for the obligations of Owner under Operative Agreements and such proceeds (and such investment earnings), to the extent not theretofore applied as provided herein, shall be released to the Owner at the Owner's written request upon the release of such Airframe or Engine and the replacement thereof as provided herein; provided, further, that no Make-Whole Amount shall be payable in connection with a redemption resulting from an Event of Loss. SECTION 3.03. PAYMENTS AFTER EVENT OF DEFAULT Except as otherwise provided in Section 3.04 hereof, all payments received and amounts held or realized by the Mortgagee (including any amounts realized by the Mortgagee from the exercise of any remedies pursuant to Article V hereof) after an Event of Default shall have occurred and be 23 2002 EETC - Mortgage (Owned) (10) continuing and after the declaration specified in Section 5.02(b) hereof, as well as all payments or amounts then held by the Mortgagee as part of the Collateral, shall be promptly distributed by the Mortgagee in the following order of priority: First, so much of such payments or amounts as shall be required to (i) reimburse the Mortgagee or WTC for any tax, expense or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the rents, revenues, issues, products and profits of, the property included in the Collateral (all such property being herein called the "Mortgaged Property") pursuant to Section 5.03(b) hereof) incurred by the Mortgagee or WTC (to the extent not previously reimbursed), the expenses of any sale, or other proceeding, reasonable attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Mortgagee, WTC or the Note Holders in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Mortgagee, WTC or any Note Holder, liquidated or otherwise, upon such Event of Default shall be applied by the Mortgagee as between itself, WTC and the Note Holders in reimbursement of such expenses and any other expenses for which the Mortgagee, WTC or the Note Holders are entitled to reimbursement under any Operative Agreement and (ii) all amounts payable to the other Mortgage Indemnitees hereunder and under the Participation Agreement; and in the case the aggregate amount to be so distributed is insufficient to pay as aforesaid in clauses (i) and (ii), then ratably, without priority of one over the other, in proportion to the amounts owed each hereunder; Second, so much of such payments or amounts remaining as shall be required to reimburse the then existing or prior Note Holders for payments made pursuant to Section 6.03 hereof (to the extent not previously reimbursed) shall be distributed to such then existing or prior Note Holders ratably, without priority of one over the other, in accordance with the amount of the payment or payments made by each such then existing or prior Note Holder pursuant to said Section 6.03 hereof; Third, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Original Amount of all Series A Equipment Notes, and the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Amount which shall not be due and payable) and all other Secured Obligations in respect of the Series A Equipment Notes (other than 24 2002 EETC - Mortgage (Owned) (10) Make-Whole Amount) to the date of distribution, shall be distributed to the Note Holders of Series A, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Original Amount of all Series A Equipment Notes held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Amount, if any) to the date of distribution, bears to the aggregate unpaid Original Amount of all Series A Equipment Notes held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Amount) to the date of distribution; and (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Original Amount of all Series B Equipment Notes, and the accrued but unpaid interest and other amounts due thereon (other than Make-Whole Amount which shall not be due and payable) and all other Secured Obligations in respect of the Series B Equipment Notes (other than Make-Whole Amount) to the date of distribution, shall be distributed to the Note Holders of Series B, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Original Amount of all Series B Equipment Notes held by each holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than the Make-Whole Amount, if any) to the date of distribution, bears to the aggregate unpaid Original Amount of all Series B Equipment Notes held by all such holders plus the accrued but unpaid interest and other amounts due thereon (other than the Make-Whole Amount) to the date of distribution; and Fourth, the balance, if any, of such payments or amounts remaining thereafter shall be distributed to the Owner. No Make-Whole Amount shall be due and payable on the Equipment Notes as a consequence of the acceleration of the Equipment Notes as a result of an Event of Default. SECTION 3.04. CERTAIN PAYMENTS (a) Any payments received by the Mortgagee for which no provision as to the application thereof is made in this Trust Indenture and for 25 2002 EETC - Mortgage (Owned) (10) which such provision is made in any other Operative Agreement shall be applied forthwith to the purpose for which such payment was made in accordance with the terms of such other Operative Agreement, as the case may be. (b) Notwithstanding anything to the contrary contained in this Article III, the Mortgagee will distribute promptly upon receipt any indemnity payment received by it from the Owner in respect of the Mortgagee in its individual capacity, any Note Holder or any other Mortgage Indemnitee, in each case whether pursuant to Section 7 of the Participation Agreement or otherwise, directly to the Person entitled thereto. Any payment received by the Mortgagee under the third paragraph of Section 2.02 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement. SECTION 3.05. OTHER PAYMENTS Any payments received by the Mortgagee for which no provision as to the application thereof is made elsewhere in this Trust Indenture or in any other Operative Agreement shall be distributed by the Mortgagee to the extent received or realized at any time, in the order of priority specified in Section 3.01 hereof, and after payment in full of all amounts then due in accordance with Section 3.01 in the manner provided in clause "Fourth" of Section 3.03 hereof. SECTION 3.06. APPLICATION OF PAYMENTS UNDER GUARANTEE All payments received by the Mortgagee pursuant to the Guarantee shall be distributed forthwith by the Mortgagee in the same order of priority, and in the same manner, as it would have distributed the payment in respect of which such payment under the Guarantee was received. ARTICLE IV COVENANTS OF THE OWNER SECTION 4.01. LIENS The Owner will not directly or indirectly create, incur, assume or suffer to exist any Lien or with respect to the Aircraft, the Airframe or any Engine or any Part, title to any of the foregoing or any interest of Owner therein, except Permitted Liens. The Owner shall promptly, at its own expense, take (or cause to be taken) such action as may be necessary to duly discharge (by bonding or otherwise) any Lien other than a Permitted Lien arising at any time in respect of the Aircraft, the Airframe, any Engine or any Part. 26 2002 EETC - Mortgage (Owned) (10) SECTION 4.02. POSSESSION, OPERATION AND USE, REGISTRATION AND MARKINGS (a) General. Except as otherwise expressly provided herein, the Owner shall be entitled to operate, use, locate, employ or otherwise utilize or not utilize the Airframe, any Engine or any Parts in any lawful manner or place in accordance with the Owner's business judgment. (b) Possession. The Owner, without the prior consent of Mortgagee, shall not lease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; except that so long as no Event of Default shall have occurred and be continuing at the time of such lease, delivery, transfer or relinquishment, the Owner may, without such prior written consent of Mortgagee: (i) Subject or permit any Permitted Lessee to subject (aa) the Airframe to normal interchange agreements, or (bb) any Engine to normal interchange agreements or pooling agreements or arrangements, in each case customary in the commercial airline industry and entered into by Owner or such Permitted Lessee, as the case may be, in the ordinary course of business; provided, however, that if Owner's title to any such Engine is divested under any such agreement or arrangement, then such Engine shall be deemed to have suffered an Event of Loss as of the date of such divestiture, and Owner shall comply with Section 4.04(e) in respect thereof; (ii) Deliver or permit any Permitted Lessee to deliver possession of the Aircraft, Airframe, any Engine or any Part (x) to the manufacturer thereof or to any third-party maintenance provider for testing, service, repair, maintenance or overhaul work on the Aircraft, Airframe, any Engine or any Part, or, to the extent required or permitted by Section 4.04, for alterations or modifications in or additions to the Aircraft, Airframe or any Engine or (y) to any Person for the purpose of transport to a Person referred to in the preceding clause (x); (iii) Install or permit any Permitted Lessee to install an Engine on an airframe owned by Owner or such Permitted Lessee, as the case may be, free and clear of all Liens, except (x) Permitted Liens and those that do not apply to the Engines, and (y) the rights of third parties under normal interchange or pooling agreements and arrangements of the type that would be permitted under Section 4.02(b)(i); (iv) Install or permit any Permitted Lessee to install an Engine on an airframe leased to Owner or such Permitted Lessee, or purchased 27 2002 EETC - Mortgage (Owned) (10) by Owner or such Permitted Lessee subject to a mortgage, security agreement, conditional sale or other secured financing arrangement, but only if (x) such airframe is free and clear of all Liens, except (A) the rights of the parties to such lease, or any such secured financing arrangement, covering such airframe and (B) Liens of the type permitted by clause (iii) above and (y) Owner or Permitted Lessee, as the case may be, shall have received from the lessor, mortgagee, secured party or conditional seller, in respect of such airframe, a written agreement (which may be a copy of the lease, mortgage, security agreement, conditional sale or other agreement covering such airframe), whereby such Person agrees that it will not acquire or claim any right, title or interest in, or Lien on, such Engine by reason of such Engine being installed on such airframe at any time while such Engine is subject to the Lien of this Trust Indenture; (v) Install or permit any Permitted Lessee to install an Engine on an airframe owned by Owner or such Permitted Lessee, leased to Owner or such Permitted Lessee, or purchased by Owner or such Permitted Lessee subject to a conditional sale or other security agreement under circumstances where neither clause (iii) or (iv) above is applicable; provided, however, that any such installation shall be deemed an Event of Loss with respect to such Engine, and Owner shall comply with Section 4.04(e) hereof in respect thereof; (vi) Transfer or permit any Permitted Lessee to transfer possession of the Aircraft, Airframe or any Engine to the U.S. Government, in which event Owner shall promptly notify Mortgagee in writing of any such transfer of possession and, in the case of any transfer pursuant to CRAF, in such notification shall identify by name, address and telephone numbers the Contracting Office Representative or Representatives for the Military Airlift Command of the United States Air Force to whom notices must be given and to whom requests or claims must be made to the extent applicable under CRAF; (vii) Enter into a charter or Wet Lease or other similar arrangement with respect to the Aircraft or any other aircraft on which any Engine may be installed (which shall not be considered a transfer of possession hereunder); provided that the Owner's obligations hereunder shall continue in full force and effect notwithstanding any such charter or Wet Lease or other similar arrangement; (viii) So long as no Event of Default shall have occurred and be continuing, and subject to the provisions of the immediately following paragraph, enter into a lease with respect to the Aircraft, Airframe or any Engine with any Permitted Air Carrier that is not the subject to any 28 2002 EETC - Mortgage (Owned) (10) bankruptcy, insolvency, liquidation, reorganization, dissolution or similar proceeding and shall not have substantially all of its property in the possession of any liquidator, trustee, receiver or similar person; provided that, in the case only of a lease to a Permitted Foreign Air Carrier, (A) the United States maintains diplomatic relations with the country of domicile of such Permitted Foreign Air Carrier (or, in the case of Taiwan, diplomatic relations at least as good as those in effect on the Closing Date) and (B) Owner shall have furnished Mortgagee a favorable opinion of counsel, reasonably satisfactory to Mortgagee, in the country of domicile of such Permitted Foreign Air Carrier, that (v) the terms of such lease are the legal, valid and binding obligations of the parties thereto enforceable under the laws of such jurisdiction (subject to customary exceptions), (w) it is not necessary for Mortgagee to register or qualify to do business in such jurisdiction, if not already so registered or qualified, as a result, in whole or in part, of the proposed lease, (x) Mortgagee's Lien in respect of, the Aircraft, Airframe and Engines will be recognized in such jurisdiction, (y) the Laws of such jurisdiction of domicile require fair compensation by the government of such jurisdiction, payable in a currency freely convertible into Dollars, for the loss of title to the Aircraft, Airframe or Engines in the event of the requisition by such government of such title (unless Owner shall provide insurance in the amounts required with respect to hull insurance under this Trust Indenture covering the requisition of title to the Aircraft, Airframe or Engines by the government of such jurisdiction so long as the Aircraft, Airframe or Engines are subject to such lease) and (z) the agreement of such Permitted Air Carrier that its rights under the lease are subject and subordinate to all the terms of this Trust Indenture is enforceable against such Permitted Air Carrier under applicable Law (subject to customary exceptions); provided that (1) the rights of any transferee who receives possession by reason of a transfer permitted by this Section 4.02(b) (other than by a transfer of an Engine which is deemed an Event of Loss) shall be subject and subordinate to all the terms of this Trust Indenture, (2) the Owner shall remain primarily liable for the performance of all of the terms of this Trust Indenture and all the terms and conditions of this Trust Indenture and the other Operative Agreements shall remain in effect and (3) Owner shall ensure that no lease or transfer of possession otherwise in compliance with this Section 4.02(b) shall (x) adversely affect the United States registration of the Aircraft, unless the Aircraft is subject to reregistration in accordance with the provisions of Section 4.02(d) or the maintenance, operation or use thereof except in compliance with Sections 4.02(c) and 4.04(a) or (y) permit any action not permitted to the Owner hereunder. In the case of any lease permitted under this Section 4.02(b), the Owner will include in such lease appropriate provisions which (t) make such 29 2002 EETC - Mortgage (Owned) (10) lease expressly subject and subordinate to all of the terms of this Trust Indenture, including the rights of the Mortgagee to avoid such lease in the exercise of its rights to repossession of the Airframe and Engines hereunder; (u) require the Permitted Lessee to comply with the terms of Section 4.06; and (v) require that the Airframe or any Engine subject thereto be used in accordance with the limitations applicable to the Owner's possession and use provided in this Trust Indenture and provisions for the maintenance and inspection of the Aircraft that are the same in all material respects as are contained herein. No lease permitted under this Section 4.02(b) shall be entered into unless (w) Owner shall provide written notice to Mortgagee and Moody's (such notice in the event of a lease to a U.S. Air Carrier to be given promptly after entering into any such lease or, in the case of a lease to any other Permitted Air Carrier, at least 10 days in advance of entering into such lease); (x) Owner shall furnish to Mortgagee evidence reasonably satisfactory to Mortgagee that the insurance required by Section 4.06 remains in effect; (y) all necessary documents shall have been duly filed, registered or recorded in such public offices as may be required fully to preserve the first priority security interest (subject to Permitted Liens) of Mortgagee in the Aircraft, Airframe and Engines; and (z) Owner shall reimburse Mortgagee for all of its reasonable out-of-pocket fees and expenses, including, without limitation, reasonable fees and disbursements of counsel, incurred by Mortgagee in connection with any such lease, and any such lease for a term of more than a year shall be assigned to Mortgagee to secure Owner's obligations hereunder. Except as otherwise provided herein and without in any way relieving the Owner from its primary obligation for the performance of its obligations under this Trust Indenture, the Owner may in its sole discretion permit a lessee to exercise any or all rights which the Owner would be entitled to exercise under Sections 4.02 and 4.04, and may cause a lessee to perform any or all of the Owner's obligations under Article IV, and the Mortgagee agrees to accept actual and full performance thereof by a lessee in lieu of performance by the Owner. Mortgagee hereby agrees, and each Note Holder by acceptance of an Equipment Note agrees, for the benefit of each lessor, conditional seller, indenture trustee or secured party of any engine leased to, or purchased by, Owner or any Permitted Lessee subject to a lease, conditional sale, trust indenture or other security agreement that Mortgagee, each Note Holder and their respective successors and assigns will not acquire or claim, as against such lessor, conditional seller, indenture trustee or secured party, any right, title or interest in any engine as the result of such engine being installed on the Airframe at any time while such engine is subject to such lease, conditional sale, trust indenture or other security agreement and owned by such lessor or conditional seller or subject to a trust indenture or security interest in favor of such indenture trustee or secured party. 30 2002 EETC - Mortgage (Owned) (10) (c) Operation and Use. So long as the Aircraft, Airframe or any Engine is subject to the Lien of this Trust Indenture, the Owner shall not operate, use or locate the Aircraft, Airframe or any Engine, or allow the Aircraft, Airframe or any Engine to be operated, used or located, (i) in any area excluded from coverage by any insurance required by the terms of Section 4.06, except in the case of a requisition by the U.S. Government where the Owner obtains indemnity in lieu of such insurance from the U.S. Government, or insurance from the U.S. Government covering such area in accordance with Section 4.06(c), or (ii) in any recognized area of hostilities unless covered in accordance with Annex B by War Risk Insurance as required by the terms of Section 4.06 (including, without limitation, Section 4.06(c)), unless in any case referred to in this Section 4.02(c) the Aircraft, the Airframe or any Engine is only temporarily operated, used or located in such area as a result of an emergency, equipment malfunction, navigational error, hijacking, weather condition or other similar unforeseen circumstance, so long as Owner diligently and in good faith proceeds to remove the Aircraft from such area. So long as the Aircraft, the Airframe or any Engine is subject to the Lien of this Trust Indenture, the Owner shall not permit such Aircraft, Airframe or any Engine, as the case may be, to be used, operated, maintained, serviced, repaired or overhauled (x) in violation of any Law binding on or applicable to such Aircraft, Airframe or Engine or (y) in violation of any airworthiness certificate, license or registration of any Government Entity relating to the Aircraft, the Airframe or any Engine, except (i) immaterial or non-recurring violations with respect to which corrective measures are taken promptly by Owner or Permitted Lessee, as the case may be, upon discovery thereof, or (ii) to the extent the validity or application of any such Law or requirement relating to any such certificate, license or registration is being contested in good faith by Owner or Permitted Lessee in any reasonable manner which does not involve any material risk of the sale, forfeiture or loss of the Aircraft, Airframe or any Engine or materially and adversely affect the interest of any Note Holder therein, any material risk of criminal liability against Mortgagee or impair the Mortgagee's security interest in the Aircraft, Airframe or any Engine. (d) Maintenance and Repair. So long as the Aircraft, Airframe or any Engine is subject to the Lien of this Trust Indenture, the Owner shall cause the Aircraft, Airframe and each Engine to be maintained, serviced, repaired and overhauled in accordance with (i) maintenance standards required by or substantially equivalent to those required by the FAA or the central aviation authority of Canada, Japan, or the Joint Aviation Authority (being the central aviation authority of France, Germany, Japan, the Netherlands, and the United Kingdom, inter alia) for the Aircraft, Airframe and Engines (the "Maintenance Program"), so as to (A) keep the Aircraft, the Airframe and each Engine in as good operating condition as on the Closing Date, ordinary wear and tear excepted, (B) keep the Aircraft in such operating 31 2002 EETC - Mortgage (Owned) (10) condition as may be necessary to enable the applicable airworthiness certification of such Aircraft to be maintained under the regulations of the FAA or other Aviation Authority then having jurisdiction over the operation of the Aircraft, except during (x) temporary periods of storage in accordance with applicable regulations, (y) maintenance and modification permitted hereunder or (z) periods when the FAA or such other Aviation Authority has revoked or suspended the airworthiness certificates for Similar Aircraft; and (ii) except during periods when a Permitted Lease is in effect, the same standards as Owner uses with respect to similar aircraft of similar size in its fleet operated by Owner in similar circumstances and, during any period in which a Permitted Lease is in effect, the same standards used by the Permitted Lessee with respect to similar aircraft of similar size in its fleet and operated by the Permitted Lessee in similar circumstances. Owner further agrees that the Aircraft, Airframe and Engines will be maintained, used, serviced, repaired, overhauled or inspected in compliance with applicable Laws with respect to the maintenance of the Aircraft and in compliance with each applicable airworthiness certificate, license and registration relating to the Aircraft, Airframe or any Engine issued by the Aviation Authority, other than minor or nonrecurring violations with respect to which corrective measures are taken upon discovery thereof and except to the extent Owner or Permitted Lessee is contesting in good faith the validity or application of any such Law or requirement relating to any such certificate, license or registration in any reasonable manner which does not create a material risk of sale, loss or forfeiture of the Aircraft, the Airframe or any Engine or the interest of Mortgagee therein, or any material risk of criminal liability or material civil penalty against Mortgagee. The Owner shall maintain or cause to be maintained the Aircraft Documents in the English language. (e) Registration. The Owner on or prior to the date of the Closing shall cause the Aircraft to be duly registered with the FAA in its name under the Act and except as otherwise permitted by this Section 4.02(e) at all times thereafter shall cause the Aircraft to remain so registered. So long as no Special Default or Event of Default shall have occurred and be continuing, Owner may, by written notice to Mortgagee, request to change the country of registration of the Aircraft. Any such change in registration shall be effected only in compliance with, and subject to all of the conditions set forth in, Section 5.4.5 of the Participation Agreement. Unless the Trust Indenture has been discharged, Owner shall also cause the Trust Indenture to be duly recorded and at all times maintained of record as a first-priority perfected mortgage (subject to Permitted Liens) on the Aircraft, the Airframe and each of the Engines (except to the extent such perfection or priority cannot be maintained solely as a result of the failure by Mortgagee to execute and deliver any necessary documents). 32 2002 EETC - Mortgage (Owned) (10) (f) Markings. If permitted by applicable Law, on or reasonably promptly after the Closing Date, Owner will cause to be affixed to, and maintained in, the cockpit of the Airframe and on each Engine, in each case, in a clearly visible location, a placard of a reasonable size and shape bearing the legend: "Subject to a security interest in favor of Wilmington Trust Company, not in its individual capacity but solely as Mortgagee." Such placards may be removed temporarily, if necessary, in the course of maintenance of the Airframe or Engines. If any such placard is damaged or becomes illegible, Owner shall promptly replace it with a placard complying with the requirements of this Section 4.02(e). SECTION 4.03. INSPECTION (a) At all reasonable times and upon reasonable advance notice (taking into consideration the availability of the Aircraft and Owner (or Permitted Lessee) personnel), so long as the Aircraft is subject to the Lien of this Trust Indenture, Mortgagee and its authorized representatives (the "Inspecting Parties") may (not more than once every 12 months unless an Event of Default has occurred and is continuing then such inspection right shall not be so limited) inspect the Aircraft, Airframe and Engines (including without limitation, the Aircraft Documents) and any such Inspecting Party may make copies of such Aircraft Documents not reasonably deemed confidential by Owner or such Permitted Lessee. (b) Any inspection of the Aircraft hereunder shall be limited to a visual, walk-around inspection and shall not include the opening of any panels, bays or other components of the Aircraft, and no such inspection shall interfere with Owner's or any Permitted Lessee's maintenance and operation of the Aircraft, Airframe and Engines. (c) With respect to such rights of inspection, Mortgagee shall not have any duty or liability to make, or any duty or liability by reason of not making, any such visit, inspection or survey. (d) Each Inspecting Party shall bear its own expenses in connection with any such inspection (including the cost of any copies made in accordance with Section 4.03(a)). SECTION 4.04. REPLACEMENT AND POOLING OF PARTS, ALTERATIONS, MODIFICATIONS AND ADDITIONS; SUBSTITUTION OF ENGINES (a) Replacement of Parts. Except as otherwise provided herein, so long as the Airframe or Engine is subject to the Lien of this Trust Indenture, Owner, at its own cost and expense, will, or will cause a Permitted Lessee to, at its own cost and expense, promptly replace (or cause to be replaced) all Parts 33 2002 EETC - Mortgage (Owned) (10) which may from time to time be incorporated or installed in or attached to the Aircraft, Airframe or any Engine and which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason whatsoever. In addition, Owner may, at its own cost and expense, or may permit a Permitted Lessee at its own cost and expense to, remove (or cause to be removed) in the ordinary course of maintenance, service, repair, overhaul or testing any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use; provided, however, that Owner, except as otherwise provided herein, at its own cost and expense, will, or will cause a Permitted Lessee at its own cost and expense to, replace such Parts as promptly as practicable. All replacement Parts shall be free and clear of all Liens, except for Permitted Liens and pooling arrangements to the extent permitted by Section 4.04(c) below (and except in the case of replacement property temporarily installed on an emergency basis) and shall be in good operating condition and have a value and utility not less than the value and utility of the Parts replaced (assuming such replaced Parts were in the condition required hereunder). (b) Parts. Except as otherwise provided herein, any Part at any time removed from the Airframe or any Engine shall remain subject to the Lien of this Trust Indenture, no matter where located, until such time as such Part shall be replaced by a Part that has been incorporated or installed in or attached to such Airframe or any Engine and that meets the requirements for replacement Parts specified above. Immediately upon any replacement Part becoming incorporated or installed in or attached to such Airframe or any Engine as provided in Section 4.04(a), without further act, (i) the replaced Part shall thereupon be free and clear of all rights of the Mortgagee and shall no longer be deemed a Part hereunder, and (ii) such replacement Part shall become subject to this Trust Indenture and be deemed part of such Airframe or any Engine, as the case may be, for all purposes hereof to the same extent as the Parts originally incorporated or installed in or attached to such Airframe or any Engine. (c) Pooling of Parts. Any Part removed from the Aircraft, Airframe or an Engine may be subjected by the Owner or a Permitted Lessee to a normal pooling arrangement customary in the airline industry and entered into in the ordinary course of business of Owner or Permitted Lessee, provided that the part replacing such removed Part shall be incorporated or installed in or attached to such Airframe or any Engine in accordance with Sections 4.04(a) and 4.04(b) as promptly as practicable after the removal of such removed Part. In addition, any replacement part when incorporated or installed in or attached to the Airframe or any Engine may be owned by any third party, subject to a normal pooling arrangement, so long as the Owner or a Permitted Lessee, at its 34 2002 EETC - Mortgage (Owned) (10) own cost and expense, as promptly thereafter as reasonably possible, either (i) causes such replacement part to become subject to the Lien of this Trust Indenture, free and clear of all Liens except Permitted Liens, at which time such replacement part shall become a Part or (ii) replaces (or causes to be replaced) such replacement part by incorporating or installing in or attaching to the Aircraft, Airframe or any Engine a further replacement Part owned by the Owner free and clear of all Liens except Permitted Liens and which shall become subject to the Lien of this Trust Indenture in accordance with Section 4.04(b). (d) Alterations, Modifications and Additions. The Owner shall, or shall cause a Permitted Lessee to, make (or cause to be made) alterations and modifications in and additions to the Aircraft, Airframe and each Engine as may be required to be made from time to time to meet the applicable standards of the FAA or other Aviation Authority having jurisdiction over the operation of the Aircraft, to the extent made mandatory in respect of the Aircraft (a "Mandatory Modification"); provided however, that the Owner or a Permitted Lessee may, in good faith and by appropriate procedure, contest the validity or application of any law, rule, regulation or order in any reasonable manner which does not materially adversely affect Mortgagee's interest in the Aircraft and does not involve any material risk of sale, forfeiture or loss of the Aircraft or the interest of Mortgagee therein, or any material risk of material civil penalty or any material risk of criminal liability being imposed on Mortgagee or the holder of any Equipment Note. In addition, the Owner, at its own expense, may, or may permit a Permitted Lessee at its own cost and expense to, from time to time make or cause to be made such alterations and modifications in and additions to the Airframe or any Engine (each an "Optional Modification") as the Owner or such Permitted Lessee may deem desirable in the proper conduct of its business including, without limitation, removal of Parts which Owner deems are obsolete or no longer suitable or appropriate for use in the Aircraft, Airframe or such Engine; provided, however, that no such Optional Modification shall (i) materially diminish the fair market value, utility, or useful life of the Aircraft or any Engine below its fair market value, utility or useful life immediately prior to such Optional Modification (assuming the Aircraft or such Engine was in the condition required by the Trust Indenture immediately prior to such Optional Modification) or (ii) cause the Aircraft to cease to have the applicable standard certificate of airworthiness. All Parts incorporated or installed in or attached to any Airframe or any Engine as the result of any alteration, modification or addition effected by the Owner shall be free and clear of any Liens except Permitted Liens and become subject to the Lien of this Trust Indenture; provided that the Owner or any Permitted Lessee may, at any time so long as the Airframe or any Engine is subject to the Lien of this Trust Indenture, remove any such Part (such Part being referred to herein as a "Removable Part") from such Airframe or an Engine if (i) such Part is in 35 2002 EETC - Mortgage (Owned) (10) addition to, and not in replacement of or in substitution for, any Part originally incorporated or installed in or attached to such Airframe or any Engine at the time of delivery thereof hereunder or any Part in replacement of, or in substitution for, any such original Part, (ii) such Part is not required to be incorporated or installed in or attached or added to such Airframe or any Engine pursuant to the terms of Section 4.02(d) or the first sentence of this Section 4.04(d) and (iii) such Part can be removed from such Airframe or any Engine without materially diminishing the fair market value, utility or remaining useful life which such Airframe or any Engine would have had at the time of removal had such removal not been effected by the Owner, assuming the Aircraft was otherwise maintained in the condition required by this Trust Indenture and such Removable Part had not been incorporated or installed in or attached to the Aircraft, Airframe or such Engine. Upon the removal by the Owner of any such Part as above provided, title thereto shall, without further act, be free and clear of all rights of the Mortgagee and such Part shall no longer be deemed a Part hereunder. Removable Parts may be leased from or financed by third parties other than Mortgagee. (e) Substitution of Engines. Upon the occurrence of an Event of Loss with respect to an Engine under circumstances in which an Event of Loss with respect to the Airframe has not occurred, Owner shall promptly (and in any event within 15 days after such occurrence) give the Mortgagee written notice of such Event of Loss. The Owner shall have the right at its option at any time, on at least five Business Days' prior notice to the Mortgagee, to substitute, and if an Event of Loss shall have occurred with respect to an Engine under circumstances in which an Event of Loss with respect to the Airframe has not occurred, shall within 60 days of the occurrence of such Event of Loss substitute, a Replacement Engine for any Engine. In such event, immediately upon the effectiveness of such substitution and without further act, (i) the replaced Engine shall thereupon be free and clear of all rights of the Mortgagee and the Lien of this Trust Indenture and shall no longer be deemed an Engine hereunder and (ii) such Replacement Engine shall become subject to this Trust Indenture and be deemed part of the Aircraft for all purposes hereof to the same extent as the replaced Engine. Such Replacement Engine shall be an engine manufactured by Engine Manufacturer that is the same model as the Engine to be replaced thereby, or an improved model, and that is suitable for installation and use on the Airframe, and that has a value, utility and remaining useful life (without regard to hours and cycles remaining until overhaul) at least equal to the Engine to be replaced thereby (assuming that such Engine had been maintained in accordance with this Trust Indenture). The Owner's right to make a replacement hereunder shall be subject to the fulfillment (which may be simultaneous with such replacement) of the applicable conditions precedent set forth in Section 4.05(c) at the Owner's sole 36 2002 EETC - Mortgage (Owned) (10) cost and expense, and the Mortgagee agrees to cooperate with the Owner to the extent necessary to enable it to timely satisfy such conditions. SECTION 4.05. LOSS, DESTRUCTION OR REQUISITION (a) Event of Loss With Respect to the Airframe. Upon the occurrence of an Event of Loss with respect to the Airframe, the Owner shall promptly (and in any event within 15 days after such occurrence) give the Mortgagee written notice of such Event of Loss. The Owner shall, within 45 days after such occurrence, give the Mortgagee written notice of Owner's election to either replace the Airframe as provided under Section 4.05(a)(i) or to make payment in respect of such Event of Loss as provided under Section 4.05(a)(ii) (it being agreed that if Owner shall not have given the Mortgagee such notice of such election within the above specified time period, the Owner shall be deemed to have elected to make payment in respect of such Event of Loss as provided under Section 4.05(a)(ii)): (i) if Owner elects to replace the Airframe, Owner shall, subject to the satisfaction of the conditions contained in Section 4.05(c), as promptly as possible and in any event within 120 days after the occurrence of such Event of Loss, cause to be subjected to the Lien of this Trust Indenture, in replacement of the Airframe with respect to which the Event of Loss occurred, a Replacement Airframe and, if any Engine shall have been installed on the Airframe when it suffered the Event of Loss, a Replacement Engine therefor, such Replacement Airframe and Replacement Engines to be free and clear of all Liens except Permitted Liens and to have a value, utility and remaining useful life (without regard to hours or cycles remaining until the next regular maintenance check) at least equal to the Airframe or Engine, as the case may be, to be replaced thereby (assuming that such Airframe or Engine had been maintained in accordance with this Trust Indenture); provided that if the Owner shall not perform its obligation to effect such replacement under this clause (i) during the 120-day period of time provided herein, it shall pay the amounts required to be paid pursuant to and within the time frame specified in clause (ii) below; or (ii) if Owner elects to make a payment in respect of such Event of Loss of the Airframe, Owner shall make a payment to the Mortgagee for purposes of redeeming Equipment Notes in accordance with Section 2.10 hereof on a date on or before the Business Day next following the earlier of (x) the 120th day following the date of the occurrence of such Event of Loss with respect to an Airframe or within 60 days of such Event of Loss with respect to any Engine, and (y) the fourth Business 37 2002 EETC - Mortgage (Owned) (10) Day following the receipt of insurance proceeds with respect to such Event of Loss (but in any event not earlier than the date of Owner's election under Section 4.05(a) to make payment under this Section 4.05 (a)(ii)); and upon such payment and payment of all other Secured Obligations then due and payable, the Mortgagee shall, at the cost and expense of the Owner, release from the Lien of this Trust Indenture the Airframe and the Engines, by executing and delivering to the Owner all documents and instruments as the Owner may reasonably request to evidence such release. (b) Effect of Replacement. Should the Owner have provided a Replacement Airframe and Replacement Engines, if any, as provided for in Section 4.05(a)(i), (i) the Lien of this Trust Indenture shall continue with respect to such Replacement Airframe and Replacement Engines, if any, as though no Event of Loss had occurred; (ii) the Mortgagee shall, at the cost and expense of the Owner, release from the Lien of this Trust Indenture the replaced Airframe and Engines, if any, by executing and delivering to the Owner such documents and instruments as the Owner may reasonably request to evidence such release; and (iii) in the case of a replacement upon an Event of Loss, the Mortgagee shall assign to the Owner (or if directed by the Owner, the insurers having made payment in respect of the applicable Event of Loss) all claims the Mortgagee may have against any other Person arising from the Event of Loss and the Owner shall receive all insurance proceeds (other than those reserved to others under Section 4.06(b)) and proceeds from any award in respect of condemnation, confiscation, seizure or requisition, including any investment interest thereon, to the extent not previously applied to the purchase price of the Replacement Airframe and Replacement Engines, if any, as provided in Sections 4.05(d). (c) Conditions to Airframe and Engine Replacement. The Owner's right to substitute a Replacement Airframe and Replacement Engines, if any, as provided in Section 4.04(e) or 4.05(a)(i), as the case may be, shall be subject to the fulfillment, at the Owner's sole cost and expense, in addition to the conditions contained in such Section 4.04(e) or 4.05(a)(i), as the case may be, of the following conditions precedent: (i) on the date when the Replacement Airframe and Replacement Engines, if any, is subjected to the Lien of this Trust Indenture (such date being referred to in this Section 4.05 as the "Replacement Closing Date"), an executed counterpart of each of the following documents (or, in the case of the FAA Bill of Sale and full warranty bill of sale referred to below, a photocopy thereof) shall have been delivered to the Mortgagee: 38 2002 EETC - Mortgage (Owned) (10) (A) a Mortgage Supplement covering the Replacement Airframe and Replacement Engines, if any, which shall have been duly filed for recordation pursuant to the Act or such other applicable law of such jurisdiction other than the United States in which the Replacement Airframe and Replacement Engines, if any, are to be registered in accordance with Section 4.02(d), as the case may be; (B) an FAA Bill of Sale (or a comparable document, if any, of another Aviation Authority, if applicable) covering the Replacement Airframe and Replacement Engines, if any, executed by the former owner thereof in favor of the Owner; (C) a full warranty (as to title) bill of sale, covering the Replacement Airframe and Replacement Engines, if any, executed by the former owner thereof in favor of the Owner (or, at the Owner's option, other evidence of the Owner's ownership of such Replacement Airframe and Replacement Engines, if any, reasonably satisfactory to the Mortgagee); and (D) Uniform Commercial Code financing statements (or any similar statements or other documents required to be filed or delivered pursuant to the laws of the jurisdiction in which the Replacement Airframe and Replacement Engines, if any, may be registered in accordance with Section 4.02(d)) as are deemed necessary or desirable by counsel for the Mortgagee to protect the security interests of the Mortgagee in the Replacement Airframe and Replacement Engines, if any; (ii) the Replacement Airframe and Replacement Engines, if any, shall be of the same model as the Airframe or Engines, as the case may be, or an improved model of such aircraft or engines of the manufacturer thereof, shall have a value and utility (without regard to hours or cycles remaining until the next regular maintenance check) at least equal to, and be in as good operating condition and repair as, the Airframe and any Engines replaced (assuming such Airframe and Engines had been maintained in accordance with this Trust Indenture); (iii) the Mortgagee (acting directly or by authorization to its special counsel) shall have received satisfactory evidence as to the compliance with Section 4.06 with respect to the Replacement Airframe and Replacement Engines, if any; (iv) on the Replacement Closing Date, (A) the Owner shall cause the Replacement Airframe and Replacement Engines, if any, to be subject 39 2002 EETC - Mortgage (Owned) (10) to the Lien of this Trust Indenture free and clear of Liens (other than Permitted Liens), (B) the Replacement Airframe shall have been duly certified by the FAA or other applicable Aviation Authority as to type and airworthiness in accordance with the terms of this Trust Indenture and (C) application for registration of the Replacement Airframe in accordance with Section 4.02(e) shall have been duly made with the FAA or other applicable Aviation Authority and the Owner shall have authority to operate the Replacement Airframe; (v) the Mortgagee at the expense of the Owner, shall have received (acting directly or by authorization to its special counsel) (A) an opinion of counsel, addressed to the Mortgagee, to the effect that (1) the Replacement Airframe and Replacement Engine, if any, has or have duly been made subject to the Lien of this Trust Indenture, and Mortgagee will be entitled to the benefits of Section 1110 with respect to the Replacement Airframe, provided that such opinion with respect to Section 1110 need not be delivered to the extent that immediately prior to such replacement the benefits of Section 1110 were not, solely by reason of a change in law or court interpretation thereof, available to Mortgagee, and (2) the FAA Bills of Sale constitutes an effective instrument for the conveyance of title to the Replacement Airframe or Replacement Engine, and (B) an opinion of Owner's aviation law counsel reasonably satisfactory to and addressed to Mortgagee as to the due registration of any such Replacement Airframe and the due filing for recordation of each Mortgage Supplement with respect to such Replacement Airframe or Replacement Engine under the Act or such other applicable law of the jurisdiction other than the United States in which the Replacement Airframe is to be registered in accordance with Section 4.02(e), as the case may be; and (vi) the Owner shall have furnished to the Mortgagee a certificate of a qualified aircraft engineer (who may be an employee of Owner) certifying that the Replacement Airframe and Replacement Engines, if any, have a value and utility and remaining useful life (without regard to hours and cycles remaining until overhaul) at least equal to the Airframe and any Engines so replaced (assuming that such Airframe and Engines had been maintained in accordance with this Trust Indenture). Owner and Mortgagee understand and agree that if, at the time of any replacement of the Airframe or any Engine(s) as contemplated in this Section 4.05, the Airframe was registered in a jurisdiction other than the United States, then the requirements set forth above in this Section 4.05 relating to compliance with the requirements of the Transportation Code or the 40 2002 EETC - Mortgage (Owned) (10) FAA shall be deemed to refer to the comparable applicable Law of, and the Aviation Authority of, such other jurisdiction. (d) Non-Insurance Payments Received on Account of an Event of Loss. Any amounts, other than insurance proceeds in respect of damage or loss not constituting an Event of Loss (the application of which is provided for in Annex B), received at any time by Mortgagee or Owner from any Government Entity or any other Person in respect of any Event of Loss will be applied as follows: (i) If such amounts are received with respect to the Airframe, and any Engine installed thereon at the time of such Event of Loss, upon compliance by Owner with the applicable terms of Section 4.05(c) with respect to the Event of Loss for which such amounts are received, such amounts shall be paid over to, or retained by, Owner; (ii) If such amounts are received with respect to an Engine (other than an Engine installed on the Airframe at the time such Airframe suffers an Event of Loss), upon compliance by Owner with the applicable terms of Section 4.04(e) with respect to the Event of Loss for which such amounts are received, such amounts shall be paid over to, or retained by, Owner; (iii) If such amounts are received, in whole or in part, with respect to the Airframe, and Owner makes, has made or is deemed to have made the election set forth in Section 4.05(a)(ii), such amounts shall be applied as follows: first, if the sum described in Section 4.05(a)(ii) has not then been paid in full by Owner, such amounts shall be paid to Mortgagee to the extent necessary to pay in full such sum; and second, the remainder, if any, shall be paid to Owner. (e) Requisition for Use. In the event of a requisition for use by any Government Entity of the Airframe and the Engines, if any, or engines installed on such Airframe while such Airframe is subject to the Lien of this Trust Indenture, the Owner shall promptly notify the Mortgagee of such requisition and all of the Owner's obligations under this Trust Indenture shall continue to the same extent as if such requisition had not occurred. Any payments received by the Mortgagee or the Owner or Permitted Lessee from such Government Entity with respect to such requisition of use shall be paid over to, or retained by, the Owner. In the event of the requisition for use by a Government Entity of such Engine (but not the Airframe), the Owner will replace such Engine hereunder by complying with the terms of Section 4.04(e) 41 2002 EETC - Mortgage (Owned) (10) to the same extent as if an Event of Loss in respect of such Engine had occurred and any payments received by the Mortgagee or the Owner from such Government Entity with respect to such requisition shall be paid over to, or retained by, the Owner. (f) Certain Payments to be Held As Security. Any amount referred to in this Section 4.05 or Section 4.06 which is payable or creditable to, or retainable by, the Owner shall not be paid or credited to, or retained by the Owner if at the time of such payment, credit or retention a Special Default shall have occurred and be continuing, but shall be paid to and held by the Mortgagee as security for the obligations of the Owner under this Trust Indenture and the Operative Agreements, and at such time as there shall not be continuing any such Special Default such amount and any gain realized as a result of investments required to be made pursuant to Section 6.06 shall to the extent not theretofore applied as provided herein, be paid over to the Owner. SECTION 4.06. INSURANCE (a) Owner's Obligation to Insure. Owner shall comply with, or cause to be complied with, each of the provisions of Annex B, which provisions are hereby incorporated by this reference as if set forth in full herein. (b) Insurance for Own Account. Nothing in Section 4.06 shall limit or prohibit (a) Owner from maintaining the policies of insurance required under Annex B with higher limits than those specified in Annex B, or (b) Mortgagee from obtaining insurance for its own account (and any proceeds payable under such separate insurance shall be payable as provided in the policy relating thereto); provided, however, that no insurance may be obtained or maintained that would limit or otherwise adversely affect the coverage of any insurance required to be obtained or maintained by Owner pursuant to this Section 4.06 and Annex B. (c) Indemnification by Government in Lieu of Insurance. Mortgagee agrees to accept, in lieu of insurance against any risk with respect to the Aircraft described in Annex B, indemnification from, or insurance provided by, the U.S. Government, or upon the written consent of Mortgagee, other Government Entity, against such risk in an amount that, when added to the amount of insurance (including permitted self-insurance), if any, against such risk that Owner (or any Permitted Lessee) may continue to maintain, in accordance with this Section 4.06, during the period of such requisition or transfer, shall be at least equal to the amount of insurance against such risk otherwise required by this Section 4.06. 42 2002 EETC - Mortgage (Owned) (10) (d) Application of Insurance Proceeds. As between Owner and Mortgagee, all insurance proceeds received as a result of the occurrence of an Event of Loss with respect to the Aircraft or any Engine under policies required to be maintained by Owner pursuant to this Section 4.06 will be applied in accordance with Section 4.05(d). All proceeds of insurance required to be maintained by Owner, in accordance with Section 4.06 and Section B of Annex B, in respect of any property damage or loss not constituting an Event of Loss with respect to the Aircraft, Airframe or any Engine will be applied in payment (or to reimburse Owner or any Permitted Lessee) for repairs or for replacement property, and any balance remaining after such repairs or replacement with respect to such damage or loss shall be paid over to, or retained by, Owner (or as Owner shall direct). SECTION 4.07. MERGER OF OWNER (a) In General. Owner shall not consolidate with or merge into any other person under circumstances in which Owner is not the surviving corporation, or convey, transfer or lease in one or more transactions all or substantially all of its assets to any other person, unless: (i) such person is organized, existing and in good standing under the Laws of the United States, any State of the United States or the District of Columbia and, upon consummation of such transaction, such person will be a U.S. Air Carrier; (ii) such person executes and delivers to Mortgagee a duly authorized, legal, valid, binding and enforceable agreement, reasonably satisfactory in form and substance to Mortgagee, containing an effective assumption by such person of the due and punctual performance and observance of each covenant, agreement and condition in the Operative Agreements to be performed or observed by Owner; (iii) if the Aircraft is, at the time, registered with the FAA, such person makes such filings and recordings with the FAA pursuant to the Act as shall be necessary to evidence such consolidation or merger or, if the Aircraft is, at the time, not registered with the FAA, such person makes such filings and recordings with the Aviation Authority as shall be necessary to evidence such consolidation or merger; and (iv) Owner furnishes Mortgagee an opinion of counsel reasonably satisfactory to Mortgagee to the effect that such consolidation or merger 43 2002 EETC - Mortgage (Owned) (10) has satisfied at the closing of such consolidation or merger items (i), (ii) and (iii) above; and (v) immediately after giving effect to such consolidation or merger no Event of Default shall have occurred and be continuing. (b) Effect of Merger. Upon any such consolidation or merger of Owner with or into, or the conveyance, transfer or lease by Owner of all or substantially all of its assets to, any Person in accordance with this Section 4.07, such Person will succeed to, and be substituted for, and may exercise every right and power of, Owner under the Operative Agreements with the same effect as if such person had been named as "Owner" therein. No such consolidation or merger, or conveyance, transfer or lease, shall have the effect of releasing Owner or such Person from any of the obligations, liabilities, covenants or undertakings of Owner under the Trust Indenture. ARTICLE V EVENTS OF DEFAULT; REMEDIES OF MORTGAGEE SECTION 5.01. EVENT OF DEFAULT "Event of Default" means any of the following events (whatever the reason for such Event of Default and whether such event shall be voluntary or involuntary or come about or be effected by operation of Law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or Governmental Entity): (i) the failure of the Owner or Guarantor to pay (i) principal of, interest on or Make-Whole Amount, if any, under any Equipment Note when due, and such failure shall continue unremedied for a period of ten Business Days, or (ii) any other amount payable by it to the Note Holders or any Mortgage Indemnitee under this Trust Indenture or the Participation Agreement when due, and such failure shall continue for a period in excess of 10 days after Owner has received written notice from Mortgagee of the failure to make such payment when due; (ii) Owner or Guarantor shall fail to carry and maintain, or cause to be carried and maintained, insurance on and in respect of the Aircraft, Airframe and Engines in accordance with the provisions of Section 4.06; (iii) Owner or Guarantor shall fail to observe or perform (or caused to be observed and performed) in any material respect any other covenant, agreement or obligation set forth herein or in any other 44 2002 EETC - Mortgage (Owned) (10) Operative Agreement to which it is a party and such failure shall continue unremedied for a period of 30 days from and after the date of written notice thereof to Owner or Guarantor, as the case may be, from Mortgagee, unless such failure is capable of being corrected and Owner or Guarantor shall be diligently proceeding to correct such failure, in which case there shall be no Event of Default unless and until such failure shall continue unremedied for a period of 270 days after receipt of such notice; (iv) any representation or warranty made by Owner or Guarantor herein, in the Participation Agreement or in any other Operative Agreement to which it is a party (a) shall prove to have been untrue or inaccurate in any material respect as of the date made, (b) is material at the time in question, and (c) remains uncured (to the extent of the adverse impact of such incorrectness on the interest of the Mortgagee) for a period in excess of 30 days from and after the date of written notice thereof from Mortgagee to Owner or Guarantor; (v) the Owner or Guarantor shall consent to the appointment of or taking possession by a receiver, trustee or liquidator of itself or of a substantial part of its property, or the Owner or Guarantor shall admit in writing its inability to pay its debts generally as they come due or shall make a general assignment for the benefit of its creditors, or the Owner or Guarantor shall file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization, liquidation or other relief under any bankruptcy laws or insolvency laws (as in effect at such time), or an answer admitting the material allegations of a petition filed against it in any such case, or the Owner or Guarantor shall seek relief by voluntary petition, answer or consent, under the provisions of any other bankruptcy or similar law providing for the reorganization or winding-up of corporations (as in effect at such time), or the Owner or Guarantor shall seek an agreement, composition, extension or adjustment with its creditors under such laws; (vi) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Owner, a receiver, trustee or liquidator of the Owner or of any substantial part of its property, or any substantial part of the property of the Owner shall be sequestered, or granting any other relief in respect of the Owner as a debtor under any bankruptcy laws or other insolvency laws (as in effect at such time), and any such order, judgment, decree, or decree of appointment or sequestration shall remain in force undismissed, unstayed or unvacated for a period of 90 days after the date of entry thereof; 45 2002 EETC - Mortgage (Owned) (10) (vii) a petition against the Owner in a proceeding under any bankruptcy laws or other insolvency laws (as in effect at such time) is filed and not withdrawn or dismissed within 90 days thereafter, or if, under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Owner, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Owner of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished, unstayed or unterminated for a period of 90 days; or (viii) the Guarantee shall for any reason whatsoever cease to be in full force and effect or Guarantor shall, in writing, repudiate the Guarantee or deny that its obligations thereunder are valid, binding and enforceable. SECTION 5.02. REMEDIES (a) If an Event of Default shall have occurred and be continuing and so long as the same shall continue unremedied, then and in every such case the Mortgagee may exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article V and shall have and may exercise all of the rights and remedies of a secured party under the Uniform Commercial Code and may take possession of all or any part of the properties covered or intended to be covered by the Lien created hereby or pursuant hereto and may exclude the Owner and all persons claiming under it wholly or partly therefrom; provided, that the Mortgagee shall give the Owner fifteen days' prior written notice of its intention to sell the Aircraft. Without limiting any of the foregoing, it is understood and agreed that the Mortgagee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. (b) If an Event of Default shall have occurred and be continuing, then and in every such case the Mortgagee may (and shall, upon receipt of a written demand therefor from a Majority in Interest of Note Holders), at any time, by delivery of written notice or notices to the Owner, declare all the Equipment Notes to be due and payable, whereupon the unpaid Original Amount of all Equipment Notes then outstanding, together with accrued but unpaid interest thereon (without Make-Whole Amount) and other amounts due thereunder or otherwise payable hereunder, shall immediately become due and payable without presentment, demand, protest or notice, all of which are hereby waived; provided that if an Event of Default referred to in clause (v), (vi) or (vii) of Section 5.01 hereof shall have occurred, then and in every such case the unpaid Original Amount then outstanding, together with accrued but 46 2002 EETC - Mortgage (Owned) (10) unpaid interest (without Make-Whole Amount) and all other amounts due hereunder and under the Equipment Notes shall immediately and without further act become due and payable without presentment, demand, protest or notice, all of which are hereby waived. This Section 5.02(b), however, is subject to the condition that, if at any time after the Original Amount of the Equipment Notes shall have become so due and payable, and before any judgment or decree for the payment of the money so due, or any thereof, shall be entered, all overdue payments of interest upon the Equipment Notes and all other amounts payable hereunder or under the Equipment Notes (except the Original Amount of the Equipment Notes which by such declaration shall have become payable) shall have been duly paid, and every other Default and Event of Default with respect to any covenant or provision of this Trust Indenture shall have been cured, then and in every such case a Majority in Interest of Note Holders may (but shall not be obligated to), by written instrument filed with the Mortgagee, rescind and annul the Mortgagee's declaration (or such automatic acceleration) and its consequences; but no such rescission or annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereon. (c) The Note Holders shall be entitled, at any sale pursuant to this Section 5.02, to credit against any purchase price bid at such sale by such holder all or any part of the unpaid obligations owing to such Note Holder and secured by the Lien of this Trust Indenture (only to the extent that such purchase price would have been paid to such Note Holder pursuant to Article III hereof if such purchase price were paid in cash and the foregoing provisions of this subsection (c) were not given effect). (d) In the event of any sale of the Collateral, or any part thereof, pursuant to any judgment or decree of any court or otherwise in connection with the enforcement of any of the terms of this Trust Indenture, the unpaid Original Amount of all Equipment Notes then outstanding, together with accrued interest thereon (without Make-Whole Amount), and other amounts due thereunder, shall immediately become due and payable without presentment, demand, protest or notice, all of which are hereby waived. (e) Notwithstanding anything contained herein, so long as the Pass Through Trustee under any Pass Through Trust Agreement (or its designee) is a Note Holder, the Mortgagee will not be authorized or empowered to acquire title to any Collateral or take any action with respect to any Collateral so acquired by it if such acquisition or action would cause any Trust to fail to qualify as a "grantor trust" for federal income tax purposes. 47 2002 EETC - Mortgage (Owned) (10) SECTION 5.03. RETURN OF AIRCRAFT, ETC. (a) If an Event of Default shall have occurred and be continuing and the Equipment Notes have been accelerated, at the request of the Mortgagee, the Owner shall promptly execute and deliver to the Mortgagee such instruments of title and other documents as the Mortgagee may deem necessary or advisable to enable the Mortgagee or an agent or representative designated by the Mortgagee, at such time or times and place or places as the Mortgagee may specify, to obtain possession of all or any part of the Collateral to which the Mortgagee shall at the time be entitled hereunder. If the Owner shall for any reason fail to execute and deliver such instruments and documents after such request by the Mortgagee, the Mortgagee may (i) obtain a judgment conferring on the Mortgagee the right to immediate possession and requiring the Owner to execute and deliver such instruments and documents to the Mortgagee, to the entry of which judgment the Owner hereby specifically consents to the fullest extent permitted by Law, and (ii) pursue all or part of such Collateral wherever it may be found and may enter any of the premises of Owner wherever such Collateral may be or be supposed to be and search for such Collateral and take possession of and remove such Collateral. All expenses of obtaining such judgment or of pursuing, searching for and taking such property shall, until paid, be secured by the Lien of this Trust Indenture. (b) Upon every such taking of possession, the Mortgagee may, from time to time, at the expense of the Collateral, make all such expenditures for maintenance, use, operation, storage, insurance, leasing, control, management, disposition, modifications or alterations to and of the Collateral, as it may deem proper. In each such case, the Mortgagee shall have the right to maintain, use, operate, store, insure, lease, control, manage, dispose of, modify or alter the Collateral and to exercise all rights and powers of the Owner relating to the Collateral, as the Mortgagee shall deem best, including the right to enter into any and all such agreements with respect to the maintenance, use, operation, storage, insurance, leasing, control, management, disposition, modification or alteration of the Collateral or any part thereof as the Mortgagee may determine, and the Mortgagee shall be entitled to collect and receive directly all rents, revenues and other proceeds of the Collateral and every part thereof, without prejudice, however, to the right of the Mortgagee under any provision of this Trust Indenture to collect and receive all cash held by, or required to be deposited with, the Mortgagee hereunder. Such rents, revenues and other proceeds shall be applied to pay the expenses of the maintenance, use, operation, storage, insurance, leasing, control, management, disposition, improvement, modification or alteration of the Collateral and of conducting the business thereof, and to make all payments which the Mortgagee may be required or may elect to make, if any, for taxes, assessments, insurance or other proper charges upon the Collateral or any part thereof (including the 48 2002 EETC - Mortgage (Owned) (10) employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner), and all other payments which the Mortgagee may be required or authorized to make under any provision of this Trust Indenture, as well as just and reasonable compensation for the services of the Mortgagee, and of all persons properly engaged and employed by the Mortgagee with respect hereto. SECTION 5.04. REMEDIES CUMULATIVE Each and every right, power and remedy given to the Mortgagee specifically or otherwise in this Trust Indenture shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at Law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Mortgagee, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by the Mortgagee in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner or to be an acquiescence therein. SECTION 5.05. DISCONTINUANCE OF PROCEEDINGS In case the Mortgagee shall have instituted any proceeding to enforce any right, power or remedy under this Trust Indenture by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Mortgagee, then and in every such case the Owner and the Mortgagee shall, subject to any determination in such proceedings, be restored to their former positions and rights hereunder with respect to the Collateral, and all rights, remedies and powers of the Owner or the Mortgagee shall continue as if no such proceedings had been instituted. SECTION 5.06. WAIVER OF PAST DEFAULTS Upon written instruction from a Majority in Interest of Note Holders, the Mortgagee shall waive any past Default hereunder and its consequences and upon any such waiver such Default shall cease to exist and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Trust Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon; provided, that in the absence of written instructions from all the Note Holders, the Mortgagee shall not waive any Default (i) in the payment of the Original Amount, Make-Whole Amount, if any, and interest and other amounts due under any Equipment 49 2002 EETC - Mortgage (Owned) (10) Note then outstanding, or (ii) in respect of a covenant or provision hereof which, under Article X hereof, cannot be modified or amended without the consent of each Note Holder. SECTION 5.07. APPOINTMENT OF RECEIVER The Mortgagee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Mortgagee or any successor or nominee thereof) for all or any part of the Collateral, whether such receivership be incidental to a proposed sale of the Collateral or the taking of possession thereof or otherwise, and the Owner hereby consents to the appointment of such a receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Collateral shall be entitled to exercise all the rights and powers of the Mortgagee with respect to the Collateral. SECTION 5.08. MORTGAGEE AUTHORIZED TO EXECUTE BILLS OF SALE, ETC. The Owner irrevocably appoints, while an Event of Default has occurred and is continuing, the Mortgagee, effective during the continuance of any Event of Default, the true and lawful attorney-in-fact of the Owner (which appointment is coupled with an interest) in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Trust Indenture, whether pursuant to foreclosure or power of sale, assignments and other instruments as may be necessary or appropriate, with full power of substitution, the Owner hereby ratifying and confirming all that such attorney or any substitute shall do by virtue hereof in accordance with applicable Law. Nevertheless, if so requested by the Mortgagee or any purchaser, the Owner shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Mortgagee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. SECTION 5.09. RIGHTS OF NOTE HOLDERS TO RECEIVE PAYMENT Notwithstanding any other provision of this Trust Indenture, the right of any Note Holder to receive payment of principal of, and premium, if any, and interest on an Equipment Note on or after the respective due dates expressed in such Equipment Note, or to bring suit for the enforcement of any such payment on or after such respective dates in accordance with the terms hereof, shall not be impaired or affected without the consent of such Note Holder. 50 2002 EETC - Mortgage (Owned) (10) ARTICLE VI DUTIES OF THE MORTGAGEE SECTION 6.01. NOTICE OF EVENT OF DEFAULT If the Mortgagee shall have Actual Knowledge of an Event of Default or of a Default arising from a failure to pay any installment of principal and interest on any Equipment Note, the Mortgagee shall give prompt written notice thereof to each Note Holder. Subject to the terms of Sections 5.06, 6.02 and 6.03 hereof, the Mortgagee shall take such action, or refrain from taking such action, with respect to such Event of Default or Default (including with respect to the exercise of any rights or remedies hereunder) as the Mortgagee shall be instructed in writing by a Majority in Interest of Note Holders. Subject to the provisions of Section 6.03, if the Mortgagee shall not have received instructions as above provided within 20 days after mailing notice of such Event of Default to the Note Holders, the Mortgagee may, subject to instructions thereafter received pursuant to the preceding provisions of this Section 6.01, take such action, or refrain from taking such action, but shall be under no duty to take or refrain from taking any action, with respect to such Event of Default or Default as it shall determine advisable in the best interests of the Note Holders; provided, however, that the Mortgagee may not sell the Aircraft or any Engine without the consent of a Majority in Interest of Note Holders. For all purposes of this Trust Indenture, in the absence of Actual Knowledge on the part of the Mortgagee, the Mortgagee shall not be deemed to have knowledge of a Default or an Event of Default (except, the failure of Owner to pay any installment of principal or interest within one Business Day after the same shall become due, which failure shall constitute knowledge of a Default) unless notified in writing by the Owner or one or more Note Holders. SECTION 6.02. ACTION UPON INSTRUCTIONS; CERTAIN RIGHTS AND LIMITATIONS Subject to the terms of Sections 5.02(a), 5.06, 6.01 and 6.03 hereof, upon the written instructions at any time and from time to time of a Majority in Interest of Note Holders, the Mortgagee shall, subject to the terms of this Section 6.02, take such of the following actions as may be specified in such instructions: (i) give such notice or direction or exercise such right, remedy or power hereunder as shall be specified in such instructions and (ii) give such notice or direction or exercise such right, remedy or power hereunder with respect to any part of the Collateral as shall be specified in such instructions; it being understood that without the written instructions of a Majority in Interest of Note Holders, the Mortgagee shall not, except as provided in Section 6.01, approve any such matter as satisfactory to the Mortgagee. 51 2002 EETC - Mortgage (Owned) (10) The Mortgagee will execute and the Owner will file such continuation statements with respect to financing statements relating to the security interest created hereunder in the Collateral as may be specified from time to time in written instructions of a Majority in Interest of Note Holders (which instructions shall be accompanied by the form of such continuation statement so to be filed). The Mortgagee will furnish to each Note Holder, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates and other instruments furnished to the Mortgagee hereunder. SECTION 6.03. INDEMNIFICATION The Mortgagee shall not be required to take any action or refrain from taking any action under Section 6.01 (other than the first sentence thereof), 6.02 or Article V hereof unless the Mortgagee shall have been indemnified to its reasonable satisfaction against any liability, cost or expense (including counsel fees) which may be incurred in connection therewith pursuant to a written agreement with one or more Note Holders. The Mortgagee agrees that it shall look solely to the Note Holders for the satisfaction of any indemnity (except expenses for foreclosure of the type referred to in clause "First" of Section 3.03 hereof) owed to it pursuant to this Section 6.03. The Mortgagee shall not be under any obligation to take any action under this Trust Indenture or any other Operative Agreement and nothing herein or therein shall require the Mortgagee to expend or risk its own funds or otherwise incur the risk of any financial liability in the performance of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it (the written indemnity of any Note Holder who is a QIB (or a Note Holder who has all of its obligations guaranteed by a QIB), signed by an authorized officer thereof, in favor of, delivered to and in form reasonably satisfactory to the Mortgagee shall be accepted as reasonable assurance of adequate indemnity). The Mortgagee shall not be required to take any action under Section 6.01 (other than the first sentence thereof) or 6.02 or Article V hereof, nor shall any other provision of this Trust Indenture or any other Operative Agreement be deemed to impose a duty on the Mortgagee to take any action, if the Mortgagee shall have been advised by counsel that such action is contrary to the terms hereof or is otherwise contrary to Law. SECTION 6.04. NO DUTIES EXCEPT AS SPECIFIED IN TRUST INDENTURE OR INSTRUCTIONS The Mortgagee shall not have any duty or obligation to use, operate, store, lease, control, manage, sell, dispose of or otherwise deal with the Aircraft or any other part of the Collateral, or to otherwise take or refrain 52 2002 EETC - Mortgage (Owned) (10) from taking any action under, or in connection with, this Trust Indenture or any part of the Collateral, except as expressly provided by the terms of this Trust Indenture or as expressly provided in written instructions from Note Holders as provided in this Trust Indenture; and no implied duties or obligations shall be read into this Trust Indenture against the Mortgagee. The Mortgagee agrees that it will in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Section 8.01 hereof), promptly take such action as may be necessary duly to discharge all liens and encumbrances on any part of the Collateral which result from claims against it in its individual capacity not related to the ownership of the Aircraft or the administration of the Collateral or any other transaction pursuant to this Trust Indenture or any document included in the Collateral. SECTION 6.05. NO ACTION EXCEPT UNDER TRUST INDENTURE OR INSTRUCTIONS The Mortgagee will not use, operate, store, lease, control, manage, sell, dispose of or otherwise deal with the Aircraft or any other part of the Collateral except in accordance with the powers granted to, or the authority conferred upon the Mortgagee pursuant to this Trust Indenture and in accordance with the express terms hereof. SECTION 6.06. INVESTMENT OF AMOUNTS HELD BY MORTGAGEE Any amounts held by the Mortgagee pursuant to the proviso to the first sentence of Section 3.01, pursuant to Section 3.02, or pursuant to any provision of any other Operative Agreement providing for amounts to be held by the Mortgagee which are not distributed pursuant to the other provisions of Article III hereof shall be invested by the Mortgagee from time to time in Cash Equivalents as directed by the Owner so long as the Mortgagee may acquire the same using its best efforts. All Cash Equivalents held by the Mortgagee pursuant to this Section 6.06 shall either be (a) registered in the name of, payable to the order of, or specially endorsed to, the Mortgagee, or (b) held in an Eligible Account. Unless otherwise expressly provided in this Trust Indenture, any income realized as a result of any such investment, net of the Mortgagee's reasonable fees and expenses in making such investment, shall be held and applied by the Mortgagee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Mortgagee shall not be liable for any loss resulting from any investment required to be made by it under this Trust Indenture other than by reason of its willful misconduct or gross negligence or negligence in the handling of funds, and any such investment may be sold (without regard to its 53 2002 EETC - Mortgage (Owned) (10) maturity) by the Mortgagee without instructions whenever such sale is necessary to make a distribution required by this Trust Indenture. ARTICLE VII THE MORTGAGEE SECTION 7.01. ACCEPTANCE OF TRUSTS AND DUTIES The Mortgagee accepts the duties hereby created and applicable to it and agrees to perform the same but only upon the terms of this Trust Indenture and agrees to receive and disburse all monies constituting part of the Trust Indenture Estate in accordance with the terms hereof. The Mortgagee, in its individual capacity, shall not be answerable or accountable under any circumstances, except (i) for its own willful misconduct or gross negligence (other than for the handling of funds, for which the standard of accountability shall be willful misconduct or negligence), (ii) as provided in the fourth sentence of Section 2.04(a) hereof and the last sentence of Section 6.04 hereof, and (iii) from the inaccuracy of any representation or warranty of the Mortgagee (in its individual capacity) in the Participation Agreement or expressly made hereunder. SECTION 7.02. ABSENCE OF DUTIES Except in accordance with written instructions furnished pursuant to Section 6.01 or 6.02 hereof, and except as provided in, and without limiting the generality of, Sections 6.03, 6.04 and 7.07 hereof the Mortgagee shall have no duty (i) to see to any registration of the Aircraft or any recording or filing of this Trust Indenture or any other document, or to see to the maintenance of any such registration, recording or filing, (ii) to see to any insurance on the Aircraft or to effect or maintain any such insurance, whether or not Owner shall be in default with respect thereto, (iii) to see to the payment or discharge of any lien or encumbrance of any kind against any part of the Collateral, (iv) to confirm, verify or inquire into the failure to receive any financial statements from Owner, or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of Owner's covenants herein or any Permitted Lessee's covenants under any assigned Permitted Lease with respect to the Aircraft. SECTION 7.03. NO REPRESENTATIONS OR WARRANTIES AS TO AIRCRAFT OR DOCUMENTS THE MORTGAGEE IN ITS INDIVIDUAL OR TRUST CAPACITY DOES NOT MAKE AND SHALL NOT BE DEEMED TO HAVE MADE AND HEREBY EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, 54 2002 EETC - Mortgage (Owned) (10) EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, QUALITY, DURABILITY, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER. The Mortgagee, in its individual or trust capacities, does not make or shall not be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Trust Indenture, the Participation Agreement, the Equipment Notes, or the Purchase Agreement or the Guarantee, or as to the correctness of any statement contained in any thereof, except for the representations and warranties of the Owner made in its individual capacity and the representations and warranties of the Mortgagee in its individual capacity, in each case expressly made in this Trust Indenture or in the Participation Agreement. The Note Holders make no representation or warranty hereunder whatsoever. SECTION 7.04. NO SEGREGATION OF MONIES; NO INTEREST Any monies paid to or retained by the Mortgagee pursuant to any provision hereof and not then required to be distributed to the Note Holders, or the Owner as provided in Article III hereof need not be segregated in any manner except to the extent required by Law or Section 6.06 hereof, and may be deposited under such general conditions as may be prescribed by Law, and the Mortgagee shall not be liable for any interest thereon (except that the Mortgagee shall invest all monies held as directed by Owner so long as no Event of Default or Default has occurred and is continuing (or in the absence of such direction, by the Majority In Interest of Note Holders) in Cash Equivalents either registered in the name of the Mortgagee or credited to an Eligible Account of the type described in clause (a) of the definition thereof; provided, however, that any payments received, or applied hereunder, by the Mortgagee shall be accounted for by the Mortgagee so that any portion thereof paid or applied pursuant hereto shall be identifiable as to the source thereof. SECTION 7.05. RELIANCE; AGREEMENTS; ADVICE OF COUNSEL The Mortgagee shall not incur any liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. The Mortgagee may accept a copy of a resolution of the Board of Directors (or 55 2002 EETC - Mortgage (Owned) (10) Executive Committee thereof) of the Owner, certified by the Secretary or an Assistant Secretary thereof as duly adopted and in full force and effect, as conclusive evidence that such resolution has been duly adopted and that the same is in full force and effect. As to the aggregate unpaid Original Amount of Equipment Notes outstanding as of any date, the Owner may for all purposes hereof rely on a certificate signed by any Vice President or other authorized corporate trust officer of the Mortgagee. As to any fact or matter relating to the Owner the manner of which is not specifically described herein, the Mortgagee may for all purposes hereof rely on a certificate, signed by a duly authorized officer of the Owner, as to such fact or matter, and such certificate shall constitute full protection to the Mortgagee for any action taken or omitted to be taken by it in good faith in reliance thereon. In the administration of the trusts hereunder, the Mortgagee may execute any of the trusts or powers hereof and perform its powers and duties hereunder directly or through agents or attorneys and may, at the expense of the Collateral, advise with counsel, accountants and other skilled persons to be selected and retained by it, and the Mortgagee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the written advice or written opinion of any such counsel, accountants or other skilled persons. SECTION 7.06. COMPENSATION (a) The Mortgagee shall be entitled to reasonable compensation for all services rendered hereunder and shall, on and subsequent to an Event of Default hereunder, have a priority claim on the Collateral for the payment of such compensation (and for expenses and disbursements, including the reasonable fees and expenses of counsel), to the extent that such compensation shall not be paid by Owner, and shall have the right, on and subsequent to an Event of Default hereunder, to use or apply any monies held by it hereunder in the Collateral toward such payments. The Mortgagee agrees that it shall have no right against the Note Holders for any fee as compensation for its services as trustee under this Trust Indenture. (b) The Owner agrees to indemnify the Mortgagee against any taxes imposed upon it relating to, or arising out of the performance of its responsibilities hereunder other than taxes, fees or charges based on, or measured by any fees or compensation received by the Mortgagee for services rendered in connection with the Transaction. SECTION 7.07. INSTRUCTIONS FROM NOTE HOLDERS In the administration of the trusts created hereunder, the Mortgagee shall have the right to seek instructions from a Majority in Interest of Note Holders should any provision of this Trust Indenture appear to conflict with any 56 2002 EETC - Mortgage (Owned) (10) other provision herein or should the Mortgagee's duties or obligations hereunder be unclear, and the Mortgagee shall incur no liability in refraining from acting until it receives such instructions. The Mortgagee shall be fully protected for acting in accordance with any instructions received under this Section 7.07. ARTICLE VIII INDEMNIFICATION SECTION 8.01. SCOPE OF INDEMNIFICATION The Mortgagee shall be indemnified by the Owner to the extent and in the manner provided in Section 7 of the Participation Agreement. ARTICLE IX SUCCESSOR AND SEPARATE TRUSTEES SECTION 9.01. RESIGNATION OF MORTGAGEE; APPOINTMENT OF SUCCESSOR (a) The Mortgagee or any successor thereto may resign at any time without cause by giving at least 30 days' prior written notice to the Owner and each Note Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Mortgagee. In addition, a Majority in Interest of Note Holders may at any time (but only with the consent of Owner, which consent shall not be unreasonably withheld, except that such consent shall not be necessary if an Event of Default is continuing) remove the Mortgagee without cause by an instrument in writing delivered to the Owner and the Mortgagee, and the Mortgagee shall promptly notify each Note Holder thereof in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Mortgagee. In the case of the resignation or removal of the Mortgagee, a Majority in Interest of Note Holders may appoint a successor Mortgagee by an instrument signed by such holders, which successor, so long as no Event of Default shall have occurred and be continuing, shall be subject to Owner's reasonable approval. If a successor Mortgagee shall not have been appointed within 30 days after such notice of resignation or removal, the Mortgagee, the Owner or any Note Holder may apply to any court of competent jurisdiction to appoint a successor Mortgagee to act until such time, if any, as a successor shall have been appointed as above provided. The successor Mortgagee so appointed by such court shall immediately and without further act be superseded by any successor Mortgagee appointed as above provided. (b) Any successor Mortgagee, however appointed, shall execute and deliver to the Owner and the predecessor Mortgagee an instrument accepting such appointment and assuming the obligations of the Mortgagee 57 2002 EETC - Mortgage (Owned) (10) arising from and after the time of such appointment, and thereupon such successor Mortgagee, without further act, shall become vested with all the estates, properties, rights, powers and duties of the predecessor Mortgagee hereunder in the trust hereunder applicable to it with like effect as if originally named the Mortgagee herein; but nevertheless upon the written request of such successor Mortgagee, such predecessor Mortgagee shall execute and deliver an instrument transferring to such successor Mortgagee, upon the trusts herein expressed applicable to it, all the estates, properties, rights and powers of such predecessor Mortgagee, and such predecessor Mortgagee shall duly assign, transfer, deliver and pay over to such successor Mortgagee all monies or other property then held by such predecessor Mortgagee hereunder. (c) Any successor Mortgagee, however appointed, shall be a bank or trust company having its principal place of business in the Borough of Manhattan, City and State of New York; Chicago, Illinois; Hartford, Connecticut; Wilmington, Delaware; or Salt Lake City, Utah; and having (or whose obligations under the Operative Agreements are guaranteed by an affiliated entity having) a combined capital and surplus of at least $100,000,000, if there be such an institution willing, able and legally qualified to perform the duties of the Mortgagee hereunder upon reasonable or customary terms. (d) Any corporation into which the Mortgagee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Mortgagee shall be a party, or any corporation to which substantially all the corporate trust business of the Mortgagee may be transferred, shall, subject to the terms of paragraph (c) of this Section 9.01, be a successor Mortgagee and the Mortgagee under this Trust Indenture without further act. SECTION 9.02. APPOINTMENT OF ADDITIONAL AND SEPARATE TRUSTEES (a) Whenever (i) the Mortgagee shall deem it necessary or desirable in order to conform to any Law of any jurisdiction in which all or any part of the Collateral shall be situated or to make any claim or bring any suit with respect to or in connection with the Collateral this Trust Indenture, any other Indenture Agreement, the Equipment Notes or any of the transactions contemplated by the Participation Agreement, (ii) the Mortgagee shall be advised by counsel satisfactory to it that it is so necessary or prudent in the interests of the Note Holders (and the Mortgagee shall so advise the Owner), or (iii) the Mortgagee shall have been requested to do so by a Majority in Interest of Note Holders, then in any such case, the Mortgagee and, upon the written request of the Mortgagee, the Owner, shall execute and deliver an indenture supplemental hereto and such other instruments as may from time to time be 58 2002 EETC - Mortgage (Owned) (10) necessary or advisable either (1) to constitute one or more bank or trust companies or one or more persons approved by the Mortgagee, either to act jointly with the Mortgagee as additional trustee or trustees of all or any part of the Collateral, or to act as separate trustee or trustees of all or any part of the Collateral, in each case with such rights, powers, duties and obligations consistent with this Trust Indenture as may be provided in such supplemental indenture or other instruments as the Mortgagee or a Majority in Interest of Note Holders may deem necessary or advisable, or (2) to clarify, add to or subtract from the rights, powers, duties and obligations theretofore granted any such additional or separate trustee, subject in each case to the remaining provisions of this Section 9.02. If the Owner shall not have taken any action requested of it under this Section 9.02(a) that is permitted or required by its terms within 15 days after the receipt of a written request from the Mortgagee so to do, or if an Event of Default shall have occurred and be continuing, the Mortgagee may act under the foregoing provisions of this Section 9.02(a) without the concurrence of the Owner, and the Owner hereby irrevocably appoints (which appointment is coupled with an interest) the Mortgagee, its agent and attorney-in-fact to act for it under the foregoing provisions of this Section 9.02(a) in either of such contingencies. The Mortgagee may, in such capacity, execute, deliver and perform any such supplemental indenture, or any such instrument, as may be required for the appointment of any such additional or separate trustee or for the clarification of, addition to or subtraction from the rights, powers, duties or obligations theretofore granted to any such additional or separate trustee. In case any additional or separate trustee appointed under this Section 9.02(a) shall die, become incapable of acting, resign or be moved, all the assets, property, rights, powers, trusts, duties and obligations of such additional or separate trustee shall revert to the Mortgagee until a successor additional or separate trustee is appointed as provided in this Section 9.02(a). (b) No additional or separate trustee shall be entitled to exercise any of the rights, powers, duties and obligations conferred upon the Mortgagee in respect of the custody, investment and payment of monies and all monies received by any such additional or separate trustee from or constituting part of the Collateral or otherwise payable under any Operative Agreement to the Mortgagee shall be promptly paid over by it to the Mortgagee. All other rights, powers, duties and obligations conferred or imposed upon any additional or separate trustee shall be exercised or performed by the Mortgagee and such additional or separate trustee jointly except to the extent that applicable Law of any jurisdiction in which any particular act is to be performed renders the Mortgagee incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations (including the holding of title to all or part of the Collateral in any such jurisdiction) shall be exercised and performed by such additional or separate trustee. No additional or separate trustee shall 59 2002 EETC - Mortgage (Owned) (10) take any discretionary action except on the instructions of the Mortgagee or a Majority in Interest of Note Holders. No trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder, except that the Mortgagee shall be liable for the consequences of its lack of reasonable care in selecting, and the Mortgagee's own actions in acting with, any additional or separate trustee. Each additional or separate trustee appointed pursuant to this Section 9.02 shall be subject to, and shall have the benefit of Articles V through IX and Article XI hereof insofar as they apply to the Mortgagee. The powers of any additional or separate trustee appointed pursuant to this Section 9.02 shall not in any case exceed those of the Mortgagee hereunder. (c) If at any time the Mortgagee shall deem it no longer necessary or in order to conform to any such Law or take any such action or shall be advised by such counsel that it is no longer so necessary or desirable in the interest of the Note Holders, or in the event that the Mortgagee shall have been requested to do so in writing by a Majority in Interest of Note Holders, the Mortgagee and, upon the written request of the Mortgagee, the Owner, shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional or separate trustee. The Mortgagee may act on behalf of the Owner under this Section 9.02(c) when and to the extent it could so act under Section 9.02(a) hereof. ARTICLE X SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS SECTION 10.01. INSTRUCTIONS OF MAJORITY; LIMITATIONS (a) The Mortgagee agrees with the Note Holders that it shall not enter into any amendment, waiver or modification of, supplement or consent to this Trust Indenture, or any other Operative Agreement to which it is a party, unless such supplement, amendment, waiver, modification or consent is consented to in writing by a Majority in Interest of Note Holders, but upon the written request of a Majority in Interest of Note Holders, the Mortgagee shall from time to time enter into any such supplement or amendment, or execute and deliver any such waiver, modification or consent, as may be specified in such request and as may be (in the case of any such amendment, supplement or modification), to the extent such agreement is required, agreed to by the Owner, as may be appropriate, the Airframe Manufacturer or the Engine Manufacturer; provided, however, that, without the consent of each holder of an affected Equipment Note then outstanding and of the Liquidity Provider, no such amendment, waiver or modification of the terms of, or consent under, any 60 2002 EETC - Mortgage (Owned) (10) thereof, shall (i) modify any of the provisions of this Section 10.01, or of Article II or III or Section 5.01, 5.02(c), 5.02(d), 6.01 or 6.02 hereof, the definitions of "Event of Default," "Default," "Majority in Interest of Note Holders," "Make-Whole Amount" or "Note Holder," or the percentage of Note Holders required to take or approve any action hereunder, (ii) reduce the amount, or change the time of payment or method of calculation of any amount, of Original Amount, Make-Whole Amount, if any, or interest with respect to any Equipment Note, (iii) reduce, modify or amend any indemnities in favor of the Mortgagee or the Note Holders (except that the Mortgagee may consent to any waiver or reduction of an indemnity payable to it), or (iv) permit the creation of any Lien on the Trust Indenture Estate or any part thereof other than Permitted Liens or deprive any Note Holder of the benefit of the Lien of this Trust Indenture on the Collateral, except as provided in connection with the exercise of remedies under Article V hereof. (b) The Owner and the Mortgagee may enter into one or more agreements supplemental hereto without the consent of any Note Holder for any of the following purposes: (i) (a) to cure any defect or inconsistency herein or in the Equipment Notes, or to make any change not inconsistent with the provisions hereof (provided that such change does not adversely affect the interests of any Note Holder in its capacity solely as Note Holder) or (b) to cure any ambiguity or correct any mistake; (ii) to evidence the succession of another party as the Owner in accordance with the terms hereof or to evidence the succession of a new trustee hereunder pursuant hereto, the removal of the trustee hereunder or the appointment of any co-trustee or co-trustees or any separate or additional trustee or trustees; (iii) to convey, transfer, assign, mortgage or pledge any property to or with the Mortgagee or to make any other provisions with respect to matters or questions arising hereunder so long as such action shall not adversely affect the interests of the Note Holders in its capacity solely as Note Holder; (iv) to correct or amplify the description of any property at any time subject to the Lien of this Trust Indenture or better to assure, convey and confirm unto the Mortgagee any property subject or required to be subject to the Lien of this Trust Indenture, the Airframe or Engines or any Replacement Airframe or Replacement Engine; (v) to add to the covenants of the Owner for the benefit of the Note Holders, or to surrender any rights or power herein conferred upon the Owner; (vi) to add to the rights of the Note Holders; (vii) to include on the Equipment Notes any legend as may be required by Law; and (viii) subject to the provisions of Section 8.3 of the Participation Agreement and Section 1 (j) of the Note Purchase Agreement, to give effect to a sale-leaseback transaction. 61 2002 EETC - Mortgage (Owned) (10) SECTION 10.02. MORTGAGEE PROTECTED If, in the opinion of the institution acting as Mortgagee hereunder, any document required to be executed by it pursuant to the terms of Section 10.01 hereof affects any right, duty, immunity or indemnity with respect to such institution under this Trust Indenture, such institution may in its discretion decline to execute such document. SECTION 10.03. DOCUMENTS MAILED TO NOTE HOLDERS Promptly after the execution by the Owner or the Mortgagee of any document entered into pursuant to Section 10.01 hereof, the Mortgagee shall mail, by first class mail, postage prepaid, a copy thereof to Owner (if not a party thereto) and to each Note Holder at its address last set forth in the Equipment Note Register, but the failure of the Mortgagee to mail such copies shall not impair or affect the validity of such document. SECTION 10.04. NO REQUEST NECESSARY FOR MORTGAGE SUPPLEMENT No written request or consent of the Note Holders pursuant to Section 10.01 hereof shall be required to enable the Mortgagee to execute and deliver a Mortgage Supplement specifically required by the terms hereof. SECTION 10.05. NOTICES TO LIQUIDITY PROVIDER. Any request made to any Note Holder for consent to any amendment or supplement to this Trust Indenture or the Equipment Notes pursuant to this Article X shall be promptly furnished by the Loan Trustee to each Liquidity Provider. ARTICLE XI MISCELLANEOUS SECTION 11.01. TERMINATION OF TRUST INDENTURE Upon (or at any time after) payment in full of the Original Amount of, Make-Whole Amount, if any, and interest on and all other amounts due under all Equipment Notes and provided that there shall then be no other Secured Obligations due to the Mortgage Indemnitees, the Note Holders and the Mortgagee hereunder or under the Participation Agreement or other Operative Agreement, the Owner shall direct the Mortgagee to execute and deliver to or as directed in writing by the Owner an appropriate instrument releasing the Aircraft and the Engines and all other Collateral from the Lien of the Trust Indenture and the Mortgagee shall execute and deliver such instrument as aforesaid; provided, however, that this Trust Indenture and the 62 2002 EETC - Mortgage (Owned) (10) trusts created hereby shall earlier terminate and this Trust Indenture shall be of no further force or effect upon any sale or other final disposition by the Mortgagee of all property constituting part of the Collateral and the final distribution by the Mortgagee of all monies or other property or proceeds constituting part of the Collateral in accordance with the terms hereof. Except as aforesaid otherwise provided, this Trust Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. SECTION 11.02. NO LEGAL TITLE TO COLLATERAL IN NOTE HOLDERS No holder of an Equipment Note shall have legal title to any part of the Collateral. No transfer, by operation of law or otherwise, of any Equipment Note or other right, title and interest of any Note Holder in and to the Collateral or hereunder shall operate to terminate this Trust Indenture or entitle such holder or any successor or transferee of such holder to an accounting or to the transfer to it of any legal title to any part of the Collateral. SECTION 11.03. SALE OF AIRCRAFT BY MORTGAGEE IS BINDING Any sale or other conveyance of the Collateral, or any part thereof (including any part thereof or interest therein), by the Mortgagee made pursuant to the terms of this Trust Indenture shall bind the Note Holders and shall be effective to transfer or convey all right, title and interest of the Mortgagee, the Owner and such holders in and to such Collateral or part thereof. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Mortgagee. SECTION 11.04. TRUST INDENTURE FOR BENEFIT OF OWNER, MORTGAGEE, NOTE HOLDERS AND THE OTHER MORTGAGE INDEMNITEES Nothing in this Trust Indenture, whether express or implied, shall be construed to give any person other than the Owner, the Mortgagee, the Note Holders and the other Mortgage Indemnitees, any legal or equitable right, remedy or claim under or in respect of this Trust Indenture, except that the persons referred to in the last paragraph of Section 4.02(b) shall be third party beneficiaries of such paragraph. SECTION 11.05. NOTICES Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, 63 2002 EETC - Mortgage (Owned) (10) waivers or documents provided or permitted by this Trust Indenture to be made, given, furnished or filed shall be in writing, personally delivered or mailed by certified mail, postage prepaid, or by facsimile or confirmed telex, and (i) if to the Owner, addressed to it at Indianapolis International Airport, 7337 West Washington Street, Indianapolis, Indiana 46231, Attention: Executive Vice President and Chief Financial Officer, facsimile number (317) 240-7091, (ii) if to Mortgagee, addressed to it at its office at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration, facsimile number (302) 651-8882, (iii) if to any Note Holder or any Indenture Indemnitee, addressed to such party at such address as such party shall have furnished by notice to the Owner and the Mortgagee, or, until an address is so furnished, addressed to the address of such party (if any) set forth on Schedule 1 to the Participation Agreement or in the Equipment Note Register. Whenever any notice in writing is required to be given by the Owner or the Mortgagee or any Note Holder to any of the other of them, such notice shall be deemed given and such requirement satisfied when such notice is received, or if made, given, furnished or filed by facsimile or telecommunication transmission, when received unless received outside of business hours, in which case on the next open of business on a Business Day. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Trust Indenture. SECTION 11.06. SEVERABILITY Any provision of this Trust Indenture 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. Any such prohibition or unenforceability in any particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 11.07. NO ORAL MODIFICATION OR CONTINUING WAIVERS No term or provision of this Trust Indenture or the Equipment Notes may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Owner and the Mortgagee, in compliance with Section 10.01 hereof. Any waiver of the terms hereof or of any Equipment Note shall be effective only in the specific instance and for the specific purpose given. 64 2002 EETC - Mortgage (Owned) (10) SECTION 11.08. SUCCESSORS AND ASSIGNS All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the permitted successors and assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Note Holder shall bind the successors and assigns of such holder. Each Note Holder by its acceptance of an Equipment Note agrees to be bound by this Trust Indenture and all provisions of the Operative Agreements applicable to a Note Holder. SECTION 11.09. HEADINGS The headings of the various Articles and sections herein and in the table of contents hereto are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 11.10. NORMAL COMMERCIAL RELATIONS Anything contained in this Trust Indenture to the contrary notwithstanding. Owner and Mortgagee may conduct any banking or other financial transactions, and have banking or other commercial relationships, with Owner, fully to the same extent as if this Trust Indenture were not in effect, including without limitation the making of loans or other extensions of credit to Owner for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. SECTION 11.11 GOVERNING LAW; COUNTERPART FORM THIS TRUST INDENTURE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS TRUST INDENTURE IS BEING DELIVERED IN THE STATE OF NEW YORK. This Trust Indenture may be executed by the parties hereto in separate counterparts (or upon separate signature pages bound together into one or more counterparts), each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 11.12. VOTING BY NOTE HOLDERS All votes of the Note Holders shall be governed by a vote of a Majority in Interest of Note Holders, except as otherwise provided herein. 65 2002 EETC - Mortgage (Owned) (10) SECTION 11.13. BANKRUPTCY It is the intention of the parties that the Mortgagee shall be entitled to the benefits of Section 1110 with respect to the right to take possession of the Aircraft. Airframe, Engines and Parts as provided herein in the event of a case under Chapter 11 of the Bankruptcy Code in which Owner is a debtor, and in any instance where more than one construction is possible of the terms and conditions hereof or any other pertinent Operative Agreement, each such party agrees that a construction which would preserve such benefits shall control over any construction which would not preserve such benefits. IN WITNESS WHEREOF, the parties hereto have caused this Trust Indenture and Mortgage to be duly executed by their respective officers thereof duly authorized as of the day and year first above written. AMERICAN TRANS AIR, INC. By:___________________________________ Name: Title: WILMINGTON TRUST COMPANY, as Mortgagee By:___________________________________ Name: Title: 66 2002 EETC - Mortgage (Owned) (10) ANNEX A DEFINITIONS [Attached] 2002 EETC - Mortgage (Owned) (10) ANNEX B - INSURANCE TRUST INDENTURE ____ ANNEX B INSURANCE Capitalized terms used but not defined herein shall have the respective meanings set forth or incorporated by reference in Annex A to the Trust Indenture. A. LIABILITY INSURANCE 1. Except as provided in Section A.2 below, Owner will carry or cause to be carried at all times, at no expense to Mortgagee, comprehensive airline legal liability (including, but not limited to passenger liability, property damage, and contractual liability insurance) with respect to the Aircraft, the Airframe and the Engines, which is (i) in an amount not less than the greater of (x) the amount of comprehensive airline legal liability insurance from time to time applicable to aircraft owned or leased and operated by Owner of the same type and operating on similar routes as the Aircraft and (y) the Minimum Liability Insurance Amount per occurrence;(ii) of the type and covering the same risks as from time to time applicable to aircraft operated by Owner of the same type as the Aircraft; and (iii) maintained in effect with insurers of nationally or internationally recognized responsibility (such insurers being referred to herein as "Approved Insurers"). 2. During any period that the Aircraft is on the ground and not in operation, Owner may carry or cause to be carried, in lieu of the insurance required by Section A.1 above, insurance otherwise conforming with the provisions of said Section A.1 except that (i) the amounts of coverage shall not be required to exceed the amounts of public liability and property damage insurance from time to time applicable to aircraft owned or operated by Owner of the same type as the Aircraft which are on the ground and not in operation and (ii) the scope of the risks covered and the type of insurance shall be the same as from time to time shall be applicable to aircraft owned or operated by Owner of the same type which are on the ground and not in operation. B. HULL INSURANCE 1. Except as provided in Section B.2 below, Owner will carry or cause to be carried at all times, at no expense to Mortgagee, with Approved Insurers "all-risk" ground and flight aircraft hull insurance covering each Aircraft (including the Engines when they are installed on the Airframe or any other airframe) which is of the type as from time to time applicable to aircraft owned FORM OF OWNED AIRCRAFT INDENTURE 2002 EETC - Mortgage (Owned) (10) by Owner of the same type as the Aircraft for an amount denominated in United States Dollars not less than the unpaid Original Amount together with six months of interest accrued thereon (the "Debt Balance"). Any policies of insurance carried in accordance with this Section B.1 covering the Aircraft and any policies taken out in substitution or replacement for any such policies (i) shall name Mortgagee as exclusive loss payee for any proceeds to be paid under such policies up to an amount equal to the Debt Balance and (ii) shall provide that (A) in the event of a loss involving proceeds in excess of the Threshold Amount, the proceeds in respect of such loss up to an amount equal to the Debt Balance shall be payable to the Mortgagee, except in the case of a loss with respect to an Engine installed on an airframe other than the Airframe, in which case Owner (or any Permitted Lessee) shall endeavor to arrange for any payment of insurance proceeds in respect of such loss to be held for the account of the Mortgagee whether such payment is made to Owner (or any Permitted Lessee) or any third party, it being understood and agreed that in the case of any payment to Mortgagee otherwise than in respect of an Event of Loss, the Mortgagee shall, upon receipt of evidence satisfactory to it that the damage giving rise to such payment shall have been repaired or that such payment shall then be required to pay for repairs then being made, pay the amount of such payment to Owner or its order, and (B) the entire amount of any loss involving proceeds of the Threshold Amount or less or the amount of any proceeds of any loss in excess of the Debt Balance shall be paid to Owner or its order unless an Event of Default shall have occurred and be continuing and the insurers have been notified thereof by the Mortgagee. In the case of a loss with respect to an engine (other than an Engine) installed on the Airframe, Mortgagee shall hold any payment to it of any insurance proceeds in respect of such loss for the account of Owner or any other third party that is entitled to receive such proceeds. 2. During any period that the Aircraft is on the ground and not in operation, Owner may carry or cause to be carried, in lieu of the insurance required by Section B.1 above, insurance otherwise conforming with the provisions of said Section B.1 except that the scope of the risks and the type of insurance shall be the same as from time to time applicable to aircraft owned by Owner of the same type similarly on the ground and not in operation, provided that Owner shall maintain insurance against risk of loss or damage to the Aircraft in an amount equal to the Debt Balance during such period that the Aircraft is on the ground and not in operation. FORM OF OWNED AIRCRAFT INDENTURE 2 2002 EETC - Mortgage (Owned) (10) C. WAR-RISK, HIJACKING AND ALLIED PERILS INSURANCE If Owner (or any Permitted Lessee) shall at any time operate or propose to operate the Aircraft, Airframe or any Engine (i) in any area of recognized hostilities or (ii) on international routes and war-risk, hijacking or allied perils insurance is maintained by Owner (or any Permitted Lessee) with respect to other aircraft owned or operated by Owner (or any Permitted Lessee) on such routes or in such areas, Owner shall maintain or cause to be maintained war-risk, hijacking and allied perils insurance of substantially the same type carried by similar United States commercial air carriers operating the same or comparable models of aircraft on similar routes or in such areas and in no event in an amount less than the unpaid Original Amount. D. GENERAL PROVISIONS Any policies of insurance carried in accordance with Sections A, B and C, including any policies taken out in substitution or replacement for such policies: (i) shall name Mortgagee, each Note Holder and each Liquidity Provider (collectively, the "Additional Insureds"), as its interests may appear; (ii) shall apply worldwide and have no territorial restrictions or limitations (except only in the case of war, hijacking and allied perils insurance required under Section C, which shall apply to the fullest extent available in the international insurance market); (iii) shall provide that, in respect of the interests of the Additional Insureds in such policies, the insurance shall not be invalidated or impaired by any act or omission (including misrepresentation and nondisclosure) by Owner (or any Permitted Lessee) or any other Person (including, without limitation, use for illegal purposes of the Aircraft or any Engine) and shall insure the Additional Insureds regardless of any breach or violation of any representation, warranty, declaration, term or condition contained in such policies by Owner (or any Permitted Lessee); (iv) shall provide that, if the insurers cancel such insurance for any reason whatsoever, or if the same is allowed to lapse for nonpayment of premium, or if any material change is made in the insurance which adversely affects the interest of any of the Additional Insureds, such cancellation, lapse or change shall not be effective as to the Additional FORM OF OWNED AIRCRAFT INDENTURE 3 2002 EETC - Mortgage (Owned) (10) Insureds for 30 (seven days in the case of war risk, hijacking and allied perils insurance) days after receipt by the Additional Insureds of written notice by such insurers of such cancellation, lapse or change, provided that if any notice period specified above is not reasonably obtainable, such policies shall provide for as long a period of prior notice as shall then be reasonably obtainable; (v) shall waive any rights of recourse, subrogation, setoff (including for unpaid premiums), recoupment, counterclaim or other deduction, whether by attachment or otherwise, against each Additional Insured; (vi) shall be primary without right of contribution from any other insurance that may be available to any Additional Insured; (vii) shall provide that all of the liability insurance provisions thereof, except the limits of liability, shall operate in all respects as if a separate policy had been issued covering each party insured thereunder; (ix) shall provide that none of the Additional Insureds shall be liable for any insurance premium; and (x) shall contain a 50/50% Clause per Lloyd's Aviation Underwriters' Association Standard Policy Form AVS 103; provided, that any such endorsements may be subject to any limitations on endorsements generally prevailing in the airline insurance marketplace at the time (e.g. AVN67B). E. REPORTS AND CERTIFICATES; OTHER INFORMATION On or prior to the Closing Date and on or prior to each renewal date of the insurance policies required hereunder, Owner will furnish or cause to be furnished to Mortgagee insurance certificates describing in reasonable detail the insurance maintained by Owner hereunder and a report, signed by Owner's or Permitted Lessee's regular independent insurance broker (the "Insurance Broker"), stating the opinion of such Insurance Broker that (a) all premiums in connection with the insurance then due have been paid and (b) such insurance complies with the terms of this Annex B. To the extent such agreement is reasonably obtainable Owner will also cause the Insurance Broker to agree to notify Mortgagee in writing of any default in the payment of any premium and of any other act or omission on the part of Owner of which it has knowledge and which might invalidate or render unenforceable, in whole or in part, any insurance on the Aircraft or Engines or cause the cancellation or termination of such insurance, and to notify Mortgagee in writing at least 30 days (seven days FORM OF OWNED AIRCRAFT INDENTURE 4 2002 EETC - Mortgage (Owned) (10) in the case of war-risk and allied perils coverage or such shorter period as may be available in the international insurance market, as the case may be) prior to the cancellation, lapse or material adverse change of any insurance maintained pursuant to this Annex B. F. RIGHT TO PAY PREMIUMS Each Additional Insured shall have the rights but not the obligations of an additional named insured. No Additional Insured shall have any obligation to pay any premium, commission, assessment or call due on any such insurance (including reinsurance). Notwithstanding the foregoing, in the event of cancellation of any required insurance due to the nonpayment of premium, Mortgagee shall have the option, in its sole discretion, to pay any such premium in respect of the Aircraft that is due in respect of the coverage pursuant to this Trust Indenture and to maintain such coverage, as Mortgagee may require, until the scheduled expiry date of such insurance and, in such event, Owner shall, upon demand, reimburse Mortgagee for amounts so paid by them. G. DEDUCTIBLES; SELF-INSURANCE Owner may self-insure by way of deductible, premium adjustment or franchise provisions or otherwise (including, with respect to insurance maintained pursuant to Section B, insuring for a maximum amount which is less than the Debt Balance) in the insurance covering the risks required to be insured against pursuant to Section 4.06 and this Annex B under a program applicable to all aircraft in Owner's fleet, but in no case shall the aggregate amount of self-insurance in regard to Section 11 and this Annex B exceed during any policy year, with respect to all of the aircraft in Owner's fleet (including, without limitation, the Aircraft), the lesser of (a) 50% of the largest replacement value of any single aircraft in Owner's fleet and (b) 1-1/2% of the average aggregate insurable value (during the preceding policy year) of all aircraft (including, without limitation, the Aircraft) on which Owner carries insurance, unless an insurance broker of national standing shall certify that the standard among all other major U.S. airlines is a higher level of self-insurance, in which case Owner may self-insure to such higher level. In addition, Owner (and any Permitted Lessee) may self-insure to the extent of any applicable deductible per aircraft that does not exceed industry standards for major U.S. airlines. FORM OF OWNED AIRCRAFT INDENTURE 5 2002 EETC - Mortgage (Owned) (10) EXHIBIT A TO TRUST INDENTURE AND MORTGAGE TRUST INDENTURE AND MORTGAGE [N___TZ] SUPPLEMENT This TRUST INDENTURE AND MORTGAGE [N___TZ] SUPPLEMENT NO. 1, dated ______________ ___, ____ (herein called this "Mortgage Supplement") of AMERICAN TRANSAIR, INC., as Owner (the "Owner"). W I T N E S S E T H: WHEREAS, the Trust Indenture and Mortgage, dated as of ______________ __, ____ (as amended and supplemented to the date hereof, the "Trust Indenture") between the Owner and Wilmington Trust Company, as Mortgagee (the "Mortgagee"), provides for the execution and delivery of a supplement thereto substantially in the form hereof, which shall particularly describe the Aircraft, and shall specifically mortgage such Aircraft to the Mortgagee; and WHEREAS, each of the Trust Agreement and Trust Indenture relates to the Airframe and Engines described below, and a counterpart of the Trust Indenture is attached hereto and made a part hereof and this Mortgage Supplement, together with such counterpart of the Trust Indenture, is being filed for recordation on the date hereof with the FAA as one document; NOW, THEREFORE, this Mortgage Supplement WITNESSETH that the Owner hereby confirms that the Lien of the Trust Indenture on the Collateral covers all of Owner's right, title and interest in and to the following described property: AIRFRAME One airframe identified as follows: FAA Registration Manufacturer's Manufacturer Model Number Serial Number - ------------ ----- ------ ------------- The Boeing Company together with all of the Owner's right, title and interest in and to all Parts of whatever nature, whether now owned or hereinafter acquired and which are from time to time incorporated or installed in or attached to said airframe. 2002 EETC - Mortgage (Owned) (10) AIRCRAFT ENGINES Two aircraft engines, each such engine having 750 or more rated take-off horsepower or the equivalent thereof, identified as follows: Manufacturer Manufacturer's Model Serial Number - ------------ -------------------- ------------- CFM International CFM56-7B27 CFM International CFM56-7B27 together with all of Owner's right, title and interest in and to all Parts of whatever nature, whether now owned or hereafter acquired and which are from time to time incorporated or installed in or attached to either of such engines. Together with all of Owner's right, title and interest in and to (a) all Parts of whatever nature, which from time to time are included within the definition of "Airframe" or "Engine", whether now owned or hereafter acquired, including all substitutions, renewals and replacements of and additions, improvements, accessions and accumulations to the Airframe and Engines (other than additions, improvements, accessions and accumulations which constitute appliances, parts, instruments, appurtenances, accessories, furnishings or other equipment excluded from the definition of Parts) and (b) all Aircraft Documents. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Mortgagee, its successors and assigns, in trust for the equal and proportionate benefit and security of the Note Holders and the Mortgage Indemnitees, except as provided in Section 2.14 and Article III of the Trust Indenture without any preference, distinction or priority of any one Equipment Note over any other by reason of priority of time of issue, sale, negotiation, date of maturity thereof or otherwise for any reason whatsoever, and for the uses and purposes and subject to the terms and provisions set forth in the Trust Indenture. This Mortgage Supplement shall be construed as supplemental to the Trust Indenture and shall form a part thereof. The Trust Indenture is each hereby incorporated by reference herein and is hereby ratified, approved and confirmed. AND, FURTHER, the Owner hereby acknowledges that the Aircraft referred to in this Mortgage Supplement has been delivered to the Owner and is included in the property of the Owner subject to the pledge and mortgage thereof under the Trust Indenture. * * * 2002 EETC - Mortgage (Owned) (10) IN WITNESS WHEREOF, the Owner has caused this Mortgage Supplement to be duly executed by one of its officers, thereunto duly authorized, on the day and year first above written. AMERICAN TRANS AIR, INC. By:___________________________________ Name: Title: 2002 EETC - Mortgage (Owned) (10) SCHEDULE I ORIGINAL AMOUNT INTEREST RATE --------------- ------------- Series A: Series B: 2002 EETC - Mortgage (Owned) (10) Trust Indenture and Mortgage Equipment Note Amortization Percentage of Original Payment Date Amount to be Paid - ------------------------------ -------------------------------------- 2002 EETC - Mortgage (Owned) (10) EX-4.5 5 file004.txt PASS THROUGH TRUST AGREEMENT CLASS A EXECUTION COPY AMTRAN, INC. AMERICAN TRANS AIR, INC. and WILMINGTON TRUST COMPANY as Trustee PASS THROUGH TRUST AGREEMENT Dated as of March 28, 2002 American Trans Air 2002-1A Pass Through Trust 8.328% Initial American Trans Air 2002-1A Pass Through Certificates 8.328% Exchange American Trans Air 2002-1A Pass Through Certificates Reconciliation and tie between American Trans Air Pass Through Trust Agreement, Series 2002-1A dated as of March 28, 2002, and the Trust Indenture Act of 1939. This reconciliation does not constitute part of the Pass Through Trust Agreement. Trust Indenture Act Pass Through Trust of 1939 Section Agreement Section --------------- ----------------- 310(a)(1) 7.08 (a)(2) 7.08 312(a) 3.05; 8.01; 8.02 313(a) 7.06; 8.03 314(a) 8.04(a),(c) & (d) (a)(4) 8.04(e) (c)(1) 1.02 (c)(2) 1.02 (d)(1) 7.13; 11.01 (d)(2) 7.13; 11.01 (d)(3) 2.01 (e) 1.02 315(b) 7.02 316(a)(last sentence) 1.04(c) (a)(1)(A) 6.04 (a)(1)(B) 6.05 (b) 6.06 (c) 1.04(e) 317(a)(1) 6.03 (b) 7.13 318(a) 12.05 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS.............................................................................................3 Section 1.01. Definitions..........................................................................3 Section 1.02. Compliance Certificates and Opinions................................................13 Section 1.03. Form of Documents Delivered to Trustee..............................................14 Section 1.04. Directions of Certificateholders....................................................14 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES; ACQUISITION OF EQUIPMENT NOTES.....................................16 Section 2.01. Issuance of Certificates; Acquisition of Equipment Notes............................16 Section 2.02. Withdrawal of Deposits..............................................................17 Section 2.03. Acceptance by Trustee...............................................................18 Section 2.04. Limitation of Powers................................................................18 ARTICLE III THE CERTIFICATES.....................................................................................18 Section 3.01. Title, Form, Denomination and Execution of Certificates.............................18 Section 3.02. Restrictive Legends.................................................................20 Section 3.03. Authentication of Certificates......................................................21 Section 3.04. Transfer and Exchange...............................................................22 Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates..22 Section 3.06. Special Transfer Provisions.........................................................24 Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates...................................26 Section 3.08. Persons Deemed Owners...............................................................26 Section 3.09. Cancellation........................................................................27 Section 3.10. Limitation of Liability for Payments................................................27 Section 3.11. Temporary Certificates..............................................................27 ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS.......................................................27 Section 4.01. Certificate Account and Special Payments Account....................................27 Section 4.02. Distributions from Certificate Account and Special Payments Account.................28 Section 4.03. Statements to Certificateholders....................................................29 Section 4.04. Investment of Special Payment Moneys................................................31 ARTICLE V THE COMPANY............................................................................................31 Section 5.01. Maintenance of Corporate Existence..................................................31 Section 5.02. Consolidation, Merger, Etc..........................................................31 Section 5.03. Rule 144A(d)(4) Information.........................................................32
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ARTICLE VI DEFAULT...............................................................................................33 Section 6.01. Events of Default...................................................................33 Section 6.02. Incidents of Sale of Equipment Notes................................................35 Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit..................35 Section 6.04. Control by Certificateholders.......................................................36 Section 6.05. Waiver of Past Defaults.............................................................36 Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired..................37 Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions...............37 Section 6.08. Remedies Cumulative.................................................................37 Section 6.09. Undertaking for Costs...............................................................37 ARTICLE VII THE TRUSTEE..........................................................................................38 Section 7.01. Notice of Defaults..................................................................38 Section 7.02. Certain Rights of Trustee...........................................................38 Section 7.03. Not Responsible for Recitals or Issuance of Certificates............................39 Section 7.04. May Hold Certificates...............................................................40 Section 7.05. Money Held in Trust.................................................................40 Section 7.06. Compensation and Reimbursement......................................................40 Section 7.07. Corporate Trustee Required, Eligibility.............................................41 Section 7.08. Resignation and Removal: Appointment of Successor...................................42 Section 7.09. Acceptance of Appointment by Successor..............................................43 Section 7.10. Merger, Conversion, Consolidation or Succession to Business.........................44 Section 7.11. Maintenance of Agencies.............................................................44 Section 7.12. Money for Certificate Payments to Be Held in Trust..................................45 Section 7.13. Registration of Equipment Notes in Name of Subordination Agent......................45 Section 7.14. Representations and Warranties of Trustee...........................................45 Section 7.15. Withholding Taxes, Information Reporting............................................46 Section 7.16. Trustee's Liens.....................................................................48 Section 7.17. Preferential Collection of Claims...................................................48 ARTICLE VIII CERTIFICATEHOLDERS'LISTS AND REPORTS BY TRUSTEE.....................................................48 Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders.......48 Section 8.02. Preservation of Information; Communications to Certificateholders...................48 Section 8.03. Reports by Trustee..................................................................48 Section 8.04. Reports by the Guarantor and Company................................................48 ARTICLE IX SUPPLEMENTAL AGREEMENTS...............................................................................49
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Section 9.01. Supplemental Agreements Without Consent of Certificateholders.......................49 Section 9.02. Supplemental Agreements with Consent of Certificateholders..........................51 Section 9.03. Documents Affecting Immunity or Indemnity...........................................52 Section 9.04. Execution of Supplemental Agreements................................................52 Section 9.05. Effect of Supplemental Agreements...................................................52 Section 9.06. Conformity with Trust Indenture Act.................................................52 Section 9.07. Reference in Certificates to Supplemental Agreements................................52 ARTICLE X AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS............................................................53 Section 10.01. Amendments and Supplements to Indentures and Other Note Documents...................53 ARTICLE XI TERMINATION OF TRUST..................................................................................54 Section 11.01. Termination of the Trust............................................................54 ARTICLE XII MISCELLANEOUS PROVISIONS.............................................................................55 Section 12.01. Limitation on Rights of Certificateholders..........................................55 Section 12.02. Liabilities of Certificateholders...................................................55 Section 12.03. Certificates Nonassessable and Fully Paid...........................................55 Section 12.04. Notices ............................................................................55 Section 12.05. Governing Law.......................................................................56 Section 12.06. Severability of Provisions..........................................................56 Section 12.07. Effect of Headings and Table of Contents............................................56 Section 12.08. Successors and Assigns..............................................................57 Section 12.09. Benefits of Agreement...............................................................57 Section 12.10. Legal Holidays......................................................................57 Section 12.11. Counterparts........................................................................57 Section 12.12. Communication by Certificateholders with Other Certificateholders...................57 Section 12.13. Intention of Parties................................................................57
Exhibit A - Form of Certificate Exhibit B - Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S Exhibit C - [Reserved] Exhibit D - [Reserved] Exhibit E - Form of Certificate to be Delivered in Connection with Transfers to QIBs iii This PASS THROUGH TRUST AGREEMENT, dated as of March 28, 2002, among AMTRAN, INC., an Indiana corporation (the "Guarantor"), AMERICAN TRANS AIR, INC., an Indiana corporation (the "Company"), and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Trustee, is made with respect to the formation of the American Trans Air 2002-1A Pass Through Trust, and the issuance of 8.328 % American Trans Air 2002-1A Pass Through Certificates representing fractional undivided interests in the Trust. WITNESSETH: WHEREAS, the Company has obtained (either directly or through General Electric Credit Corporation) commitments from The Boeing Company for the delivery of, or has taken delivery of, certain Aircraft; WHEREAS, the Company intends to finance the acquisition of each such Aircraft either (i) through separate leveraged lease transactions in which the Company will lease such aircraft (collectively, the "Leased Aircraft") or (ii) through separate secured loan transactions in which the Company will own such Aircraft (collectively, the "Owned Aircraft"); WHEREAS, in the case of each Leased Aircraft, each Owner Trustee, acting on behalf of the corresponding Owner Participant, will issue pursuant to an Indenture, on a non-recourse basis, two series of Equipment Notes in order to finance a portion of the purchase price of each such Leased Aircraft; WHEREAS, in the case of each Owned Aircraft, the Company, will issue pursuant to an Indenture, on a recourse basis, two series of Equipment Notes to finance a portion of the purchase price of each such Owned Aircraft; WHEREAS, the Company has entered into a Certificate Purchase Agreement dated as of March 26, 2002 (as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Certificate Purchase Agreement") with the Guarantor and Nyala Funding LLC (the "Purchaser") which provides for the issuance and sale of the Certificates to the Purchaser; WHEREAS, the Company, the Guarantor, the Trustee, the Subordination Agent, the Escrow Agent, the Liquidity Provider and the Paying Agent and certain other parties named therein concurrently herewith are entering into a Delayed Funding Implementation Agreement, dated as of the date hereof (the "Delayed Funding Implementation Agreement") pursuant to which the parties thereto agree to supplement and modify the Operative Agreements, as defined therein; WHEREAS, the Trustee, upon execution and delivery of this Agreement, hereby declares the creation of this Trust (the "2002-1A Trust") for the benefit of the Certificateholders, and the Certificateholders, as the grantors of the 2002-1A Trust, by their respective acceptances of the Certificates, join in the creation of this 2002-1A Trust with the Trustee; WHEREAS, all Certificates to be issued by the Trust will evidence fractional undivided interests in the Trust and will convey no rights, benefits or interests in respect of any property other than the Trust Property; WHEREAS, the Escrow Agent, the Purchaser, the Trustee and the Escrow Paying Agent have contemporaneously herewith entered into an Escrow Agreement pursuant to which the Purchaser has delivered to the Escrow Agent the purchase price for the Certificates and has irrevocably instructed the Escrow Agent to withdraw and pay funds from such amount upon request and proper certification by the Trustee to purchase Equipment Notes at the times at which the Aircraft are to be financed as contemplated by the Note Purchase Agreement from time to time prior to the Delivery Period Termination Date (other than the financing of an Aircraft on the Issuance Date, if applicable); WHEREAS, the Escrow Agent on behalf of the Certificateholders has contemporaneously herewith entered into the Deposit Agreement (Class A) and the Delayed Deposit Agreement (Class A) with the Depositary; WHEREAS, pursuant to the terms and conditions of this Agreement and the Note Purchase Agreement, the Trustee, on behalf of the Trust, shall (subject to certain conditions) purchase Equipment Notes having the same interest rate as, and final maturity date not later than the final Regular Distribution Date of, the Certificates issued hereunder and shall hold such Equipment Notes in trust for the benefit of the Certificateholders; WHEREAS, all of the conditions and requirements necessary to make this Agreement, when duly executed and delivered, a valid, binding and legal instrument, enforceable in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Agreement in the form and with the terms hereof have been in all respects duly authorized; WHEREAS, to facilitate the sale of Equipment Notes to, and the purchase of Equipment Notes by, the Trustee on behalf of the 2002-1A Trust, (i) the Company has duly authorized the execution and delivery of this Agreement as the "issuer", as such term is defined in and solely for purposes of the Securities Act of 1933, as amended, of the Certificates to be issued pursuant hereto, and as the "obligor", as such term is defined in and solely for purposes of the Trust Indenture Act or 1939, as amended, and (ii) the Guarantor has duly authorized the execution and delivery of this Agreement with respect to all such Certificates and the Company and the Guarantor are undertaking to perform certain administrative and ministerial duties hereunder and are also undertaking to pay the fees and expenses of the Trustee; WHEREAS, the Trustee, the Other Trustee, the Investors (as defined in the Registration Rights Agreement), the Guarantor and the Company, have contemporaneously herewith entered into a Registration Rights Agreement that provides for, among other things, the possible issuance of Exchange Certificates; and WHEREAS, upon issuance of the Exchange Certificates, if any, or the effectiveness of the Shelf Registration Statement, this Agreement, as amended or supplemented from time to time, will be subject to the provisions of the Trust Indenture Act of 1939, and shall, to the extent applicable, be governed by such provisions. 2 NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms used herein that are defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference herein, have the meanings assigned to them therein; (3) all references in this Agreement to designated "Articles", "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement; (4) the words "herein", "hereof' and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; and (5) unless the context otherwise requires, whenever the words "including", "include" or "includes" are used herein, it shall be deemed to be followed by the phrase "without limitation". Accountants: Has the meaning specified in Section 7.15(b). Affiliate: With respect to any specified Person, means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. Agent Members: Has the meaning specified in Section 3.05(a). Aircraft: Means each of the Aircraft or Substitute Aircraft in respect of which a Participation Agreement is entered into in accordance with the Note Purchase Agreement. Applicable Delivery Date: Has the meaning specified in Section 2.01(b). Applicable Participation Agreement: Has the meaning specified in Section 2.01(b). 3 Authorized Agent: Means any Paying Agent or Registrar for the Certificates. Avoidable Tax: Has the meaning specified in Section 7.08(e) hereof. Book-Entry Certificates: With respect to the Certificates, means a beneficial interest in the Certificates, ownership and transfers of which shall be made through book entries as described in Section 3.04. Business Day: Means any day other than a Saturday, a Sunday or a day on which commercial banks are required or authorized to close in Indianapolis, Indiana or New York, New York or so long as any such Certificate is outstanding, the city and state in which the Trustee or any related Loan Trustee maintains its Corporate Trust Office or receives and disburses funds. Certificate: Means any one of the Initial Certificates or Exchange Certificates and any Initial Certificates or Exchange Certificates issued in exchange therefor or replacement thereof pursuant to this Agreement and authenticated hereunder substantially in the form of Exhibit A hereto. Certificate Account: Means the account or accounts created and maintained pursuant to Section 4.01(a). Certificateholder or Holder: Means the Person in whose name a Certificate is registered in the Register. Certificate Purchase Agreement: Has the meaning specified in the fifth recital to this Agreement. Class C Certificateholder: Means, at any time, any holder of one or more pass through certificates issued by the American Trans Air Pass Through Trust, Series 2002-1C, if and when established. Clearing Agency: Means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. Clearing Agency Participant: Means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects, directly or indirectly, book-entry transfers and pledges of securities deposited with the Clearing Agency. Code: Means the Internal Revenue Code of 1986, as amended. Company: Means American Trans Air, Inc., an Indiana corporation, or its successor in interest pursuant to Section 5.02. Controlling Party: Has the meaning specified in the Intercreditor Agreement. 4 Corporate Trust Office: With respect to the Trustee or any Loan Trustee, means the office of such trustee in the city at which at any particular time its corporate trust business shall be principally administered. Cut-off Date: Means the earlier of (a) the Delivery Period Termination Date and (b) the date on which a Triggering Event occurs. Delayed Funding Implementation Agreement: Has the meaning specified in the sixth recital to this Agreement. Delivery Date: Has the meaning specified in Annex A to the Note Purchase Agreement. Delivery Notice: Has the meaning specified in Section 1(b) of the Note Purchase Agreement. Delivery Period Termination Date: Has the meaning specified in Annex A to the Note Purchase Agreement. Deposit Agreement: Means (i) prior to the Delayed Funding Date (as defined in the Delayed Funding Implementation Agreement) the Deposit Agreement (Class A) and (ii) on and after the Delayed Funding Date, such Deposit Agreement (to the extent of any payment to be made by the Depositary thereunder on or after the Delayed Funding Date) and the Delayed Deposit Agreement (Class A), each dated as of March 28, 2002 relating to the Certificates, between the Depositary and the Escrow Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms and shall include any Replacement Deposit Agreement (as defined in the Note Purchase Agreement). Depositary: Means IntesaBci S.p.A., acting through its New York Branch. Deposits: Has the meaning specified in the Deposit Agreement. Direction: Has the meaning specified in Section 1.04(a). Distribution Date: Means each Regular Distribution Date and each Special Distribution Date. DTC: Means The Depository Trust Company, its nominees and their respective successors. Equipment Note: Means the Series A Equipment Notes issued under (and as defined in) the Indentures. ERISA: Means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor federal statute. 5 Escrow Agent: Means, initially, Wells Fargo Bank Northwest, National Association, and any replacement or successor therefor appointed in accordance with the Escrow Agreement. Escrow Agreement: Means the Escrow and Paying Agent Agreement (Class A) dated as of March 28, 2002 relating to the Certificates, among the Escrow Agent, the Escrow Paying Agent, the Purchaser and the Trustee, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. Escrow Paying Agent: Means the Person acting as paying agent under the Escrow Agreement. Escrow Receipt: Means the receipt substantially in the form annexed to the Escrow Agreement representing a fractional undivided interest in the funds held in escrow thereunder. Euroclear: Means the Euroclear System. Event of Default: Means the occurrence of an Indenture Default under any Indenture. Exchange Act: Has the meaning specified in Section 5.03. Exchange Certificates: Means the pass through certificates substantially in the form of Exhibit A hereto issued in exchange for the Initial Certificates or upon sale of the Initial Certificates under the Shelf Registration Statement, in each case pursuant to the Registration Rights Agreement and authenticated hereunder. Exchange Offer: Means the exchange offer which may be made pursuant to the Registration Rights Agreement to exchange Initial Certificates for Exchange Certificates. Exchange Offer Registration Statement: Means the registration statement that, pursuant to the Registration Rights Agreement, is filed by the Company with the SEC with respect to the exchange of Initial Certificates for Exchange Certificates. FAA: Has the meaning specified in Section 5.02(a). Final Withdrawal: Has the meaning specified in the Escrow Agreement. Final Withdrawal Date: Has the meaning specified in the Escrow Agreement. Final Withdrawal Notice: Has the meaning specified in Section 2.02. Fractional Undivided Interest: Means the fractional undivided interest in the Trust that is evidenced by a Certificate. Funding Date: Has the meaning specified in Annex A to the Note Purchase Agreement. 6 Global Certificates: Has the meaning assigned to such term in Section 3.01(d). Global Exchange Certificate: Has the meaning specified in Section 3.01(h). Guarantor: Means Amtran, Inc., an Indiana corporation, or its successor in interest. Indenture: Means each separate trust indenture and mortgage agreement relating to the Aircraft, each entered into pursuant to the related Participation Agreement, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. Indenture Default: With respect to an Indenture, a Mortgage Event of Default under (and as defined in) any Indenture relating to a Leased Aircraft or an Event of Default under (and as defined in ) an Indenture relating to an Owned Aircraft. Initial Certificates: Means the certificates issued and authenticated hereunder substantially in the form of Exhibit A hereto (including the Additional Certificates (as defined in the Delayed Funding Implementation Agreement)), other than the Exchange Certificates. Initial Regular Distribution Date: Means the first Regular Distribution Date on which a Scheduled Payment is to be made. Institutional Accredited Investor: Means an institutional investor that is an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act. Intercreditor Agreement: Means the Intercreditor Agreement dated March 28, 2002 among the Trustee, the Other Trustee, the Liquidity Provider, the liquidity provider relating to the Certificates issued under (and as defined in) the Other Pass Through Trust Agreement, and Wilmington Trust Company, as Subordination Agent thereunder, as amended, supplemented or otherwise modified from time to time in accordance with its terms. Issuance Date: Means the initial date of the issuance of the Certificates. Lease: Means, with respect to each Leased Aircraft, the lease between an Owner Trustee, as the lessor, and the Company, as the lessee, referred to in the related Indenture, as each such lease may be amended, supplemented or otherwise modified in accordance with its terms. Leased Aircraft: Has the meaning specified in the second recital to this Agreement. Letter of Representations: Means the agreement dated the Issuance Date among the Company, the Trustee and the initial Clearing Agency. Liquidity Facility: Means the Revolving Credit Agreement (2002-1A) dated March 28, 2002 relating to the Certificates between the Liquidity Provider and the Subordination 7 Agent, as amended, replaced, supplemented or otherwise modified from time to time in accordance with its terms and the terms of the Intercreditor Agreement. Liquidity Provider: Means, initially, AIG Matched Funding Corp., and any replacement or successor therefor appointed in accordance with the Liquidity Facility and the Intercreditor Agreement. Loan Trustee: With respect to any Equipment Note or the Indenture applicable thereto, means the bank or trust company designated as loan or indenture trustee under such Indenture, not in its individual capacity but solely as trustee; and any successor to such Loan Trustee as such trustee; and Loan Trustees means all of the Loan Trustees under the Indentures. Non-U.S. Person: Means a Person that is not a U.S. Person as defined in Regulation S. Note Documents: With respect to any Equipment Note, means the related Indenture, Lease (if the related Aircraft is leased to the Company) and Participation Agreement. Note Purchase Agreement: Means the Note Purchase Agreement dated as of March 28, 2002 among the Trustee, the Other Trustee, the Company, the Guarantor, the Escrow Agent, the Escrow Paying Agent and the Subordination Agent, providing for, among other things, the purchase of Equipment Notes by the Trustee on behalf of the Trust, as the same may be amended, supplemented or otherwise modified from time to time, in accordance with its terms. Notice of Purchase Withdrawal: Has the meaning specified in the Deposit Agreement. Officer's Certificate: Means a certificate signed (a) in the case of the Guarantor or the Company, by (i) the President or any Executive Vice President or Senior Vice President of the Guarantor or the Company, respectively, signing alone or (ii) any Vice President of the Guarantor or the Company signing together with the Secretary, the Assistant Secretary, the Treasurer or any Assistant Treasurer of the Guarantor or the Company, respectively, or (b) in the case of the Trustee or an Owner Trustee or a Loan Trustee, a Responsible Officer of the Trustee or such Owner Trustee or such Loan Trustee, as the case may be. Offshore Global Certificates: Has the meaning assigned to such term in Section 3.01(d). Offshore Physical Certificates: Means the Initial Certificates, issued pursuant to Section 3.05(b) in exchange for interests in any Offshore Global Certificate, in the form of permanent certificated Certificates in registered form substantially in the form set forth in Exhibit A hereto. Opinion of Counsel: Means a written opinion of legal counsel who (a) in the case of counsel for the Guarantor or the Company, may be (i) a senior attorney in rank of the officers of the Guarantor or the Company a principal duty of which is furnishing advice as to legal 8 matters or (ii) such other counsel designated by the Guarantor or the Company and reasonably acceptable to the Trustee and (b) in the case of any Owner Trustee or any Loan Trustee, may be such counsel as may be designated by any of them whether or not such counsel is an employee of any of them, and who shall be reasonably acceptable to the Trustee. Other Pass Through Trust Agreement: Means the American Trans Air 2002-1B Pass Through Trust Agreement relating to the American Trans Air 2002-1B Pass Through Trust, dated the date hereof. Other Trust: Means the American Trans Air 2002-1B Pass Through Trust. Other Trustee: Means the trustee under the Other Pass Through Trust Agreement, and any successor or other trustee appointed as provided therein. Outstanding: With respect to Certificates, means, as of the date of determination, all Certificates theretofore authenticated and delivered under this Agreement, except: (i) Certificates theretofore canceled by the Registrar or delivered to the Trustee or the Registrar for cancellation; (ii) Certificates for which money in the full amount required to make the final distribution with respect to such Certificates pursuant to Section 11.01 hereof has been theretofore deposited with the Trustee in trust for the Holders of such Certificates as provided in Section 4.01 pending distribution of such money to such Certificateholders pursuant to payment of such final distribution; and (iii) Certificates in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to this Agreement. Owned Aircraft: Has the meaning specified in the second recital to this Agreement. Owner Participant: With respect to any Equipment Note, means the "Owner Participant" as referred to in the Indenture pursuant to which such Equipment Note is issued and any permitted successor or assign of such Owner Participant; and Owner Participants at any time of determination means all of the Owner Participants thus referred to in the Indentures. Owner Trustee: With respect to any Equipment Note relating to a Leased Aircraft, means the "Owner Trustee", as referred to in the Indenture pursuant to which such Equipment Note is issued, not in its individual capacity but solely as trustee; and Owner Trustees means all of the Owner Trustees party to any of the Indentures. Participation Agreement: Means each Participation Agreement to be entered into by the Trustee and the Other Trustee pursuant to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms; and Participation Agreements means all such agreements. 9 Paying Agent: Means the paying agent maintained and appointed for the Certificates pursuant to Section 7.11. Permitted Investments: Means obligations of the United States of America or agencies or instrumentalities thereof for the payment of which the full faith and credit of the United States of America is pledged, maturing in not more than 60 days after the acquisition thereof or such lesser time as is required for the distribution of any Special Payments on a Special Distribution Date. Person: Means any person, including any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee, unincorporated organization, or government or any agency or political subdivision thereof. Physical Certificates: Has the meaning specified in Section 3.01(e). Pool Balance: Has the meaning specified in the Intercreditor Agreement. Pool Factor: Means, as of any date, the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance as at such date by (ii) the original aggregate face amount of the Certificates. The Pool Factor as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property and the distribution thereof to be made on such Distribution Date and the distribution of the Final Withdrawal to be made on such Distribution Date. Private Placement Memorandum: Means the Private Placement Memorandum dated March 26, 2002 relating to the offering of the Certificates and the certificates issued under the Other Pass Through Trust Agreement. Private Placement Legend: Has the meaning specified in Section 3.02. PTC Event of Default: Means any failure to pay within 10 Business Days of the due date thereof: (i) the outstanding Pool Balance on the Final Legal Distribution Date or (ii) interest due on the Certificates on any Distribution Date (unless the Subordination Agent shall have made an Interest Drawing (as defined in the Intercreditor Agreement) or a withdrawal or withdrawals from a cash collateral account pursuant to Section 3.6(f) of the Intercreditor Agreement with respect thereto in an amount sufficient to pay such interest (or such Pool Balance, as the case may be) and shall have distributed such amount to the Trustee entitled thereto). QIB: Means a qualified institutional buyer as defined in Rule 144A. Rating Agency: Means Moody's Investor Service, Inc. and its successors in interest. Record Date: Means (i) for Scheduled Payments to be distributed on any Regular Distribution Date, other than the final distribution, the 15th day (whether or not a Business Day) preceding such Regular Distribution Date, and (ii) for Special Payments to be distributed on any 10 Special Distribution Date, other than the final distribution, the 15th day (whether or not a Business Day) preceding such Special Distribution Date. Register and Registrar: Mean the register maintained and the registrar appointed pursuant to Sections 3.04 and 7.11. Registration Rights Agreement: Means the Registration Rights Agreement dated March 26, 2002, among the Trustee, the Other Trustee, the Investors (as defined in the Registration Rights Agreement), the Guarantor and the Company, as amended, supplemented or otherwise modified from time to time in accordance with its terms. Regular Distribution Date: With respect to distributions of Scheduled Payments in respect of the Certificates, means each date designated as a Regular Distribution Date in the Certificates issued pursuant to this Agreement, until payment of all the Scheduled Payments to be made under the Equipment Notes held in the Trust have been made; provided, however, that, if any such day shall not be a Business Day, the related distribution shall be made on the next succeeding Business Day without additional interest. Regulation S: Means Regulation S under the Securities Act and any successor regulation thereto. Regulation S Restricted Date: Means, with respect to each Initial Certificate, the date 40 days after the later of the commencement of the initial offering of such Initial Certificate and the date of initial issuance thereof. Request: Means a request by the Company setting forth the subject matter of the request accompanied by an Officer's Certificate and an Opinion of Counsel as provided in Section 1.02 of this Agreement. Responsible Officer: With respect to the Trustee, any Loan Trustee and any Owner Trustee, means any officer in the Corporate Trust Office of the Trustee, Loan Trustee or Owner Trustee or any other officer customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject. Rule 144A: Means Rule 144A under the Securities Act and any successor rule thereto. Scheduled Payment: With respect to any Equipment Note, means (i) any payment of principal or interest on or in respect of such Equipment Note (other than any such payment which is not in fact received by the Trustee or any Subordination Agent within five days of the date on which such payment is scheduled to be made) due from the obligor thereon or (ii) any payment of interest on the Certificates with funds drawn under the Liquidity Facility, which payment in any such case represents the installment of principal at the stated maturity of such installment of principal on such Equipment Note, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Note, or both; provided that any 11 payment of principal, premium, if any, or interest resulting from the redemption or purchase of any Equipment Note shall not constitute a Scheduled Payment. SEC: Means the Securities and Exchange Commission as from time to time constituted or created under the United States Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. Securities Act: Means the United States Securities Act of 1933, as amended from time to time, or any successor thereto. Shelf Registration Statement: Means the shelf registration statement which may be required to be filed by the Company with the SEC pursuant to the Registration Rights Agreement, other than an Exchange Offer Registration Statement. Special Distribution Date: Means each date on which a Special Payment is to be distributed as specified in this Agreement; provided, however, that, if any such day shall not be a Business Day, the related distribution shall be made on the next succeeding Business Day without additional interest. Special Redemption Premium: Means the premium payable by the Company in respect of a Prepayment Withdrawal (as defined in the Escrow Agreement) or the Final Withdrawal pursuant to the Note Purchase Agreement. Special Payment: Means any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture) or the Special Redemption Premium (if applicable). Special Payments Account: Means the account or accounts created and maintained pursuant to Section 4.01(b). Subordination Agent: Has the meaning specified therefor in the Intercreditor Agreement. Substitute Aircraft: Has the meaning specified in Section 1(g) of the Note Purchase Agreement. Triggering Event: Has the meaning specified therefor in the Intercreditor Agreement. Trust: Means the trust created by this Agreement, the estate of which consists of Trust Property. Trust Indenture Act: Means the United States Trust Indenture Act of 1939, as amended from time to time. 12 Trust Property: Means (i) the Equipment Notes held as the property of the Trust and, subject to the Intercreditor Agreement, all monies at any time paid thereon and all monies due and to become due thereunder, (ii) all rights of the Trust and the Trustee, on behalf of the Trust, under the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement and the Liquidity Facilities, including, without limitation, all rights to receive certain payments thereunder, and all monies paid to the Trustee on behalf of the Trust pursuant to the Intercreditor Agreement or the Liquidity Facilities, provided, that rights with respect to the Deposits or under the Escrow Agreement, except for the right to direct withdrawals for the purchase of Equipment Notes to be held herein, will not constitute Trust Property, and (iii) the funds from time to time deposited in the Certificate Account and the Special Payments Account and, subject to the Intercreditor Agreement, any proceeds from the sale by the Trustee pursuant to Article VI hereof of any such Equipment Note. Trustee: Means Wilmington Trust Company, not in its individual capacity but solely as trustee, or its successor in interest, and any successor trustee appointed as provided herein. Trustee's Lien: Has the meaning specified in section 7.16. U.S. Global Certificate: Has the meaning specified in Section 3.01(c). U.S. Physical Certificates: Means the Initial Certificates offered and sold to Institutional Accredited Investors issued in the form of permanent certificated Certificates in registered form in substantially the form set forth as Exhibit A hereto with such applicable legends as are provided for in clauses (a) and (b) of Section 3.02 hereto. Section 1.02. Compliance Certificates and Opinions. Upon any application or request (except with respect to matters set forth in Article II) by the Company, any Owner Trustee or any Loan Trustee to the Trustee to take any action under any provision of this Agreement, the Company, such Owner Trustee or such Loan Trustee, as the case may be, shall furnish to the Trustee (i) an Officer's Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Agreement relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Agreement relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Agreement (other than a certificate provided pursuant to Section 8.04(d)) shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions in this Agreement relating thereto; 13 (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.03. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters and any such Person may certify or give an opinion as to such matters in one or several documents. Any Opinion of Counsel stated to be based on the opinion of other counsel shall be accompanied by a copy of such other opinion. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Agreement, they may, but need not, be consolidated and form one instrument. Section 1.04. Directions of Certificateholders. (a) Any direction, consent, request, demand, authorization, notice, waiver or other action provided by this Agreement to be given or taken by Certificateholders (a "Direction") may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Certificateholders in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required pursuant to this Agreement, to the Company or any Loan Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the Directions of the Certificateholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent or proxy shall be sufficient for any purpose of this Agreement and conclusive in favor of the Trustee, the Company and any Loan Trustee, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or such other officer and where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such 14 corporation, association or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient. (c) In determining whether the Certificateholders of the requisite Fractional Undivided Interests of Certificates Outstanding have given any Direction under this Agreement, Certificates owned by the Company, the Guarantor, any Owner Trustee, any Owner Participant or any Affiliate of any such Person (other than an Affiliate of any Owner Participant) shall be disregarded and deemed not to be Outstanding for purposes of any such determination. In determining whether the Trustee shall be protected in relying upon any such Direction, only Certificates which the Trustee knows to be so owned shall be so disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of the Certificates Outstanding, such Certificates shall not be so disregarded as aforesaid, and (ii) if any amount of Certificates so owned by any such Person have been pledged in good faith, such Certificates shall not be disregarded as aforesaid if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Company, the Guarantor, any Owner Trustee, any Owner Participant or any Affiliate of any such Person. (d) The Company may, at its option by delivery of an Officer's Certificate to the Trustee, set a record date to determine the Certificateholders entitled to give a Direction. Notwithstanding Section 316(c) of the Trust Indenture Act, such record date shall be the record date specified in such Officer's Certificate which shall be a date not more than 30 days prior to the first solicitation of Certificateholders in connection therewith. If such a record date is fixed, such Direction may be given before or after such record date, but only the Certificateholders of record at the close of business on such record date shall be deemed to be Certificateholders for the purposes of determining whether Certificateholders of the requisite proportion of Outstanding Certificates have authorized or agreed or consented to such Direction, and for that purpose the Outstanding Certificates shall be computed as of such record date; provided that no such Direction by the Certificateholders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Agreement not later than one year after the record date. (e) Any Direction by the Holder of any Certificate shall bind the Holder of every Certificate issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of such Direction is made upon such Certificate. (f) Except as otherwise provided in Section 1.04(c), Certificates owned by or pledged to any Person shall have an equal and proportionate benefit under the provisions of this Agreement, without preference, priority, or distinction as among all of the Certificates. (g) For all purposes of this Agreement, all Initial Certificates and all Exchange Certificates shall vote and take all actions of Certificateholders together as one series of Certificates. 15 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES; ACQUISITION OF EQUIPMENT NOTES Section 2.01. Issuance of Certificates; Acquisition of Equipment Notes. (a) The Trustee is hereby (i) authorized and directed to execute and deliver the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement and the Note Purchase Agreement on or prior to the Issuance Date, each in the form delivered to the Trustee by the Company and (ii) authorized, subject to the respective terms thereof, to perform its obligations thereunder. Upon the request of the Company and the satisfaction or waiver of the closing conditions specified in the Certificate Purchase Agreement, the Trustee shall, execute, deliver, authenticate, issue and sell Certificates in authorized denominations equaling in the aggregate the amount set forth in Schedule A to the Certificate Purchase Agreement, and evidencing the entire ownership interest in the Trust, which amount equals the maximum aggregate principal amount of Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. Except as provided in Sections 3.04, 3.05, 3.06, 3.07 and 3.10 hereof and subject to the Delayed Funding Implementation Agreement, the Trustee shall not execute, authenticate or deliver Certificates in excess of the aggregate amount specified in this paragraph. (b) On or after the Issuance Date, the Company may deliver from time to time to the Trustee (but in any case no later than one Business Day prior to the date on which the Trustee must instruct the Escrow Agent as described below) a Delivery Notice relating to one or more Equipment Notes. After receipt of a Delivery Notice and in any case no later than one Business Day prior to a Delivery Date or Funding Date as to which such Delivery Notice relates (the "Applicable Delivery Date") (or, if the Issuance Date is an Applicable Delivery Date, on the Issuance Date), the Trustee shall (as and when specified in the Delivery Notice) instruct the Escrow Agent to provide a Notice of Purchase Withdrawal to the Depositary requesting (i) the withdrawal of one or more Deposits on the Applicable Delivery Date in accordance with and to the extent permitted by the terms of the Escrow Agreement and the Deposit Agreement and (ii) the payment of all, or a portion, of such Deposit or Deposits, in an aggregate amount equal to the purchase price of the Equipment Notes relating to the Aircraft to be delivered on such Applicable Delivery Date, to or on behalf of the Owner Trustee or the Company, as the case may be, issuing such Equipment Notes, all as shall be described in the Delivery Notice; provided that, if the Issuance Date is an Applicable Delivery Date, such purchase price shall be paid from a portion of the proceeds of the sale of the Certificates. The Trustee shall (as and when specified in such Delivery Notice), subject to the conditions set forth in Sections 1 and 2 of the Note Purchase Agreement, enter into and perform its obligations under the Participation Agreement specified in such Delivery Notice (the "Applicable Participation Agreement") and cause such certificates, documents and legal opinions relating to the Trustee to be duly delivered as required by the Applicable Participation Agreement. If at any time prior to the Applicable Delivery Date, the Trustee receives a notice of postponement pursuant to Section 1(d) or 1(e) of the Note Purchase Agreement, then the Trustee shall give the Depositary (with a copy to the Escrow Agent) a notice of cancellation of such Notice of Purchase Withdrawal relating to such Deposit 16 or Deposits on such Applicable Delivery Date. Upon satisfaction of the conditions specified in the Note Purchase Agreement and the Applicable Participation Agreement, the Trustee shall purchase the applicable Equipment Notes with the proceeds of the withdrawals of one or more Deposits made on the Applicable Delivery Date in accordance with the terms of the Deposit Agreement and the Escrow Agreement (or, if the Issuance Date is the Applicable Delivery Date with respect to such Applicable Participation Agreement, from a portion of the proceeds of the sale of the Certificates). The purchase price of such Equipment Notes shall equal the principal amount of such Equipment Notes. Amounts withdrawn from such Deposit or Deposits in excess of the purchase price of the Equipment Notes or to the extent not applied on the Applicable Delivery Date to the purchase price of the Equipment Notes, shall be re-deposited with the Depositary on the Applicable Delivery Date in accordance with the terms of the Deposit Agreement. Section 2.02. Withdrawal of Deposits. (a) If the Trustee is notified that any Deposits remain outstanding on the Business Day next succeeding the Cut-Off Date, (i) the Trustee shall give the Escrow Agent notice that the Trustee's obligation to purchase Equipment Notes under the Note Purchase Agreement has terminated and instruct the Escrow Agent to provide a notice of Final Withdrawal to the Depositary substantially in the form of Exhibit B to the Deposit Agreement (the "Final Withdrawal Notice") and (ii) the Trustee will make a demand upon the Company under the Note Purchase Agreement for an amount equal to the Special Redemption Premium, if applicable, such payment to be made on the Final Withdrawal Date. (b) If (i) as a result of a downgrading of the Company's corporate credit ratings, General Electric Capital Corporation has elected to exercise its contractual rights not to act as an Owner Participant with respect to a GE Aircraft (as defined in the Note Purchase Agreement), (ii) pursuant to the separate aircraft financing agreement between the Company and General Electric Capital Corporation, the Company will not own or lease such GE Aircraft and (iii) the Company will not identify and substitute a Substitute Aircraft for such GE Aircraft, the Company may deliver to the Trustee written notice requesting that the Trustee deliver to the Escrow Agent a Prepayment Withdrawal Certificate (as defined in the Escrow Agreement) pursuant to the Escrow Agreement directing the Escrow Agent to provide a Notice of Prepayment Withdrawal (as defined in the Deposit Agreement) to the Depositary requesting the withdrawal of all or a portion of the Deposit relating to the Equipment Notes in respect of such GE Aircraft in accordance with and to the extent permitted by the terms of the Escrow Agreement and the Deposit Agreement. In connection with the Trustee's delivery of a Prepayment Withdrawal Certificate, the Trustee shall make a demand upon the Company under the Note Purchase Agreement for an amount equal to the Special Redemption Premium, if applicable, to be payable on the Prepayment Withdrawal Date (as defined in the Escrow Agreement). Section 2.03. Acceptance by Trustee. The Trustee, upon the execution and delivery of this Agreement, acknowledges its acceptance of all right, title, and interest in and to the Trust Property and declares that the Trustee holds and will hold such right, title, and interest for the benefit of all then present and future Certificateholders, upon the trusts herein set forth. Subject to Section 7.13, the Trustee shall take all actions reasonably necessary to effect the registration of all such Equipment Notes in the name of the Subordination Agent. By its payment 17 for and acceptance of each Certificate issued to it under this Agreement, each Certificateholder as grantor of the Trust thereby joins in the creation and declaration of the Trust. Section 2.04. Limitation of Powers. The Trust is constituted solely for the purpose of making the investment in the Equipment Notes, and, except as set forth herein, the Trustee shall not be authorized or empowered to acquire any other investments or engage in any other activities and, in particular, the Trustee shall not be authorized or empowered to do anything that would cause such Trust to fail to qualify as a "grantor trust" for federal income tax purposes (including as subject to this restriction acquiring the Aircraft (as defined in the respective related Indentures) by bidding such Equipment Notes or otherwise, or taking any action with respect to any such Aircraft once acquired). ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates. (a) The Initial Certificates shall be known as the "8.328% Initial Pass Through Certificates, Series 2002-1A" and the Exchange Certificates shall be known as the "8.328% Exchange Pass Through Certificates, Series 2002-1A." Each Certificate will represent a fractional undivided interest in the Trust and shall be substantially in the form set forth as Exhibit A hereto, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Agreement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the Trustee or the officers executing such Certificates, as evidenced by the Trustee's or the officer's execution of the Certificates. Any portion of the text of any Certificate may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. At the Escrow Agent's request under the Escrow Agreement, the Trustee shall affix the corresponding Escrow Receipt to each Certificate. Any transfer or exchange of any Certificate shall also effect a transfer or exchange of the related Escrow Receipt. Prior to the Final Withdrawal Date, no transfer or exchange of any Certificate shall be permitted unless the corresponding Escrow Receipt is attached thereto and also is so transferred or exchanged. By acceptance of any Certificate to which an Escrow Receipt is attached, each Holder of such a Certificate acknowledges and accepts the restrictions on transfer of the Escrow Receipt set forth herein and in the Escrow Agreement. (b) The Initial Certificates shall be issued only in fully registered form without coupons in minimum denominations of $100,000 or integral multiples of $1,000 in excess thereof, except that one Certificate may be issued in a denomination of less than $100,000. The Exchange Certificates shall be issued only in fully registered form without coupons in minimum denominations of $1,000 or integral multiples thereof. Each Certificate shall be dated the date of its authentication. The aggregate Fractional Undivided Interest of Certificates shall not at any time exceed $111,716,000. 18 (c) The Initial Certificates shall be issued initially in the form of one or more permanent global Certificates in registered form, substantially in the form set forth as Exhibit A hereto with such applicable legends as are provided for in clauses (a) and (b) of Section 3.02 (each, a "U.S. Global Certificate"), duly executed and authenticated by the Trustee as hereinafter provided. Each U.S. Global Certificate will be registered in the name of a nominee for DTC and deposited with the Trustee, as custodian for DTC. The aggregate principal amount of any U.S. Global Certificate may from time to time be increased or decreased by adjustments made on the records of DTC or its nominee, or of the Trustee, as custodian for DTC or its nominee, as hereinafter provided. (d) Any Initial Certificates transferred in reliance on Regulation S shall be issued in the form of a single global Certificate in registered form, substantially in the form set forth as Exhibit A hereto with such applicable legends as are provided for in clause (b) of Section 3.02 (the "Offshore Global Certificate") duly executed and authenticated by the Trustee as hereinafter provided. The U.S. Global Certificates and the Offshore Global Certificates are sometimes referred to as the "Global Certificates". (e) [Reserved] (f) [Reserved] (g) The Certificates shall be in registered form and shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner, all as determined by the officers executing such Certificates, as evidenced by their execution of such Certificates. (h) The Exchange Certificates shall be issued in the form of one or more Global Certificates substantially in the form of Exhibit A hereto (each, a "Global Exchange Certificate"), except that (i) the Private Placement Legend (hereinafter defined) shall be omitted and (ii) such Exchange Certificates shall contain such appropriate insertions, omissions, substitutions and other variations from the form set forth in Exhibit A hereto relating to the nature of the Exchange Certificates as the Responsible Officer of the Trustee executing such Exchange Certificates on behalf of the Trust may determine, as evidenced by such officer's execution on behalf of the Trust of such Exchange Certificates. Such Global Exchange Certificates shall be in registered form and be registered in the name of DTC and deposited with the Trustee, at its Corporate Trust Office, as custodian for DTC. The aggregate principal amount of any Global Exchange Certificate may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC for such Global Exchange Certificate, which adjustments shall be conclusive as to the aggregate principal amount of any such Global Exchange Certificate. Subject to clause (i) and (ii) of the first sentence of this Section 3.01(h), the terms hereof applicable to U.S. Global Certificates and/or Global Certificates shall apply to the Global Exchange Certificates mutatis mutandis. Section 3.02. Restrictive Legends. 19 (a) Subject to Section 3.01 and 3.06, each U.S. Global Certificate and each U.S. Physical Certificate shall bear the following legend (the "Private Placement Legend") on the face thereof: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO ATA OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CASE THIS CERTIFICATE IS IN DEFINITIVE FORM, IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE APPLICABLE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE CERTIFICATES PURSUANT TO CLAUSE 2(E) ABOVE OR UPON ANY TRANSFER OF THE CERTIFICATES UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "OFFSHORE 20 TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS. (b) Each Global Certificate shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN. Section 3.03. Authentication of Certificates. (a) On the Issuance Date, the Trustee shall duly execute, authenticate and deliver Certificates in authorized denominations in the aggregate amount of $111,716,000, evidencing the entire ownership interest of the Trust, which amount equals the maximum aggregate principal amount of Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. (b) No Certificate shall be entitled to any benefit under this Agreement or be valid or obligatory for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. 21 Section 3.04. Transfer and Exchange. (a) The Trustee shall cause to be kept at the office or agency to be maintained by it in accordance with the provisions of Section 7.11 of this Agreement a register (the "Register") for the Certificates in which, subject to such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of the Certificates and of transfers and exchanges of the Certificates as herein provided. The Trustee shall initially be the registrar (the "Registrar") for the purpose of registering the Certificates and transfers and exchanges of the Certificates as herein provided. A Certificateholder may transfer a Certificate by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Agreement, including providing a written certificate or other evidence of compliance with any restrictions on transfer, in form satisfactory to the Trustee and the Registrar. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Certificateholder only upon, final acceptance and registration of the transfer by the Registrar in the Register. Prior to the registration of any transfer by a Certificateholder as provided herein, the Trustee shall treat the person in whose name the Certificate is registered as the owner thereof for all purposes, and the Trustee shall not be affected by notice to the contrary. Furthermore, DTC shall, by acceptance of a Global Certificate, agree that transfers of beneficial interests in such Global Certificate may be effected only through a book-entry system maintained by DTC (or its agent), and that ownership of a beneficial interest in the Certificate shall be required to be reflected in a book entry. When Certificates are presented to the Registrar with a request to register the transfer thereof or to exchange them for an equal face amount of Certificates of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges in accordance with the terms, conditions and restrictions hereof, the Trustee shall execute and authenticate Certificates at the Registrar's request. No service charge shall be made to a Certificateholder for any registration of transfer or exchange of the Certificates, but the Trustee shall require payment of a sum sufficient to cover any tax or similar governmental charge payable in connection therewith. All Certificates surrendered for registration of transfer or exchange shall be canceled and subsequently destroyed by the Trustee. Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates. (a) Members of, or participants in, DTC ("Agent Members") shall have no rights under this Agreement with respect to any Global Certificate held on their behalf by DTC, or the Trustee as its custodian, and DTC may be treated by the Trustee and any agent of the Trustee as the absolute owner of such Global Certificate for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Trustee or any agent of the Trustee from giving effect to any written certification, proxy or other authorization furnished by DTC or shall impair, as between DTC and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Certificate. Upon the issuance of any Global Certificate, the Registrar or its duly appointed agent shall record a nominee of DTC as the registered holder of such Global Certificate. 22 (b) Transfers of any Global Certificate shall be limited to transfers of such Global Certificate in whole, but not in part, to nominees of DTC, its successor or such successor's nominees. Beneficial interests in the U.S. Global Certificate and any Offshore Global Certificate may be transferred in accordance with the rules and procedures of DTC and the provisions of Section 3.06. Beneficial interests in the U.S. Global Certificate or an Offshore Global Certificate shall be delivered to all beneficial owners in the form of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, if (i) the Company notifies the Trustee in writing that DTC is unwilling or unable to discharge properly its responsibilities as depositary for the U.S. Global Certificate or such Offshore Global Certificate, as the case may be, and the Company is unable to locate a qualified successor depositary within 90 days of such notice or (ii) after the occurrence of an Event of Default, beneficial owners of the U.S. Global Certificate or Offshore Global Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust, by Direction of such Certificateholders delivered to the Company and the Trustee, advise the Company, the Trustee and DTC through its Clearing Agency Participants in writing that the continuation of a book-entry system through DTC is no longer in the best interests of the Certificateholders, then the Trustee shall notify all owners of beneficial interests in the U.S. Global Certificate or an Offshore Global Certificate, through DTC, of the occurrence of any such event and the availability of definitive Certificates. (c) Any beneficial interest in one of the Global Certificates that is transferred to a Person who takes delivery in the form of an interest in the other Global Certificate will, upon such transfer, cease to be an interest in such Global Certificate and become an interest in another Global Certificate and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Certificate for as long as it remains such an interest. (d) In connection with the transfer of the entire U.S. Global Certificate or an entire Offshore Global Certificate to the beneficial owners thereof pursuant to paragraph (b) of this Section 3.05, such U.S. Global Certificate or Offshore Global Certificate, as the case may be, shall be deemed to be surrendered to the Trustee for cancellation, and the Trustee shall execute, authenticate and deliver, to each beneficial owner identified by DTC in exchange for its beneficial interest in such U.S. Global Certificate or Offshore Global Certificate, as the case may be, an equal aggregate principal amount of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, of authorized denominations. (e) Any U.S. Physical Certificate delivered in exchange for an interest in the U.S. Global Certificate pursuant to paragraph (b) of this Section 3.05 shall, except as otherwise provided by paragraph (f) of Section 3.06, bear the Private Placement Legend. (f) Any Offshore Physical Certificate delivered in exchange for an interest in an Offshore Global Certificate pursuant to paragraph (b) of this Section shall, except as otherwise provided by paragraph (f) of Section 3.06, bear the applicable legend regarding transfer restrictions set forth in Section 3.02(a). (g) The registered holder of the U.S. Global Certificate or any Offshore Global Certificate may grant proxies and otherwise authorize any Person, including Agent 23 Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Agreement or the Certificates. Section 3.06. Special Transfer Provisions. Unless and until (i) an Initial Certificate is sold under an effective Shelf Registration Statement, or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case pursuant to the terms of the Registration Rights Agreement, the following provisions shall apply to the Initial Certificates: (a) [Reserved] (b) Transfers to QIBS. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Certificate to a QIB (excluding Non-U.S. Persons): (i) If the Initial Certificate to be transferred consists of an interest in any Offshore Global Certificate prior to the Regulation S Restricted Date, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of U.S. Physical Certificate or delivered a certificate to the Trustee in the form of Exhibit E hereto stating, or has otherwise advised the Trustee and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who, in the case of an Offshore Global Certificate transferred prior to the Regulation S Restricted Date, has signed the certification provided for in Exhibit E hereto, stating, or has otherwise advised the Trustee and the Registrar in writing, that it is purchasing the Initial Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it, or the Person on whose behalf it is acting with respect to any such account, is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and has been advised of the applicable transfer restrictions relating to the Initial Certificates and acknowledges that it has received such information regarding the Trust and/or the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) Upon receipt by the Registrar of the documents referred to in clause (i) above and instructions given in accordance with DTC's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date of such transfer and an increase in the principal amount of the U.S. Global Certificate in an amount equal to the principal amount of the interests in the Offshore Global Certificate being transferred, and the Trustee shall decrease the amount of such Offshore Global Certificate so transferred. (c) Transfers of Interests in the Offshore Global Certificate on or after the Regulation S Restricted Date. The Registrar shall register any transfer of interests in the 24 Offshore Global Certificate on or after the Regulation S Restricted Date without requiring any additional certification. (d) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any registration of any transfer of an Initial Certificate to a Non-U.S. Person: (i) The Registrar shall register any proposed transfer of a U.S. Global Certificate to any Non-U.S. Person, upon receipt of a certificate substantially in the form of Exhibit B hereto from the proposed transferor. The Registrar shall promptly send a copy of such certificate to the Company. (ii) (A) Upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions in accordance with DTC's and the Registrar's procedures, the Registrar shall reflect on its books and records the date of such transfer and shall decrease the principal amount of any such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and (B) upon receipt by the Registrar of instructions given in accordance with DTC's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Offshore Global Certificate in an amount equal to the principal amount of the U.S. Global Certificate to be transferred, and the Trustee shall decrease the amount of such U.S. Global Certificate. (e) Private Placement Legend. Upon the transfer, exchange or replacement of Certificates not bearing the Private Placement Legend, the Registrar shall deliver Certificates that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Certificates bearing the Private Placement Legend, the Registrar shall deliver only Certificates that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (a)(i)(x) or (e)(ii) of this Section 3.06 exist or (ii) there is delivered to the Registrar an Opinion of Counsel to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (f) General. By its acceptance of any Certificate bearing the Private Placement Legend, each Holder of such a Certificate acknowledges the restrictions on transfer of such Certificate set forth in this Agreement and agrees that it will transfer such Certificate only as provided in this Agreement. The Registrar shall not register a transfer of any Certificate unless such transfer complies with the restrictions on transfer of such Certificate set forth in this Agreement. In connection with any transfer of Certificates, each Certificateholder agrees by its acceptance of the Certificates to furnish the Registrar or the Trustee such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine the sufficiency of any such certifications, legal opinions or other information. 25 Until such time as no Certificates remain Outstanding, the Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 3.05 or this Section 3.06. The Trustee, if not the Registrar at such time, shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate is surrendered to the Registrar, or the Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate, and (b) there is delivered to the Registrar and the Trustee such security, indemnity or bond, as may be required by them to save each of them harmless, then, in the absence of notice to the Registrar or the Trustee that such destroyed, lost or stolen Certificate has been acquired by a protected purchaser, and provided that the requirements of Section 8-405 of the Uniform Commercial Code in effect in any applicable jurisdiction are met, the Trustee shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate or Certificates, in authorized denominations and of like Fractional Undivided Interest. In connection with the issuance of any new Certificate under this Section 3.07, the Trustee shall require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and the Registrar) connected therewith. Any duplicate Certificate issued pursuant to this Section 3.07 shall constitute conclusive evidence of the appropriate Fractional Undivided Interest in the related Trust, as if originally issued, whether or not the lost stolen or destroyed Certificate shall be found at any time. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates. Section 3.08. Persons Deemed Owners. Prior to due presentment of a Certificate for registration of transfer, the Trustee, the Registrar, and any Paying Agent of the Trustee may treat the Person in whose name any Certificate is registered (as of the day of determination) as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 4.02 and for all other purposes whatsoever, and neither the Trustee, the Registrar, nor any Paying Agent of the Trustee shall be affected by any notice to the contrary. Section 3.09. Cancellation. All Certificates surrendered for payment or transfer or exchange shall, if surrendered to any Person party hereto other than the Registrar, be delivered to the Registrar for cancellation. No Certificates shall be authenticated in lieu of or in exchange for any Certificates cancelled as provided in this Section, except as expressly permitted by this Agreement. All cancelled Certificates held by the Registrar shall be destroyed and a certification of their destruction delivered to the Trustee. Section 3.10. Limitation of Liability for Payments. All payments or distributions made to Certificateholders shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such 26 payments in accordance with the terms of Article IV of this Agreement. Each Certificateholder, by its acceptance of a Certificate, agrees that it will look solely to the income and proceeds from the Trust Property for any payment or distribution due to such Certificateholder pursuant to the terms of this Agreement and that it will not have any recourse to the Company, the Trustee, the Loan Trustee, the Liquidity Provider, the Owner Trustees or the Owner Participants, except as otherwise expressly provided herein or in the Intercreditor Agreement. The Company is a party to this Agreement solely for purposes of meeting the requirements of the Trust Indenture Act. Section 3.11. Temporary Certificates. Until definitive Certificates are ready for delivery, the Trustee shall authenticate temporary Certificates. Temporary Certificates shall be substantially in the form of definitive Certificates but may have insertions, substitutions, omissions and other variations determined to be appropriate by the officers executing the temporary Certificates, as evidenced by their execution of such temporary Certificates. If temporary Certificates are issued, the Trustee will cause definitive Certificates to be prepared without unreasonable delay. After the preparation of definitive Certificates, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of the temporary Certificates at the office or agency of the Trustee designated for such purpose pursuant to Section 7.11, without charge to the Certificateholder. Upon surrender for cancellation of any one or more temporary Certificates, the Trustee shall execute, authenticate and deliver in exchange therefor a like face amount of definitive Certificates of authorized denominations. Until so exchanged, the temporary Certificates shall be entitled to the same benefits under this Agreement as definitive Certificates. ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account. (a) The Trustee shall establish and maintain on behalf of the Certificateholders a Certificate Account as one or more non-interest-bearing accounts. The Trustee shall hold the Certificate Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when a Scheduled Payment is made to the Trustee under the Intercreditor Agreement, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Scheduled Payment into the Certificate Account. (b) The Trustee shall establish and maintain on behalf of the Certificateholders a Special Payments Account as one or more accounts, which shall be non-interest-bearing except as provided in Section 4.04. The Trustee shall hold the Special Payments Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when one or more Special Payments are made to the Trustee under the Intercreditor Agreement, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Special Payments into the Special Payments Account. 27 (c) The Trustee shall cause the Subordination Agent to present to the Loan Trustee to which an Equipment Note relates such Equipment Note on the date of its stated final maturity or, in the case of any Equipment Note which is to be redeemed in whole pursuant to the relevant Indenture, on the applicable redemption date under such Indenture. Section 4.02. Distributions from Certificate Account and Special Payments Account. (a) On each Regular Distribution Date or as soon thereafter as the Trustee has confirmed receipt of the payment of all or any part of the Scheduled Payments due on such date, the Trustee shall distribute out of the Certificate Account the entire amount deposited therein pursuant to Section 4.01 (a). There shall be so distributed to each Certificateholder of record on the Record Date with respect to such Regular Distribution Date (other than as provided in Section 11.01 concerning the final distribution), by check mailed to such Certificateholder at the address appearing in the Register, such Certificateholder's pro rata share (based on the aggregate Fractional Undivided Interest in the Trust held by such Certificateholder) of the aggregate amount in the Certificate Account, except that, with respect to Certificates registered on the Record Date in the name of the nominee of DTC (initially, such nominee to be Cede & Co.), such distribution shall be made by wire transfer in immediately available funds to the account designated by such nominee. (b) On each Special Distribution Date with respect to any Special Payment or as soon thereafter as the Trustee has confirmed receipt of any Special Payments due on the Equipment Notes or realized upon the sale of such Equipment Notes, the Trustee shall distribute out of the Special Payments Account the entire amount deposited therein pursuant to Section 4.01(b) of such Special Payment. There shall be so distributed to each Certificateholder of record on the Record Date with respect to such Special Distribution Date (other than as provided in Section 11.01 concerning the final distribution), by check mailed to such Certificateholder at the address appearing in the Register, such Certificateholder's pro rata share (based on the aggregate Fractional Undivided Interest in the Trust held by such Certificateholder) of the aggregate amount in the Special Payments Account on account of such Special Payment, except that, with respect to Certificates registered on the Record Date in the name of the nominee of DTC (initially, such nominee to be Cede & Co.), such distribution shall be made by wire transfer in immediately available funds to the account designated by such nominee. (c) The Trustee shall, at the expense of the Company, cause notice of each Special Payment to be mailed to each Certificateholder at his address as it appears in the Register. In the event of redemption or purchase of Equipment Notes held in the Trust, such notice shall be mailed not less than 20 days prior to the date any such Special Payment is scheduled to be distributed. In the event the Company is required to pay a Special Redemption Premium to the Trustee under the Note Purchase Agreement, such notice shall be mailed, together with the notice by the Escrow Paying Agent under Section 2.06 of the Escrow Agreement, not less than 20 days prior to the Special Distribution Date for such amount, which Special Distribution Date shall be the date of a Prepayment Withdrawal (as defined in the Escrow Agreement) or the Final Withdrawal Date. In the case of any other Special Payments, such notice shall be mailed as soon as practicable after the Trustee has confirmed that it has received 28 funds for such Special Payment, stating the Special Distribution Date for such Special Payment which shall occur not less than 15 days after the date of such notice and as soon as practicable thereafter. Notices mailed by the Trustee shall set forth: (i) the Special Distribution Date and the Record Date therefor (except as otherwise provided in Section 11.01), (ii) the amount of the Special Payment for each $1,000 face amount Certificate and the amount thereof constituting principal, premium, if any, and interest, (iii) the reason for the Special Payment, and (iv) if the Special Distribution Date is the same date as a Regular Distribution Date for the Certificates, the total amount to be received on such date for each $1,000 face amount Certificate. If the amount of (i) premium, if any, payable upon the redemption or purchase of an Equipment Note or (ii) the Special Redemption Premium, if any, has not been calculated at the time that the Trustee mails notice of a Special Payment, it shall be sufficient if the notice sets forth the other amounts to be distributed and states that any premium received will also be distributed. If any redemption of the Equipment Notes held in the Trust is cancelled, the Trustee, as soon as possible after learning thereof, shall cause notice thereof to be mailed to each Certificateholder at its address as it appears on the Register. Section 4.03. Statements to Certificateholders. (a) On each Regular Distribution Date and Special Distribution Date, the Trustee will include with each distribution to Certificateholders a statement, giving effect to such distribution to be made on such Regular Distribution Date or Special Distribution Date, as the case may be, setting forth the following information (in the case of a Special Payment, including any Special Redemption Premium, reflecting in part the information provided by the Escrow Paying Agent under the Escrow Agreement) (per a $1,000 face amount Certificate as to clauses (ii), (iii), (iv) and (v) below): (i) the aggregate amount of funds distributed on such Distribution Date hereunder and under the Escrow Agreement, indicating the amount allocable to each source including any portion thereof paid by the Liquidity Provider; (ii) the amount of such distribution allocable to principal and the amount allocable to premium (including any Special Redemption Premium), if any; (iii) the amount of such distribution hereunder allocable to interest; (iv) the amount of such distribution under the Escrow Agreement allocable to interest on the Deposits; 29 (v) the amount of such distribution under the Escrow Agreement allocable to the principal of the unused Deposits; and (vi) the Pool Balance and the Pool Factor. With respect to the Certificates registered in the name of a Clearing Agency or its nominee, on the Record Date prior to each Distribution Date, the Trustee will request from the Clearing Agency a securities position listing setting forth the names of all the Clearing Agency Participants reflected on the Clearing Agency's books as holding interests in the Certificates on such Record Date. On each Distribution Date, the Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of Certificates. (b) Within a reasonable period of time after the end of each calendar year but not later than the latest date permitted by law, the Trustee shall furnish to each Person who at any time during such calendar year was a Certificateholder of record a statement containing the sum of the amounts determined pursuant to clauses (a)(i) through (a)(v), inclusive, above with respect to the Trust for such calendar year or, in the event such Person was a Certificateholder of record during a portion of such calendar year, for the applicable portion of such year, and such other items as are readily available to the Trustee and which a Certificateholder shall reasonably request as necessary for the purpose of such Certificateholder's preparation of its federal income tax returns. With respect to Certificates registered in the name of a Clearing Agency or its nominee, such report and such other items shall be prepared on the basis of information supplied to the Trustee by the Clearing Agency Participants and shall be delivered by the Trustee to such Clearing Agency Participants to be available for forwarding by such Clearing Agency Participants. (c) Promptly following (i) the Delivery Period Termination Date, if there has been any change in the information set forth in clauses (x), (y) and (z) below from that set forth on pages 34 and Appendix III of the Private Placement Memorandum, and (ii) any early redemption or purchase of, or any default in the payment of principal or interest in respect of, any of the Equipment Notes held in the Trust, or any Final Withdrawal, the Trustee shall furnish to Certificateholders of record on such date a statement setting forth (x) the expected Pool Balances for each subsequent Regular Distribution Date following the Delivery Period Termination Date, (y) the related Pool Factors for such Regular Distribution Dates and (z) the expected principal distribution schedule of the Equipment Notes, in the aggregate, held as Trust Property at the date of such notice. With respect to the Certificates registered in the name of a Clearing Agency or its nominee, on the Delivery Period Termination Date, the Trustee will request from the Clearing Agency a securities position listing setting forth the names of all the Clearing Agency Participants reflected on the Clearing Agency's books as holding interests in the Certificates on such date. The Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of Certificates. Section 4.04. Investment of Special Payment Moneys. Any money received by the Trustee pursuant to Section 4.01(b) representing a Special Payment which is not to be 30 promptly distributed shall, to the extent practicable, be invested in Permitted Investments by the Trustee (and such Permitted Investments shall be registered in the name of the Trustee) as directed in writing by the Company pending distribution of such Special Payment pursuant to Section 4.02. Any investment made pursuant to this Section 4.04 shall be in such Permitted Investments having maturities not later than the date that such moneys are required to be used to make the payment required under Section 4.02 on the applicable Special Distribution Date and the Trustee shall hold any such Permitted Investments until maturity. The Trustee shall have no liability with respect to any investment made pursuant to this Section 4.04, other than by reason of the willful misconduct or negligence of the Trustee. All income and earnings from such investments shall be distributed on such Special Distribution Date as part of such Special Payment. ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence. The Company, at its own cost and expense, will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises, except as otherwise specifically permitted in Section 5.02; provided, however, that the Company shall not be required to preserve any right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company. Section 5.02. Consolidation, Merger, Etc. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease substantially all of its assets as an entirety to any Person unless: (a) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall be organized and validly existing under the laws of the United States of America or any state thereof or the District of Columbia and a "citizen of the United States" (as defined in Section 40102(a)(15) of Title 49 of the United States Code) holding an air carrier operating certificate issued by the Federal Aviation Administration, or any successor agency thereto (the "FAA"), pursuant to Chapter 447 of Title 49, United States Code, authorizing the operation in air transportation of aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo pursuant to Part 121 of the FAA's regulations (14 CFR Part 121); (b) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall execute and deliver to the Trustee a duly authorized, valid, binding and enforceable agreement in form and substance reasonably satisfactory to the Trustee containing an assumption by such successor corporation or Person of the due and punctual performance and observance of each covenant and condition of the Note Documents, the Note Purchase Agreement, the Other Pass Through Trust Agreements and this Agreement to be performed or observed by the Company; 31 (c) immediately after giving effect to such transaction, no Event of Default applicable to the Certificates shall have occurred and be continuing; and (d) the Company shall have delivered to the Trustee an Officers' Certificate of the Company and an Opinion of Counsel of the Company (which may be the Company's General Counsel) reasonably satisfactory to the Trustee, each stating that such consolidation, merger, conveyance, transfer or lease and the assumption agreement mentioned in clause (b) above comply with this Section 5.02 and that all conditions precedent herein provided for relating to such transaction have been complied with. (e) Upon any consolidation or merger, or any conveyance, transfer or lease of substantially all of the assets of the Company as an entirety in accordance with this Section 5.02, the successor corporation or Person formed by such consolidation or into which the Company is merged or to which such conveyance, offer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement with the same effect as if such successor corporation or Person had been named as the Company herein. No such conveyance, transfer or lease of substantially all of the assets of the Company as an entirety shall have the effect of releasing the Company or any successor corporation or Person which shall theretofore have become such in the manner prescribed in this Section 5.02 from its liability in respect of this Agreement, the Note Purchase Agreement or any Note Document to which it is a party. Section 5.03. Rule 144A(d)(4) Information. So long as any of the Certificates are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, at any time when the Guarantor is neither subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company and the Guarantor will provide to any holder of such restricted securities, or to any prospective purchaser of such restricted securities designated by a holder, upon the request of such holder or prospective purchaser, any information required to be delivered to holders and prospective purchasers of the Certificates pursuant to Rule 144A(d)(4) under the Securities Act. ARTICLE VI DEFAULT Section 6.01. Events of Default. (a) Exercise of Remedies. Upon the occurrence and during the continuation of any Indenture Default under any Indenture, the Trustee may, to the extent it is the Controlling Party at such time (as determined pursuant to the Intercreditor Agreement), direct the exercise of remedies as provided in the Intercreditor Agreement. (b) Purchase Rights of Certificateholders. By acceptance of its Certificate, each Certificateholder agrees that at any time after the occurrence and during the continuation of a Triggering Event: 32 (i) each Class B Certificateholder shall have the right to purchase all, but not less than all, of the Certificates upon ten days' written notice to the Trustee and each other Class B Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class B Certificateholder notifies such purchasing Class B Certificateholder that such other Class B Certificateholder wants to participate in such purchase, then such other Class B Certificateholder may join with the purchasing Class B Certificateholder to purchase all, but not less than all, of the Certificates pro rata based on the Fractional Undivided Interest in the Class B Trust held by each such Class B Certificateholder and (B) if prior to the end of such ten-day period any other Class B Certificateholder fails to notify the purchasing Class B Certificateholder of such other Class B Certificateholder's desire to participate in such a purchase, then such other Class B Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b); and (ii) each Class C Certificateholder shall have the right (which shall not expire upon any purchase of the Certificates pursuant to clause (i) above) to purchase all, but not less than all, of the Certificates and the Class B Certificates upon ten days' written notice to the Trustee, the Class B Trustee and each other Class C Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class C Certificateholder notifies such purchasing Class C Certificateholder that such other Class C Certificateholder wants to participate in such purchase, then such other Class C Certificateholder may join with the purchasing Class C Certificateholder to purchase all, but not less than all, of the Certificates and the Class B Certificates pro rata based on the Fractional Undivided Interest in the Class C Trust, taken as a whole, held by each such Class C Certificateholder and (B) if prior to the end of such ten-day period any other Class C Certificateholder fails to notify the purchasing Class C Certificateholder of such other Class C Certificateholder's desire to participate in such a purchase, then such other Class C Certificateholder shall lose its right to purchase the Certificates pursuant to this Section 6.01(b); The purchase price with respect to the Certificates shall be equal to the Pool Balance of the Certificates, together with accrued and unpaid interest thereon to the date of such purchase, without premium, but including any other amounts then due and payable to the Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement or any Note Document or on or in respect of the Certificates; provided, however, that (i) if such purchase occurs after the Record Date with respect to the Final Withdrawal Date, such purchase price shall be reduced by the aggregate amount of unused Deposits and interest to be distributed under the Escrow Agreement (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date) and (ii) if such purchase occurs after a Record Date but prior to the Distribution Date relating to such Record Date, such purchase price shall be reduced by the amount to be distributed hereunder on such related Distribution Date (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date); provided, further, that no such purchase of Certificates shall be effective unless the purchaser shall certify to the Trustee that contemporaneously with such purchase, such purchaser is purchasing, pursuant to the terms of this Agreement and the Other Pass Through Trust Agreement, the 33 Certificates and the Class B Certificates which are senior to the securities held by such purchaser. Each payment of the purchase price of the Certificates referred to in the first sentence hereof shall be made to an account or accounts designated by the Trustee and each such purchase shall be subject to the terms of this Section. Each Certificateholder agrees by its acceptance of its Certificate that it will, subject to Section 3.04 hereof, upon payment from such Class B Certificateholder(s) or Class C Certificateholder(s), as the case may be, of the purchase price set forth in the first sentence of this paragraph, forthwith sell, assign, transfer and convey to the purchaser thereof (without recourse, representation or warranty of any kind except for its own acts), all of the right, title, interest and obligation of such Certificateholder in, this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facility, the Note Documents, the Note Purchase Agreement and all Certificates and Escrow Receipts held by such Certificateholder (excluding all right, title and interest under any of the foregoing to the extent such right, title or interest is with respect to an obligation not then due and payable as respects any action or inaction or state of affairs occurring prior to such sale) and the purchaser shall assume all of such Certificateholder's obligations under this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facility, the Note Documents and the Note Purchase Agreement and all such Certificates and Escrow Receipts. The Certificates will be deemed to be purchased on the date payment of the purchase price is made notwithstanding the failure of the Certificateholders to deliver any Certificates (whether in the form of Physical Certificates or beneficial interests in Global Certificates) and, upon such a purchase, (i) the only rights of the Certificateholders will be to deliver the Certificates to the purchaser and receive the purchase price for such Certificates and (ii) if the purchaser shall so request such Certificateholder will comply with all of the provisions of Section 3.04 hereof to enable new Certificates to be issued to the purchaser in such denominations as it shall request. All charges and expenses in connection with the issuance of any such new Certificates shall be borne by the purchaser thereof. As used in this Section 6.01(b), the terms "Class B Certificate", "Class B Certificateholder", "Class B Trust", "Class B Trustee", "Class C Certificateholder", "Class C Certificate", "Class C Trust" and "Class C Trustee", shall have the respective meanings assigned to such terms in the Intercreditor Agreement. Section 6.02. Incidents of Sale of Equipment Notes. Upon any sale of all or any part of the Equipment Notes made either under the power of sale given under this Agreement or otherwise for the enforcement of this Agreement, the following shall be applicable: (1) Certificateholders and Trustee May Purchase Equipment Notes. Any Certificateholder, the Trustee in its individual or any other capacity or any other Person may bid for and purchase any of the Equipment Notes, and upon compliance with the terms of sale, may hold, retain, possess and dispose of such Equipment Notes in their own absolute right without further accountability. (2) Receipt of Trustee Shall Discharge Purchaser. The receipt of the Trustee or of the officer making such sale shall be a sufficient discharge to any purchaser for his purchase money, and, after paying such purchase money and receiving such receipt, such purchaser or its personal representative or assigns shall not be obliged to see to the 34 application of such purchase money, or be in any way answerable for any loss, misapplication or non-application thereof. (3) Application of Moneys Received upon Sale. Any moneys collected by the Trustee upon any sale made either under the power of sale given by this Agreement or otherwise for the enforcement of this Agreement shall be applied as provided in Section 4.02. Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit. If there shall be a failure to make payment of the principal of, premium, if any, or interest on any Equipment Note, or if there shall be any failure to pay Rent (as defined in the relevant Lease) under any Lease when due and payable, then the Trustee, in its own name, and as trustee of an express trust, as holder of such Equipment Notes, to the extent permitted by and in accordance with the terms of the Intercreditor Agreement and the rights of the Controlling Party thereunder, the Note Purchase Agreement and the Note Documents (subject to the rights of the applicable Owner Trustee or Owner Participant to cure any such failure to pay principal of, or premium, if any, or interest on any Equipment Note or to pay Rent under any Lease in accordance with the applicable Indenture), shall be entitled and empowered to institute any suits, actions or proceedings at law, in equity or otherwise, for the collection of the sums so due and unpaid on such Equipment Notes or under such Lease and may prosecute any such claim or proceeding to judgment or final decree with respect to the whole amount of any such sums so due and unpaid. Section 6.04. Control by Certificateholders. Subject to Section 6.03 and the Intercreditor Agreement and the rights of the Controlling Party thereunder, the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to the Trust or pursuant to the terms of the Intercreditor Agreement, or exercising any trust or power conferred on the Trustee under this Agreement or the Intercreditor Agreement, including any right of the Trustee as Controlling Party under the Intercreditor Agreement or as holder of the Equipment Notes, provided that: (1) such Direction shall not be in conflict with any rule of law or with this Agreement and would not involve the Trustee in personal liability or expense, (2) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the Certificateholders not taking part in such Direction, and (3) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such Direction. Section 6.05. Waiver of Past Defaults. Subject to the Intercreditor Agreement and the rights of the Controlling Party thereunder, the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust (i) may on behalf of all of the Certificateholders waive any past Event of Default hereunder and its consequences or (ii) if the Trustee is the Controlling Party, may direct the Trustee to 35 instruct the applicable Loan Trustee to waive any past Indenture Default under any Indenture and its consequences, and thereby annul any Direction given by such Certificateholders or the Trustee to such Loan Trustee with respect thereto, except a default: (1) in the deposit of any Scheduled Payment or Special Payment under Section 4.01 or in the distribution of any payment under Section 4.02 on the Certificates, or (2) in the payment of the principal of (premium, if any) or interest on the Equipment Notes, or (3) in respect of a covenant or provision hereof which under Article IX hereof cannot be modified or amended without the consent of each Certificateholder holding an Outstanding Certificate affected thereby. Upon any such waiver, such default shall cease to exist with respect to the Certificates and any Event of Default arising therefrom shall be deemed to have been cured for every purpose and any direction given by the Trustee on behalf of the Certificateholders to the relevant Loan Trustee shall be annulled with respect thereto; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Upon any such waiver, the Trustee shall vote the Equipment Notes issued under the relevant Indenture to waive the corresponding Indenture Default. Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding, including, without limitation, Section 6.07 hereof, but subject to the Intercreditor Agreement, the right of any Certificateholder to receive distributions of payments required pursuant to Section 4.02 hereof on the Certificates when due, or to institute suit for the enforcement of any such payment on or after the applicable Regular Distribution Date or Special Distribution Date, shall not be impaired or affected without the consent of such Certificateholder. Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions. A Certificateholder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise with respect to this Agreement, for the appointment of a receiver or for the enforcement of any other remedy under this Agreement, unless: (1) such Certificateholder previously shall have given written notice to the Trustee of a continuing Event of Default; (2) Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than 25% of the Trust shall have requested the Trustee in writing to institute such action, suit or proceeding and shall have offered to the Trustee indemnity as provided in Section 7.02(e); (3) the Trustee shall have refused or neglected to institute such an action, suit or proceeding for 60 days after receipt of such notice, request and offer of indemnity; and 36 (4) no Direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. (5) It is understood and intended that no one or more of the Certificateholders shall have any right in any manner whatsoever hereunder or under the Certificates to (i) surrender, impair, waive, affect, disturb or prejudice any property in the Trust Property or the lien of any Indenture on any property subject thereto, or the rights of the Certificateholders or the holders of the related Equipment Notes, (ii) obtain or seek to obtain priority over or preference with respect to any other such Certificateholder or (iii) enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all the Certificateholders subject to the provisions of this Agreement. Section 6.08. Remedies Cumulative. Every remedy given hereunder to the Trustee or to any of the Certificateholders shall not be exclusive of any other remedy or remedies, and every such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter given by statute, law, equity or otherwise. Section 6.09. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Agreement, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or the Guarantor. ARTICLE VII THE TRUSTEE Section 7.01. Notice of Defaults. As promptly as practicable after, and in any event within 90 days after the occurrence of any default (as such term is defined below) hereunder actually known to the Trustee, the Trustee shall transmit by mail to the Company, the related Owner Trustees, the related Loan Trustees and the Certificateholders in accordance with Section 313(c) of the Trust Indenture Act, notice of such default hereunder actually known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (premium, if any) or interest on any Equipment Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Certificateholders. For the purpose of this Section, the term "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default. 37 Section 7.02. Certain Rights of Trustee. Subject to the provisions of Section 315 of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Request; (c) whenever in the administration of this Agreement or the Intercreditor Agreement the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate of the Company, any Owner Trustee or any Loan Trustee; (d) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or the Intercreditor Agreement at the request or direction of any of the Certificateholders pursuant to this Agreement or the Intercreditor Agreement unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the cost, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, or report, notice, request, direction, consent, order, bond, debenture or other paper or document; (g) the Trustee may execute any of the trusts or powers under this Agreement or the Intercreditor Agreement or perform any duties under this Agreement or the Intercreditor Agreement either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it under this Agreement or the Intercreditor Agreement; (h) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust relating to the time, method and place of conducting any 38 proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement or the Intercreditor Agreement; (i) the Trustee shall not be required to expend or risk its own funds in the performance of any of its duties under this Agreement, or in the exercise of any of its rights or powers, if it shall have reason to believe that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it; and (j) except during the continuance of an Event of Default, the Trustee undertakes and shall be responsible to perform only such duties as are specifically set forth herein and no implied covenants or obligations shall be read into this Agreement or be enforceable against Trustee. Section 7.03. Not Responsible for Recitals or Issuance of Certificates. The recitals contained herein and in the Certificates, except the certificates of authentication, shall not be taken as the statements of the Trustee, and the Trustee assumes no responsibility for their correctness. Subject to Section 7.14, the Trustee makes no representations as to the validity or sufficiency of this Agreement, the Note Purchase Agreement, any Note Documents, any Participation Agreement or any Intercreditor Agreement, the Delayed Funding Implementation Agreement, the Deposit Agreement, the Escrow Agreement and Equipment Notes or the Certificates, except that the Trustee hereby represents and warrants that this Agreement has been, and each Certificate, the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Note Purchase Agreement, the Escrow Agreement and each Certificate will be, executed, authenticated and delivered by one of its officers who is duly authorized to execute, authenticate and deliver such document on its behalf. Section 7.04. May Hold Certificates. The Trustee, any Paying Agent, Registrar or any of their Affiliates or any other agent, in their respective individual or any other capacity, may become the owner or pledgee of Certificates and subject to Sections 310(b) and 311 of the Trust Indenture Act, if applicable, may otherwise deal with the Company, the Guarantor, the Owner Trustees or the Loan Trustees with the same rights it would have if it were not Trustee, Paying Agent, Registrar or such other agent. Section 7.05. Money Held in Trust. Money held by the Trustee or the Paying Agent in trust hereunder need not be segregated from other funds except to the extent required herein or by law and neither the Trustee nor the Paying Agent shall have any liability for interest upon any such moneys except as provided for herein. Section 7.06. Compensation and Reimbursement. The Company agrees with respect to the trustee in its individual capacity: (1) to pay, or cause to be paid, to the Trustee compensation (as set out in a separate fee agreement between the Trustee and the Company) for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); 39 (2) except as otherwise expressly provided herein to reimburse, or cause to be reimbursed, the Trustee upon its request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Agreement or the Intercreditor Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith or as may be incurred due to the Trustee's breach of its representations and warranties set forth in Section 7.14; (3) to indemnify, or cause to be indemnified, the Trustee for, and to hold it harmless against, any loss, liability or expense (other than for or with respect to any tax) incurred without negligence, willful misconduct or bad faith, on its part, arising out of or in connection with the acceptance or administration of this Trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except for any such loss, liability or expense incurred by reason of the Trustee's breach of its representations and warranties set forth in Section 7.14. The Trustee shall notify the Company and the Guarantor promptly of any claim for which it may seek indemnity. The Company and the Guarantor shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel with the consent of the Company and the Guarantor and the Company and the Guarantor will pay the reasonable fees and expenses of such counsel. Neither the Company nor the Guarantor need pay for any settlement made without its consent; and (4) to indemnify, or cause to be indemnified, the Trustee, solely in its individual capacity, for, and to hold it harmless against, any tax (except to the extent the Trustee actually receives reimbursement therefor pursuant to the next paragraph, provided that no indemnification shall be available with respect to any tax attributable to the Trustee's compensation for serving as such) incurred without negligence, willful misconduct or bad faith, on its part, arising out of or in connection with the acceptance or administration of this Trust, including any costs and expenses incurred in contesting the imposition of any such tax. The Trustee, in its individual capacity, shall notify the Company and the Guarantor promptly of any claim for any tax for which it may seek indemnity. The Trustee shall permit the Company and the Guarantor to contest the imposition of such tax and the Trustee, in its individual capacity, shall cooperate in the defense. The Trustee, in its individual capacity, may have separate counsel with the consent of the Company and the Guarantor and the Company and the Guarantor will pay the reasonable fees and expenses of such counsel. Neither the Company nor the Guarantor need pay for any taxes paid, in settlement or otherwise, without its consent. (5) The Trustee shall be entitled to reimbursement from, and shall have a lien prior to the Certificates upon, the Trust Property for any tax incurred without negligence, bad faith or willful misconduct on its part, arising out of or in connection with the acceptance or administration of such Trust (other than any tax attributable to the Trustee's compensation for serving as such), including any costs and expenses incurred in contesting the imposition of any such tax. The Trustee shall notify the Company of any 40 claim for any tax for which it may seek reimbursement. The Trustee shall cooperate in the contest by the Company of any such claim. If the Trustee reimburses itself from the Trust Property for any such tax it will within 30 days mail a brief report setting forth the amount of such tax and the circumstances thereof to all Certificateholders as their names and addresses appear in the Register. As security for the performance of the obligations of the Company under this Section the Trustee shall have a lien prior to the Certificates upon the Trust Property. Section 7.07. Corporate Trustee Required, Eligibility. There shall at all times be a Trustee hereunder which shall be eligible to act as a trustee under Section 310(a) of the Trust Indenture Act and shall have a combined capital and surplus of at least $75,000,000 (or a combined capital and surplus in excess of $5,000,000 and the obligations of which, whether now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws of the United States, any State or Territory thereof or of the District of Columbia that has a combined capital and surplus of at least $75,000,000). If such corporation publishes reports of conditions at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 7.07, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of conditions so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.07 to act as Trustee, the Trustee shall resign immediately as Trustee in the manner and with the effect specified in Section 7.08. Section 7.08. Resignation and Removal: Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 7.09. (b) The Trustee may resign at any time as trustee by giving written notice thereof to the Company, the Authorized Agents, the Owner Trustees and the Loan Trustees. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Company, the Authorized Agents, the Owner Trustees, the Loan Trustees and the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust delivered to the Trustee, the Company, the Owner Trustees and the Loan Trustees. (d) If at any time: 41 (1) the Trustee shall fail to comply with Section 310 of the Trust Indenture Act after written request therefor by the Company or by any Certificateholder who has been a bona fide Certificateholder for at least six months; or (2) the Trustee shall cease to be eligible under Section 7.07 and shall fail to resign after written request therefor by the Company or by any such Certificateholder; or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any case, (i) the Company may remove the Trustee or (ii) any Certificateholder who has been a bona fide Certificateholder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If a Responsible Officer of the Trustee shall obtain actual knowledge of an Avoidable Tax (as hereinafter defined) which has been or is likely to be asserted, the Trustee shall promptly notify the Company and shall, within 30 days of such notification, resign as Trustee hereunder unless within such 30-day period the Trustee shall have received notice that the Company has agreed to pay such tax. The Company shall promptly appoint a successor Trustee in a jurisdiction where there are no Avoidable Taxes. As used herein, an "Avoidable Tax" means a state or local tax: (i) upon (w) the Trust, (x) the Trust Property, (y) Certificateholders or (z) the Trustee for which the Trustee is entitled to seek reimbursement from the Trust Property, and (ii) which would be avoided if the Trustee were located in another state, or jurisdiction within a state, within the United States. A tax shall not be an Avoidable Tax if the Company or any Owner Trustee shall agree to pay, and shall pay, such tax. (f) If the Trustee shall resign, be removed or become incapable of acting as trustee or if a vacancy shall occur in the office of the Trustee for any cause, the Company shall promptly appoint a successor Trustee. If, within 90 days after such resignation, removal or incapability, or other occurrence of such vacancy, a successor Trustee shall be appointed by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust delivered to the Company, the Owner Trustees, the Loan Trustee and the retiring Trustee, the successor Trustees so appointed shall, with the approval of the Company, which approval shall not be unreasonably withheld, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed as provided above. If no successor Trustee shall have been so appointed as provided above and accepted appointment in the manner hereinafter provided, the resigning Trustee or any Certificateholder who has been a bona fide Certificateholder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (g) The successor Trustee of a Trust shall give notice of the resignation and removal of the Trustee and appointment of the successor Trustee by mailing written notice of 42 such event by first-class mail, postage prepaid, to the Certificateholders as their names and addresses appear in the Register. Each notice shall include the name of such successor Trustee and the address of its Corporate Trust Office. Section 7.09. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall execute and deliver an instrument transferring to such successor Trustee all such rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee, subject nevertheless to its lien, if any, provided for in Section 7.06. Upon request of any such successor Trustee, the Company, the retiring Trustee and such successor Trustee shall execute and deliver any and all instruments containing such provisions as shall be necessary or desirable to transfer and confirm to, and for more fully and certainly vesting in, such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 7.10. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Certificates shall have been executed or authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such execution or authentication and deliver the Certificates so executed or authenticated with the same effect as if such successor Trustee had itself executed or authenticated such Certificates. Section 7.11. Maintenance of Agencies. (a) There shall at all times be maintained an office or agency where Certificates may be presented or surrendered for registration of transfer or for exchange, and for payment thereof and where notices and demands to or upon the Trustee in respect of such Certificates may be served. Presentations and demands may be made and notices may be served at the Corporate Trust Office of the Trustee. (b) There shall at all times be a Registrar and a Paying Agent hereunder with respect to the Certificates. Each such Authorized Agent shall be a bank or trust company, shall be a corporation organized and doing business under the laws of the United States or any state, 43 with a combined capital and surplus of at least $75,000,000, or a corporation having a combined capital and surplus in excess of $5,000,000 the obligations of which are guaranteed by a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, and shall be authorized under such laws to exercise corporate trust powers, subject to supervision by federal or state authorities. The Trustee shall initially be the Paying Agent and, as provided in Section 3.04, Registrar hereunder with respect to the Certificates. Each Registrar shall furnish to the Trustee, at stated intervals of not more than six months, and at such other times as the Trustee may request in writing, a copy of the Register maintained by such Registrar. (c) Any corporation into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authorized Agent, shall be a party, or any corporation succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent hereunder, if such successor corporation is otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor corporation. (d) Any Authorized Agent may at any time resign by giving written notice of resignation to the Trustee, the Company, the Owner Trustees and the Loan Trustees. The Company may, and at the request of the Trustee shall, at any time terminate the agency of any Authorized Agent by giving written notice of termination to such Authorized Agent and to the Trustee. Upon the resignation or termination of an Authorized Agent or in case at any time any such Authorized Agent shall cease to be eligible under this Section (when in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the Company shall promptly appoint one or more qualified successor Authorized Agents, reasonably satisfactory to the Trustee, to perform the functions of the Authorized Agent which has resigned or whose agency has been terminated or who shall have ceased to be eligible under this Section. The Company shall give written notice of any such appointment made by it to the Trustee, the Owner Trustees and the Loan Trustees; and in each case the Trustee shall mail notice of such appointment to all Certificateholders as their names and addresses appear on the Register. (e) The Company agrees to pay, or cause to be paid, from time to time to each Authorized Agent reasonable compensation for its services and to reimburse it for its reasonable expenses. Section 7.12. Money for Certificate Payments to Be Held in Trust. All moneys deposited with any Paying Agent for the purpose of any payment on Certificates shall be deposited and held in trust for the benefit of the Certificateholders entitled to such payment, subject to the provisions of this Section. Moneys so deposited and held in trust shall constitute a separate trust fund for the benefit of the Certificateholders with respect to which such money was deposited. The Trustee may at any time, for the purpose of obtaining the satisfaction and discharge of this Agreement or for any other purpose, direct any Paying Agent to pay to the 44 Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by such Paying Agent and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Section 7.13. Registration of Equipment Notes in Name of Subordination Agent. The Trustee agrees that all Equipment Notes to be purchased by the Trust shall be issued in the name of the Subordination Agent or its nominee and held by the Subordination Agent in trust for the benefit of the Certificateholders, or, if not so held, the Subordination Agent or its nominee shall be reflected as the owner of such Equipment Notes in the register of the issuer of such Equipment Notes. Section 7.14. Representations and Warranties of Trustee. The Trustee hereby represents and warrants that: (a) the Trustee is a Delaware banking corporation organized and validly existing, and in good standing under the laws of the State of Delaware; (b) the Trustee has full corporate power, authority and legal right to execute, deliver and perform this Agreement, the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement, the Note Purchase Agreement and the Note Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance by it of this Agreement, the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement, the Note Purchase Agreement and the Note Documents to which it is a party; (c) the execution, delivery and performance by the Trustee of this Agreement, the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement, the Note Purchase Agreement and the Note Documents to which it is a party (i) will not violate any provision of the law of the State of Delaware or governing the banking and trust powers of the Trustee or any order, writ, judgment, or decree of any court, arbitrator, or governmental authority applicable to the Trustee or any of its assets, (ii) will not violate any provision of the articles of association or by-laws of the Trustee, or (iii) will not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Trust Property pursuant to the provisions of, any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have an adverse effect on the Trustee's performance or ability to perform its duties hereunder or thereunder or on the transactions contemplated herein or therein; (d) the execution, delivery and performance by the Trustee of this Agreement, the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement, the Note Purchase Agreement and the Note Documents to which it is a party will not require the authorization, consent, or 45 approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any governmental authority or agency of the State of Delaware or the United States regulating the banking and corporate trust activities of the Trustee; and (e) this Agreement, the Intercreditor Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement, the Note Purchase Agreement and the Note Documents to which it is a party have been duly executed and delivered by the Trustee and constitute the legal, valid, and binding agreements of the Trustee, enforceable against it in accordance with their respective terms, provided that enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and (ii) general principles of equity, regardless of whether applied in a proceeding at equity or at law. Section 7.15. Withholding Taxes, Information Reporting. (a) The Trustee, as trustee of the grantor trust created by this Agreement, shall exclude and withhold from each distribution of principal, premium, if any, and interest and other amounts due under this Agreement or under the Certificates any and all federal United States withholding taxes applicable thereto as required by law. The Trustee agrees to act as such withholding agent and, in connection therewith, whenever any taxes or similar charges are required to be withheld with respect to any amounts paid by or on behalf of the Trustee in respect of the Certificates, to withhold such amounts and timely pay the same to the authority in the name of and on behalf of the Certificateholders, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Certificateholder necessary documentation showing the payment thereof, together with such additional documentary evidence as such Certificateholders may reasonably request from time to time. The Trustee agrees to file any other information reports as it may be required to file under United States law. In the event that any withholding tax is imposed on a payment to a Certificateholder, such tax shall reduce the amount otherwise distributable to the Certificateholder in accordance with this Section. (b) Any Certificateholder which is organized under the laws of a jurisdiction outside the United States shall, on or prior to the date such Certificateholder becomes a Certificateholder, (a) so notify the Trustee, (b)(i) provide the Trustee with Internal Revenue Service form W-8BEN, W-8ECI, W-8IMY or W-8EXP, or any substitute or successor form, or (ii) notify the Trustee that it is not entitled to an exemption from United States withholding tax or a reduction in the rate thereof on payments of interest. Any such Certificateholder agrees by its acceptance of a Trust Security, on an ongoing basis, to provide like certification should any previously provided form become invalid and to notify the Trustee should subsequent circumstances arise affecting the information provided the Trustee in clauses (a) and (b) above. The Trustee shall be fully protected in relying upon, and each Certificateholder by its acceptance of a Security agrees to indemnify and hold the Trustee harmless against all claims or liability of any kind arising in connection with or related to the Trustee's reliance upon any documents, forms or information provided by any Certificateholder to the Trustee. In addition, if the Trustee has not withheld taxes on any payment made to any Certificateholder, and the Trustee is subsequently required to remit to any taxing authority any such amount not withheld, such 46 Certificateholder shall return such amount to the Trustee upon written demand by the Trustee. The Trustee shall be liable only for direct (but not consequential) damages to any Certificateholder due to the Trustee's violation of the Code and only to the extent such liability is caused by the Trustee's gross negligence or willful misconduct. (c) The Trustee may satisfy certain of its obligations with respect to this Agreement by retaining, at the expense of the Company, a firm of independent public accountants (the "Accountants") which shall (i) be responsible for all tax filing requirements and (ii) perform the obligations of the Trustee in respect of tax filing requirements. The Trustee shall be deemed to have discharged its tax filing obligations under this Agreement upon its retention of the Accountants, and, if the Trustee shall have selected the Accountants in good faith and without gross negligence or with the prior approval of or notice to the Company, the Trustee shall not have any liability with respect to the default or misconduct of the Accountants. (d) The Trustee, at the request and instruction of the Company, will make such United States federal income tax elections as may be necessary to prevent the Trust from being classified for federal income tax purposes as an association taxable as a corporation. Section 7.16. Trustee's Liens. The Trustee in its individual capacity agrees that it will at its own cost and expense promptly take any action as may be necessary to duly discharge and satisfy in full any mortgage, pledge, lien, charge, encumbrance, security interest or claim ("Trustee's Liens") on or with respect to the Trust Property which is attributable to the Trustee either (i) in its individual capacity and which is unrelated to the transactions contemplated by this Agreement, the Registration Rights Agreement, the Intercreditor Agreement, the Participation Agreements, the Note Purchase Agreement or the Note Documents, or (ii) in its individual capacity and which arises out of acts or omissions of the Trustee in its individual capacity which are not contemplated by this Agreement. Section 7.17. Preferential Collection of Claims. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. If the Trustee shall resign or be removed as Trustee, it shall be subject to Section 311(a) of the Trust Indenture Act to the extent provided therein. ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders. The Company will furnish or cause to be furnished to the Trustee within 15 days after each Record Date with respect to a Scheduled Payment, and at such other times as the Trustee may request in writing, within 30 days after receipt by the Company of any such request, a list, in such form as the Trustee may reasonably require, of all information in the possession or control of the Company as to the names and addresses of the Certificateholders, in each case as of a date not more than 15 days prior to the time such list is furnished; provided, however, that so long as the Trustee is the sole Registrar, no such list need be furnished; and provided further, 47 however, that no such list need be furnished for so long as a copy of the Register is being furnished to the Trustee pursuant to Section 7.11. Section 8.02. Preservation of Information; Communications to Certificateholders. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Certificateholders contained in the most recent list furnished to the Trustee as provided in Section 7.11 or Section 8.01, as the case may be, and the names and addresses of Certificateholders received by the Trustee in its capacity as Registrar, if so acting. The Trustee may destroy any list furnished to it as provided in Section 7.11 or Section 8.01, as the case may be, upon receipt of a new list so furnished. Section 8.03. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first full year following the issuance of the Certificates, the Trustee shall transmit to the Certificateholders, as provided in Section 313(c) of the Trust Indenture Act, a brief report dated as of such May 15, if required by Section 313(a) of the Trust Indenture Act. Section 8.04. Reports by the Guarantor and Company. The Guarantor and the Company each shall: (a) file with the Trustee, within 30 days after the Guarantor or the Company is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which the Guarantor or the Company is required to file with the SEC pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Guarantor or the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the SEC, in accordance with rules and regulations prescribed by the SEC, such of the supplementary and periodic information, documents and reports which may be required pursuant to section 13 of the Securities Exchange Act of 1934, as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed in such rules and regulations; (b) file with the Trustee and the SEC, in accordance with the rules and regulations prescribed by the SEC, such additional information, documents and reports with respect to compliance by the Guarantor and the Company with the conditions and covenants of the Guarantor and the Company provided for in this Agreement, as may be required by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 1.02; (c) transmit to all Certificateholders, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, such summaries of any information, documents and reports required to be filed by the Guarantor and the Company pursuant to subsections (a) and (b) of this Section 8.04 as may be required by rules and regulations prescribed by the SEC; and 48 (d) furnish to the Trustee, not less often than annually, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Guarantor's and the Company's compliance with all conditions and covenants under this Agreement (it being understood that for purposes of this paragraph (d), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Agreement). ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders. Without the consent of the Certificateholders, the Guarantor and the Company may, and the Trustee (subject to Section 9.03) shall, at any time and from time to time, enter into one or more agreements supplemental hereto or, if applicable, to the Indenture, the Lease, the Participation Agreement, Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or the Liquidity Facility in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another corporation to the Company or the Guarantor and the assumption by any such successor of the covenants of the Company or the Guarantor contained herein or in each of the other related documents to which the Company or the Guarantor is a party or of the Company's or the Guarantor's obligations under the Note Purchase Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or the Liquidity Facility; or (2) to add to the covenants of the Guarantor or the Company for the benefit of the Certificateholders, or to surrender any right or power in this Agreement, the Note Purchase Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or the Liquidity Facility conferred upon the Guarantor or the Company; or (3) to correct or supplement any provision in this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or the Liquidity Facility which may be defective or inconsistent with any other provision herein or therein or to cure any ambiguity or correct any mistake or to modify any other provision with respect to matters or questions arising under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or the Liquidity Facility, provided that any such action shall not materially adversely affect the interests of the Certificateholders; or to cure any ambiguity or correct any mistake in such documents, or as provided in the Intercreditor Agreement, to give effect to or provide for a Replacement Liquidity Facility (as defined in the Intercreditor Agreement); or 49 (4) to comply with any requirement of the SEC, any applicable law, rules or regulations of any exchange or quotation system on which the Certificates are listed, or any regulatory body or the Registration Rights Agreement or the Delayed Funding Implementation Agreement to effectuate the Exchange Offer; or (5) to modify, eliminate or add to the provisions of this Agreement to such extent as shall be necessary to qualify, or to continue the qualification of, this Agreement (including any supplemental agreement) under the Trust Indenture Act, or under any similar Federal statute hereafter enacted, and to add to this Agreement such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this instrument was executed or any corresponding provision in any similar Federal statute hereafter enacted; or (6) to evidence and provide for the acceptance of appointment under this Agreement by the Trustee of a successor Trustee and to add to or change any of the provisions of this Agreement as shall be necessary to provide for or facilitate the administration of the Trust, pursuant to the requirements of Section 7.09; or (7) if with respect to any Owned Aircraft any "Class C" pass through certificates are issued, to modify, eliminate or add to the provisions of this Agreement to the extent necessary to provide for the subordination of such "Class C" pass through certificates to the Certificates; or (8) to modify or eliminate provisions relating to the transfer or exchange of Exchange Certificates or the Initial Certificates upon the consummation of the Exchange Offer (as defined in the Registration Rights Agreement) or effectiveness of the Shelf Registration Statement or the Exchange Offer Registration Statement; provided that no such action described in this Section 9.01 shall adversely affect the interests of the Certificateholders. Notwithstanding any provision of this Agreement, upon and simultaneously with the issuance of the Additional Certificates (as defined in the Delayed Funding Implementation Agreement), this Agreement shall be forthwith amended as provided in the Delayed Funding Implementation Agreement, without any need for further action on the part of any party hereto and without any consent of any of the Certificateholders. Section 9.02. Supplemental Agreements with Consent of Certificateholders. With the consent of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust, by Direction of said Certificateholders delivered to the Guarantor, the Company and the Trustee, the Guarantor and the Company may (with the consent of the Owner Trustees, if any, which consent shall not be unreasonably withheld), and the Trustee (subject to Section 9.03) shall, enter into an agreement or agreements supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, the Intercreditor Agreement, 50 the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or the Liquidity Facility to the extent applicable to such Certificateholders or of modifying in any manner the rights and obligations of such Certificateholders under this Agreement, the Intercreditor Agreement, the Liquidity Facility, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement, the Deposit Agreement or the Note Purchase Agreement; provided, however, that no such supplemental agreement shall, without the consent of the Certificateholder of each Outstanding Certificate affected thereby: (1) reduce in any manner the amount of, or delay the timing of, any receipt by the Trustee (or, with respect to the Deposits, the Certificateholders) of payments on the Equipment Notes or other Trust Property held in the Trust or on the Deposits or distributions that are required to be made herein on any Certificate, or change any date of payment on any Certificate, or change the place of payment where, or the coin or currency in which, any Certificate is payable, or impair the right to institute suit for the enforcement of any such payment or distribution on or after the Regular Distribution Date or Special Distribution Date applicable thereto; or (2) permit the disposition of any Equipment Note included in the Trust Property except as permitted by this Agreement, or otherwise deprive such Certificateholder of the benefit of the ownership of the Equipment Notes in the Trust; or (3) alter the priority of distributions specified in the Intercreditor Agreement; or (4) modify any of the provisions of this Section or Section 6.05, except to increase any percentage or to provide that certain other provisions of this Agreement cannot be modified or waived without the consent of the Certificateholder of each Certificate affected thereby; or (5) adversely affect the status of the Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. It shall not be necessary for any Direction of Certificateholders under this Section to approve the particular form of any proposed supplemental agreement but it shall be sufficient if such Direction shall approve the substance thereof. Section 9.03. Documents Affecting Immunity or Indemnity. If in the opinion of the Trustee any document required to be executed by it pursuant to the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or indemnity in favor of the Trustee under this Agreement, the Trustee may in its discretion decline to execute such document. Section 9.04. Execution of Supplemental Agreements. In executing, or accepting the additional trusts created by, any supplemental agreement permitted by this Article or the modifications thereby of the trust created by this Agreement, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, written advice of counsel or an Opinion of 51 Counsel stating that the execution of such supplemental agreement is authorized or permitted by this Agreement. Section 9.05. Effect of Supplemental Agreements. Upon the execution of any supplemental agreement under this Article, this Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of this Agreement for all purposes; and every Certificateholder theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 9.06. Conformity with Trust Indenture Act. Every supplemental agreement executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 9.07. Reference in Certificates to Supplemental Agreements. Certificates authenticated and delivered after the execution of any supplemental agreement pursuant to this Article may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental agreement; and, in such case, suitable notation may be made upon Outstanding Certificates after proper presentation and demand. ARTICLE X AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indentures and Other Note Documents. In the event that the Trustee, as holder (or beneficial owner through the Subordination Agent) of any Equipment Note in trust for the benefit of the Certificateholders or as Controlling Party under the Intercreditor Agreement, receives (directly or indirectly through the Subordination Agent) a request for a consent to any amendment, modification, waiver or supplement under any Indenture, any other Note Document, any Equipment Note, the Note Purchase Agreement or any other related document, the Trustee shall forthwith send a notice of such proposed amendment, modification, waiver or supplement to each Certificateholder registered on the Register as of the date of such notice. The Trustee shall request from the Certificateholders a Direction as to (a) whether or not to take or refrain from taking (or direct the Subordination Agent to take or refrain from taking) any action which a holder of such Equipment Note has the option to direct, (b) whether or not to give or execute (or direct the Subordination Agent to give or execute) any waivers, consents, amendments, modifications or supplements as a holder of such Equipment Note or a Controlling Party and (c) how to vote (or direct the Subordination Agent to vote) any Equipment Note if a vote has been called for with respect thereto. Provided such a request for Certificateholder Direction shall have been made, in directing any action or casting any vote or giving any consent as the holder of any Equipment Note (or in directing the Subordination Agent in any of the foregoing), (i) other than as Controlling Party, the Trustee shall vote for or give consent to any such action with respect to such Equipment Note in the same proportion as that of (A) the aggregate face amounts of all Certificates actually voted in favor of or for giving consent to such action by such Direction of Certificateholders to (B) the aggregate face amount of all Outstanding Certificates and (ii) as Controlling Party, the Trustee shall vote as directed in such Certificateholder Direction by the 52 Certificateholders evidencing a Fractional Undivided Interest aggregating not less than a majority in interest in the Trust. For purposes of the immediately preceding sentence, a Certificate shall have been "actually voted" if the Holder of such Certificate has delivered to the Trustee an instrument evidencing such Holder's consent to such Direction prior to two Business Days before the Trustee directs such action or casts such vote or gives such consent. Notwithstanding the foregoing, but subject to Section 6.04 and the Intercreditor Agreement, the Trustee may, in its own discretion and at its own direction, consent and notify the relevant Loan Trustee of such consent (or direct the Subordination Agent to consent and notify the Loan Trustee of such consent) to any amendment, modification, waiver or supplement under the relevant Indenture, any other Note Document, any Equipment Note, the Note Purchase Agreement or any other related document, if an Event of Default hereunder shall have occurred and be continuing, or if such amendment, modification, waiver or supplement will not materially adversely affect the interests of the Certificateholders. ARTICLE XI TERMINATION OF TRUST Section 11.01. Termination of the Trust. The respective obligations and responsibilities of the Company, the Guarantor and the Trustee with respect to the Trust shall terminate upon distribution to all Holders of the Certificates and the Trustee of all amounts required to be distributed to them pursuant to this Agreement and the disposition of all property held as part of the Trust Property; provided, however, that in no event shall the Trust continue beyond one hundred ten (110) years following the date of the earliest execution of this Agreement. Notice of such termination, specifying the Regular Distribution Date (or Special Distribution Date, as the case may be) upon which the Certificateholders may surrender their Certificates to the Trustee for payment of the final distribution and cancellation, shall be mailed promptly, upon notice to the Trustee, by the Trustee to Certificateholders not earlier than the 60th day and not later than the 20th day next preceding such final distribution specifying (A) the Regular Distribution Date (or Special Distribution Date, as the case may be) upon which the proposed final payment of the Certificates will be made upon presentation and surrender of Certificates at the office or agency of the Trustee therein specified, (B) the amount of any such proposed final payment, and (C) that the Record Date otherwise applicable to such Regular Distribution Date (or Special Distribution Date, as the case may be) is not applicable, payments being made only upon presentation and surrender of the Certificates at the office or agency of the Trustee therein specified. The Trustee shall give such notice to the Registrar at the time such notice is given to Certificateholders. Upon presentation and surrender of the Certificates in accordance with such notice, the Trustee shall cause to be distributed to Certificateholders amounts distributable on such final payments. In the event that all of the Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above-mentioned written notice, the Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. No 53 additional interest shall accrue on the Certificates after the Regular Distribution Date (or Special Distribution Date, as the case may be). In the event that any money held by the Trustee for the payment of distributions on the Certificates shall remain unclaimed for two years (or such lesser time as the Trustee shall be satisfied, after sixty days' notice from the Company, is one month prior to the escheat period provided under applicable law) after the final distribution date with respect thereto, the Trustee shall pay to each Loan Trustee the appropriate amount of money relating to such Loan Trustee and shall give written notice thereof to the related Owner Trustees, Owner Participants and the Company. ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders. The death or incapacity of any Certificateholder shall not operate to terminate this Agreement, or the Trust, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations, and liabilities of the parties hereto or any of them. Section 12.02. Liabilities of Certificateholders. Neither the existence of the Trust nor any provision in this Agreement is intended to or shall limit the liability the Certificateholders would otherwise incur if the Certificateholders owned Trust Property as co-owners, or incurred any obligations of the Trust, directly rather than through the Trust. Section 12.03. Certificates Nonassessable and Fully Paid. Subject to Section 12.02, Certificateholders shall not be personally liable for obligations of the Trust, the Fractional Undivided Interests represented by the Certificates shall be nonassessable for any losses or expenses of the Trust or for any reason whatsoever, and Certificates upon authentication thereof by the Trustee pursuant to Section 3.03 are and shall be deemed fully paid. No Certificateholder shall have any right (except as expressly provided herein) to vote or in any manner otherwise control the operation and management of the Trust Property, the Trust, or the obligations of the parties hereto, nor shall anything set forth herein, or contained in the terms of the Certificates, be construed so as to constitute the Certificateholders from time to time as partners or members of an association. Section 12.04. Notices. (a) Unless otherwise specifically provided herein, all notices required under the terms and provisions of this Agreement shall be in English and in writing, and any such notice may be given by United States mail, courier service, telecopy (confirmed by telephone or in writing in the case of notice by telecopy) or any other customary means of communication, and any such notice shall be effective upon receipt, if to the Company or the Guarantor, to: American Trans Air, Inc. 7337 West Washington Street Indianapolis International Airport Indianapolis, Indiana 06927 54 Attention: Executive Vice President and Chief Financial Officer Facsimile: (317) 240-7087 if to the Trustee, to: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Facsimile: (302) 636-4140 (b) The Company, the Guarantor or the Trustee, by notice to the other, may designate additional or different addresses for subsequent notices or communications. (c) Any notice or communication to Certificateholders shall be mailed by first-class mail to the addresses for Certificateholders shown on the Register kept by the Registrar and to addresses filed with the Trustee. Failure so to mail a notice or communication or any defect in such notice or communication shall not affect its sufficiency with respect to other Certificateholders. (d) If a notice or communication is mailed in the manner provided above within the time prescribed, it is conclusively presumed to have been duly given, whether or not the addressee receives it. (e) If the Company mails a notice or communication to the Certificateholders, it shall mail a copy to the Trustee and to each Paying Agent at the same time. (f) Notwithstanding the foregoing, all communications or notices to the Trustee shall be deemed to be given only when received by a Responsible Officer of the Trustee. (g) The Trustee shall promptly furnish the Company with a copy of any demand, notice or written communication received by the Trustee hereunder from any Certificateholder, Owner Trustee or Loan Trustee. Section 12.05. Governing Law. THIS AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND THIS AGREEMENT AND THE CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF 55 THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 12.06. Severability of Provisions. If any one or more of the covenants, agreements, provisions, or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or the Trust or of the Certificates or the rights of the Certificateholders thereof. Section 12.07. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 12.08. Successors and Assigns. All covenants, agreements, representations and warranties in this Agreement by the Trustee, the Guarantor and the Company shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. Section 12.09. Benefits of Agreement. Nothing in this Agreement or in the Certificates, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the Certificateholders and the Liquidity Providers, any benefit or any legal or equitable right, remedy or claim under this Agreement. Section 12.10. Legal Holidays. In any case where any Regular Distribution Date or Special Distribution Date relating to any Certificate shall not be a Business Day, then (notwithstanding any other provision of this Agreement) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date, and no interest shall accrue during the intervening period. Section 12.11. Counterparts. For the purpose of facilitating the execution of this Agreement and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. Section 12.12. Communication by Certificateholders with Other Certificateholders. Certificateholders may communicate with other Certificateholders with respect to their rights under this Agreement or the Certificates pursuant to Section 312(b) of the Trust Indenture Act. The Company, the Guarantor, the Trustee and any and all other persons benefited by this Agreement shall have the protection afforded by Section 312(c) of the Trust Indenture Act. Section 12.13. Intention of Parties. The parties hereto intend that the Trust be classified for U.S. federal income tax purposes as a grantor trust under Subpart E, Part I of 56 Subchapter J of the Internal Revenue Code of 1986, as amended, and not as a trust or association taxable as a corporation or as a partnership. Each Certificateholder, by its acceptance of its Certificate or a beneficial interest therein, agrees to treat the Trust as a grantor trust for all U.S. federal, state and local income tax purposes. The powers granted and obligations undertaken pursuant to this Agreement shall be so construed so as to further such intent. 57 IN WITNESS WHEREOF, the Guarantor, the Company and the Trustee have caused this Agreement to be duly executed by their respective officers, all as of the day and year first written above. AMTRAN, INC. By: -------------------------------- Executive Vice President and Chief Financial Officer AMERICAN TRANS AIR, INC. By: -------------------------------- Chief Financial Officer WILMINGTON TRUST COMPANY, as Trustee By: -------------------------------- Title: 58 EXHIBIT A FORM OF CERTIFICATE REGISTERED No.________ [THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO ATA OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CASE THIS CERTIFICATE IS IN DEFINITIVE FORM, IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE APPLICABLE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. A-1 THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE CERTIFICATES PURSUANT TO CLAUSE 2(E) ABOVE OR UPON ANY TRANSFER OF THE CERTIFICATES UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS; AND]1 [BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT EITHER (A) NO PLAN ASSETS AND NO NON-ERISA PLAN ASSETS HAVE BEEN USED TO PURCHASE THIS CERTIFICATE OR (B) THE PURCHASE AND HOLDING OF THIS CERTIFICATE ARE EXEMPT FROM THE PROHIBITED TRANSACTION RESTRICTIONS OF ERISA AND THE CODE AND WILL BE PERMISSIBLE UNDER ALL APPLICABLE SIMILAR LAWS PURSUANT TO ONE OR MORE PROHIBITED TRANSACTION STATUTORY, CLASS OR INDIVIDUAL, EXEMPTIONS. AS USED HEREIN, THE TERM "PLAN ASSETS" MEANS THE ASSETS OF ANY "PLAN" (WITHIN THE MEANING OF SECTION 3(3) OF ERISA OR SECTION 4975(e)(1) OF THE CODE) THAT IS SUBJECT TO ERISA OR SECTION 4975 OF THE CODE, INCLUDING PLAN ASSETS WITHIN THE MEANING OF DEPARTMENT OF LABOR REGULATION SECTION 2510.3-101, AND THE TERM "NON-ERISA PLAN ASSETS" MEANS THE ASSETS OF ANY PLAN (INCLUDING, WITHOUT LIMITATION, "GOVERNMENTAL PLANS" (WITHIN THE MEANING OF SECTION 3(32) OF ERISA OR SECTION 414(d) OF THE CODE), "CHURCH PLANS" (WITHIN THE MEANING OF SECTION 3(33) OF ERISA OF SECTION 414(e) OF THE CODE) AND FOREIGN PLANS) THAT IS NOT SUBJECT TO ERISA OR SECTION 4975 OF THE CODE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED - --------------- (1) Not to be included on the face of the Offshore Global Certificate or any Offshore Physical Certificates. A-2 OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN.](2) - --------------- (2) To be included on the face of each Global Certificate. A-3 AMERICAN TRANS AIR 2002-1A PASS THROUGH TRUST Pass Through Certificate, Series 2002-1A Issuance Date: ____________, 2002 Final Legal Distribution Date: November 20, 2014 Evidencing a Fractional Undivided Interest in the American Trans Air 2002-1A Pass Through Trust, the Property of Which Includes Certain Equipment Notes each secured by Aircraft leased to or owned by American Trans Air, Inc. $[ ] Fractional Undivided Interest representing [ ] % of the Trust per $1,000 of Reference Principal Amount THIS CERTIFIES THAT Cede & Co., for value received, is the registered owner of a Fractional Undivided Interest in the amount of $ [ ] (_____________________ dollars), as such amount may be adjusted from time to time in accordance with the Agreement (the "Reference Principal Amount"), in the American Trans Air 2002-1A Pass Through Trust (the "Trust") pursuant to a Pass Through Trust Agreement dated as of March 28, 2002 (as amended, supplemented or otherwise modified from time to time, the "Agreement"), among Wilmington Trust Company, not in its individual capacity but solely as trustee (the "Trustee"), Amtran, Inc., a corporation incorporated under Indiana law (the "Guarantor"), and American Trans Air, Inc., a corporation incorporated under Indiana law (the "Company"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Agreement. This Certificate is one of the duly authorized Certificates designated as "Pass Through Certificates, Series 2002-1A" (herein called the "Certificates"). This Certificate is issued under and is subject to the terms, provisions, and conditions of the Agreement and the Intercreditor Agreement, to which agreements the Certificateholder of this Certificate by virtue of the acceptance hereof assents and by which such Certificateholder is bound. The property of the Trust includes certain Equipment Notes and all rights of the Trust to receive any payments under the Intercreditor Agreement and the Liquidity Facility (the "Trust Property"). Each issue of the Equipment Notes is secured by a security interest in The Aircraft leased to or owned by the Company. Each of the Certificates represents a fractional undivided interest in the Trust and the Trust Property, and has no rights, benefits or interest in respect of any assets or property other than the Trust Property. The undivided percentage interest in the Trust represented by each of this Certificate (as specified above) and the other Pass Through Certificates, Series 2002-1A, was determined on the basis of (x) the aggregate of the Reference Principal Amount of this Certificate (as specified above) and of the other Pass Through Certificates, Series 2002-1A and (y) the A-1 aggregate original principal amounts of the Equipment Notes constituting the Trust Property. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, from funds then available to the Trustee, there will be distributed on each February 20, May 20, August 20 and November 20 (a "Regular Distribution Date"), commencing May 20, 2002, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Notes due on such Regular Distribution Date, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, in the event that Special Payments on the Equipment Notes are received by the Trustee, from funds then available to the Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Special Distribution Date, an amount in respect of such Special Payments on the Equipment Notes, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Special Payments so received. If a Regular Distribution Date or Special Distribution Date is not a Business Day, distribution shall be made on the immediately following Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date and no interest shall accrue during the intervening period. The Trustee shall mail notice of each Special Payment and the Special Distribution Date therefor to the Certificateholder of this Certificate. Subject to the terms of the Agreement, distributions on this Certificate will be made by the Trustee by check mailed to the Person entitled thereto, without the presentation or surrender of this Certificate or the making of any notation hereon. Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Trustee specified in such notice. The Certificates do not represent a direct obligation of, or an obligation guaranteed by, or an interest in, the Guarantor, the Company or the Trustee or any affiliate thereof. The Certificates are limited in right of payment, all as more specifically set forth on the face hereof and in the Agreement. All payments or distributions made to Certificateholders under the Agreement shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Agreement. Each Certificateholder of this Certificate, by its acceptance hereof, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Certificateholder as provided in the Agreement. This Certificate does not purport to summarize the Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may be examined during normal business hours at the principal office of the Trustee, and at such other places, if any, designated by the Trustee, by any Certificateholder upon request. A-2 The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Agreement at any time by the Guarantor, the Company and the Trustee with the consent of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. Any such consent by the Certificateholder of this Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Certificates. Upon and simultaneously with the issuance of the Additional Certificates, the Agreement shall be forthwith amended as provided in the Delayed Funding Implementation Agreement without any need for further action on the part of any party thereto. As provided in the Agreement and subject to certain limitations set forth, the transfer of this Certificate is registrable in the Register upon surrender of this Certificate for registration of transfer at the offices or agencies maintained by the Trustee in its capacity as Registrar, or by any successor Registrar duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee and the Registrar, duly executed by the Certificateholder hereof or such Certificateholder's attorney duly authorized in writing, and thereupon one or more new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust will be issued to the designated transferee or transferees. [THE HOLDER OF THIS CERTIFICATE IS ENTITLED TO THE BENEFITS OF THE REGISTRATION RIGHTS AGREEMENT, DATED AS OF MARCH 28, 2002, AMONG THE TRUSTEE, THE OTHER TRUSTEE, THE INVESTORS (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT), THE GUARANTOR AND THE COMPANY (AS AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME IN ACCORDANCE WITH ITS TERMS, THE "REGISTRATION RIGHTS AGREEMENT"). THE INTEREST RATE PER ANNUM APPLICABLE TO THIS CERTIFICATE SHALL BE INCREASED BY 0.50% PER ANNUM FOR ANY PERIOD REQUIRED BY THE REGISTRATION RIGHTS AGREEMENT.]* The Certificates are issuable only as registered Certificates without coupons in minimum denominations of [$100,000] [$1,000]** Fractional Undivided Interest and integral multiples of $1,000 in excess thereof, except that one Certificate may be issued in a denomination of less than [$100,000] [$1,000].** As provided in the Agreement and subject to certain limitations therein set forth, the Certificates are exchangeable for new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust, as requested by the Certificateholder surrendering the same. - ------------------- * TO BE INCLUDED ONLY ON EACH INITIAL CERTIFICATE. ** To be included only on each Exchange Certificate. ** To be included only on each Exchange Certificate. A-3 No service charge will be made for any such registration of transfer or exchange, but the Trustee shall require payment by the Holder of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Trustee, the Registrar, and any agent of the Trustee or the Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. Any person acquiring or accepting this Certificate or an interest herein will, by such acquisition or acceptance, be deemed to have represented and warranted to and for the benefit of each Owner Participant and the Company that either: (i) no Plan Assets and no Non-ERISA Plan Assets have been used to purchase this Certificate or (ii) the purchase and holding of this Certificate are exempt from the prohibited transaction restrictions of ERISA and the Code and will be permissible under all applicable similar laws pursuant to one or more prohibited transaction, statutory, class or individual exemptions. As used in the preceding paragraph, the term "Plan Assets" means the assets of any "Plan"(within the meaning of Section 3(3) of ERISA or Section 4975(e)(1) of the Code) that is subject to ERISA or Section 4975 of the Code, including Plan Assets within the meaning of Department of Labor Regulation Section 2510.3-101, and the term "Non-ERISA Plan Assets" means the assets of any plan (including, without limitation, "Governmental Plans" (within the meaning of Section 3(32) of ERISA or Section 414(d) of the Code), "Church Plans" (within the meaning of Section 3(33) of ERISA of Section 414(e) of the Code) and Foreign Plans) that is not subject to ERISA or Section 4975 of the Code. Each Certificateholder or Investor that is not a United States person within the meaning of Section 7701(a)(30) of the Internal Revenue Code, as amended, by its acceptance of a Certificate or a beneficial interest therein, agrees to indemnify and hold harmless the Trust and the Trustee from and against any improper failure to withhold taxes from amounts payable to it or for its benefit. Each Certificateholder and Investor, by its acceptance of this Certificate or a beneficial interest herein, agrees to treat the Trust as a grantor trust for all U.S. federal, state and local income tax purposes. Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Trustee specified in such notice. The obligations and responsibilities created by the Agreement and the Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Agreement and the disposition of all property held as part of the Trust Property. THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK A-4 AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Unless the certificate of authentication hereon has been executed by the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. All payments or distributions made to Certificateholders shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of Article IV of this Agreement. Each Certificateholder, by its acceptance of a Certificate, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Certificateholder as provided in this Agreement. A-5 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed. Dated ____________, _____ WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee for AMERICAN TRANS AIR 2002-1A PASS THROUGH TRUST By: ------------------------------------------ Title: A-6 [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Certificates referred to in the within-mentioned Agreement. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee By: -------------------------------------- Authorized Officer A-7 FORM OF TRANSFER NOTICE FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto [Insert Taxpayer Identification No.] - -------------------- - -------------------- please print or typewrite name and address including zip code of assignee - -------------------------------------------------------------------------------- the within Certificate and all rights thereunder, hereby irrevocably constituting and appointing - -------------------------------------------------------------------------------- attorney to transfer said Certificate on the books of the Trustee with full power of substitution in the premises. [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL U.S. PHYSICAL CERTIFICATES] In connection with any transfer of this Certificate occurring prior to the date that is the earlier of the date of an effective Registration Statement or the end of the two year period referred to in the Private Placement Legend, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] [ ] (a) this Certificate is being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder. or [ ] (b) this Certificate is being transferred other than in accordance with (a) above and documents are being furnished that comply with the conditions of transfer set forth in this Certificate and the Agreement. A-8 If neither of the foregoing boxes is checked, the Trustee or other Registrar shall not be obligated to register this Certificate in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 3.06 of the Agreement shall have been satisfied. Date: [Name of Transferor] NOTE: The signature must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. Signature Guarantee: TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and has been advised of the applicable transfer restrictions relating to the Certificates and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. [Name of Transferee] Dated: ------------------------------ NOTE: To be executed by an executive officer. A-9 EXHIBIT B FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S [date] Wilmington Trust Company, not in its individual capacity but solely as Trustee Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Re: American Trans Air 2002-1A Pass Through Trust (the "Trust"), % American Trans Air Pass Through Certificates Series 2002-1A (the Certificates") --------------------------------------------------------------------- Sirs: In connection with our proposed sale of $[ ] Fractional Undivided Interest of the Certificates, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended, and, accordingly, we represent that: (1) the offer of the Certificates was not made to a person in the United States; (2) either (a) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. In addition, if the sale is made during a restricted period and the provisions of B-1 Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be. You and American Trans Air, Inc. are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: ------------------------------------- Authorized Signature B-2 EXHIBIT E FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO QIBs [date] Wilmington Trust Company, not in its individual capacity but solely as Trustee Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration AMERICAN TRANS AIR PASS-THROUGH TRUST, SERIES 2002-1A (the "Trust") Pass Through Certificates, Series 2002-1A (the "Certificates") ------------------------ Ladies and Gentlemen: In connection with our proposed sale of $[ ] Fractional Undivided Interest of the Certificates, we confirm that without utilizing any general solicitation or general advertising that such Certificates are being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder. Date: [Name of Transferor NOTE: The signature must correspond with the name as written upon the face of the within-mentioned Certificate in every particular, without alteration or any change whatsoever. Signature Guarantee: TO BE COMPLETED BY PURCHASER: The undersigned represents and warrants that it is purchasing the within-mentioned Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and has been advised of the applicable transfer restrictions relating to the Certificates and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: NOTE: To be executed by an executive officer. E-2 EX-4.6 6 file005.txt PASS THROUGH TRUST AGREEMENT CLASS B EXECUTION COPY AMTRAN, INC. AMERICAN TRANS AIR, INC. and WILMINGTON TRUST COMPANY as Trustee PASS THROUGH TRUST AGREEMENT Dated as of March 28, 2002 American Trans Air 2002-1B Pass Through Trust 10.699 % Initial American Trans Air 2002-1B Pass Through Certificates 10.699 % Exchange American Trans Air 2002-1B Pass Through Certificates Reconciliation and tie between American Trans Air Pass Through Trust Agreement, Series 2002-1B dated as of March 28, 2002, and the Trust Indenture Act of 1939. This reconciliation does not constitute part of the Pass Through Trust Agreement. Trust Indenture Act Pass Through Trust of 1939 Section Agreement Section --------------- ----------------- 310(a)(1) 7.08 (a)(2) 7.08 312(a) 3.05; 8.01; 8.02 313(a) 7.06; 8.03 314(a) 8.04(a),(c) & (d) (a)(4) 8.04(e) (c)(1) 1.02 (c)(2) 1.02 (d)(1) 7.13; 11.01 (d)(2) 7.13; 11.01 (d)(3) 2.01 (e) 1.02 315(b) 7.02 316(a)(last sentence) 1.04(c) (a)(1)(A) 6.04 (a)(1)(B) 6.05 (b) 6.06 (c) 1.04(e) 317(a)(1) 6.03 (b) 7.13 318(a) 12.05 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS.............................................................................................3 Section 1.01. Definitions..........................................................................3 Section 1.02. Compliance Certificates and Opinions................................................13 Section 1.03. Form of Documents Delivered to Trustee..............................................14 Section 1.04. Directions of Certificateholders....................................................14 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES; ACQUISITION OF EQUIPMENT NOTES.....................................16 Section 2.01. Issuance of Certificates; Acquisition of Equipment Notes............................16 Section 2.02. Withdrawal of Deposits..............................................................17 Section 2.03. Acceptance by Trustee...............................................................17 Section 2.04. Limitation of Powers................................................................18 ARTICLE III THE CERTIFICATES.....................................................................................18 Section 3.01. Title, Form, Denomination and Execution of Certificates.............................18 Section 3.02. Restrictive Legends.................................................................19 Section 3.03. Authentication of Certificates......................................................21 Section 3.04. Transfer and Exchange...............................................................22 Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates................................................................22 Section 3.06. Special Transfer Provisions.........................................................24 Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates...................................26 Section 3.08. Persons Deemed Owners...............................................................26 Section 3.09. Cancellation........................................................................26 Section 3.10. Limitation of Liability for Payments................................................26 Section 3.11. Temporary Certificates..............................................................27 ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS.......................................................27 Section 4.01. Certificate Account and Special Payments Account....................................27 Section 4.02. Distributions from Certificate Account and Special Payments Account.................28 Section 4.03. Statements to Certificateholders....................................................29 Section 4.04. Investment of Special Payment Moneys................................................30 ARTICLE V THE COMPANY............................................................................................31 Section 5.01. Maintenance of Corporate Existence..................................................31 Section 5.02. Consolidation, Merger, Etc..........................................................31 Section 5.03. Rule 144A(d)(4) Information.........................................................32
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ARTICLE VI DEFAULT...............................................................................................32 Section 6.01. Events of Default...................................................................32 Section 6.02. Incidents of Sale of Equipment Notes................................................34 Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit..................35 Section 6.04. Control by Certificateholders.......................................................35 Section 6.05. Waiver of Past Defaults.............................................................35 Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired..................36 Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions...............36 Section 6.08. Remedies Cumulative.................................................................37 Section 6.09. Undertaking for Costs...............................................................37 ARTICLE VII THE TRUSTEE..........................................................................................37 Section 7.01. Notice of Defaults..................................................................37 Section 7.02. Certain Rights of Trustee...........................................................37 Section 7.03. Not Responsible for Recitals or Issuance of Certificates............................39 Section 7.04. May Hold Certificates...............................................................39 Section 7.05. Money Held in Trust.................................................................39 Section 7.06. Compensation and Reimbursement......................................................39 Section 7.07. Corporate Trustee Required, Eligibility.............................................41 Section 7.08. Resignation and Removal: Appointment of Successor...................................41 Section 7.09. Acceptance of Appointment by Successor..............................................42 Section 7.10. Merger, Conversion, Consolidation or Succession to Business.........................43 Section 7.11. Maintenance of Agencies.............................................................43 Section 7.12. Money for Certificate Payments to Be Held in Trust..................................44 Section 7.13. Registration of Equipment Notes in Name of Subordination Agent......................44 Section 7.14. Representations and Warranties of Trustee...........................................45 Section 7.15. Withholding Taxes, Information Reporting............................................46 Section 7.16. Trustee's Liens.....................................................................47 Section 7.17. Preferential Collection of Claims...................................................47 ARTICLE VIII CERTIFICATEHOLDERS'LISTS AND REPORTS BY TRUSTEE.....................................................47 Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders..........................................................47 Section 8.02. Preservation of Information; Communications to Certificateholders...................47 Section 8.03. Reports by Trustee..................................................................48 Section 8.04. Reports by the Guarantor and Company................................................48 ARTICLE IX SUPPLEMENTAL AGREEMENTS...............................................................................49
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Section 9.01. Supplemental Agreements Without Consent of Certificateholders.......................49 Section 9.02. Supplemental Agreements with Consent of Certificateholders..........................50 Section 9.03. Documents Affecting Immunity or Indemnity...........................................51 Section 9.04. Execution of Supplemental Agreements................................................51 Section 9.05. Effect of Supplemental Agreements...................................................51 Section 9.06. Conformity with Trust Indenture Act.................................................52 Section 9.07. Reference in Certificates to Supplemental Agreements................................52 ARTICLE X AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS............................................................52 Section 10.01. Amendments and Supplements to Indentures and Other Note Documents...................52 ARTICLE XI TERMINATION OF TRUST..................................................................................53 Section 11.01. Termination of the Trust............................................................53 ARTICLE XII MISCELLANEOUS PROVISIONS.............................................................................54 Section 12.01. Limitation on Rights of Certificateholders..........................................54 Section 12.02. Liabilities of Certificateholders...................................................54 Section 12.03. Certificates Nonassessable and Fully Paid...........................................54 Section 12.04. Notices 55 Section 12.05. Governing Law.......................................................................54 Section 12.06. Severability of Provisions..........................................................55 Section 12.07. Effect of Headings and Table of Contents............................................55 Section 12.08. Successors and Assigns..............................................................56 Section 12.09. Benefits of Agreement...............................................................56 Section 12.10. Legal Holidays......................................................................56 Section 12.11. Counterparts........................................................................56 Section 12.12. Communication by Certificateholders with Other Certificateholders...................56 Section 12.13. Intention of Parties................................................................56
Exhibit A - Form of Certificate Exhibit B - Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S Exhibit C - [Reserved] Exhibit D - [Reserved] Exhibit E - Form of Certificate to be Delivered in Connection with Transfers to QIBs iii This PASS THROUGH TRUST AGREEMENT, dated as of March 28, 2002, among AMTRAN, INC., an Indiana corporation (the "Guarantor"), AMERICAN TRANS AIR, INC., an Indiana corporation (the "Company"), and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Trustee, is made with respect to the formation of the American Trans Air 2002-1B Pass Through Trust, and the issuance of 10.699% American Trans Air 2002-1B Pass Through Certificates representing fractional undivided interests in the Trust. WITNESSETH: WHEREAS, the Company has obtained (either directly or through General Electric Credit Corporation) commitments from The Boeing Company for the delivery of, or has taken delivery of, certain Aircraft; WHEREAS, the Company intends to finance the acquisition of each such Aircraft either (i) through separate leveraged lease transactions in which the Company will lease such aircraft (collectively, the "Leased Aircraft") or (ii) through separate secured loan transactions in which the Company will own such Aircraft (collectively, the "Owned Aircraft"); WHEREAS, in the case of each Leased Aircraft, each Owner Trustee, acting on behalf of the corresponding Owner Participant, will issue pursuant to an Indenture, on a non-recourse basis, two series of Equipment Notes in order to finance a portion of the purchase price of each such Leased Aircraft; WHEREAS, in the case of each Owned Aircraft, the Company, will issue pursuant to an Indenture, on a recourse basis, two series of Equipment Notes to finance a portion of the purchase price of each such Owned Aircraft; WHEREAS, the Company has entered into a Certificate Purchase Agreement dated as of March 26, 2002 (as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Certificate Purchase Agreement") with the Guarantor and PK AirFinance US, Inc. (the "Purchaser") which provides for the issuance and sale of the Certificates to the Purchaser; WHEREAS, the Company, the Guarantor, the Trustee, the Subordination Agent, the Escrow Agent, the Liquidity Provider and the Paying Agent and certain other parties named therein concurrently herewith are entering into a Delayed Funding Implementation Agreement, dated as of the date hereof (the "Delayed Funding Implementation Agreement") pursuant to which the parties thereto agree to supplement and modify the Operative Agreements, as defined therein; WHEREAS, the Trustee, upon execution and delivery of this Agreement, hereby declares the creation of this Trust (the "2002-1B Trust") for the benefit of the Certificateholders, and the Certificateholders, as the grantors of the 2002-1B Trust, by their respective acceptances of the Certificates, join in the creation of this 2002-1B Trust with the Trustee; WHEREAS, all Certificates to be issued by the Trust will evidence fractional undivided interests in the Trust and will convey no rights, benefits or interests in respect of any property other than the Trust Property; WHEREAS, the Escrow Agent, the Purchaser, the Trustee and the Escrow Paying Agent have contemporaneously herewith entered into an Escrow Agreement pursuant to which the Purchaser has delivered to the Escrow Agent the purchase price for the Certificates and has irrevocably instructed the Escrow Agent to withdraw and pay funds from such amount upon request and proper certification by the Trustee to purchase Equipment Notes at the times at which the Aircraft are to be financed as contemplated by the Note Purchase Agreement from time to time prior to the Delivery Period Termination Date (other than the financing of an Aircraft on the Issuance Date, if applicable); WHEREAS, the Escrow Agent on behalf of the Certificateholders has contemporaneously herewith entered into the Deposit Agreement (Class B) and the Delayed Deposit Agreement (Class B) with the Depositary; WHEREAS, pursuant to the terms and conditions of this Agreement and the Note Purchase Agreement, the Trustee, on behalf of the Trust, shall (subject to certain conditions) purchase Equipment Notes having the same interest rate as, and final maturity date not later than the final Regular Distribution Date of, the Certificates issued hereunder and shall hold such Equipment Notes in trust for the benefit of the Certificateholders; WHEREAS, all of the conditions and requirements necessary to make this Agreement, when duly executed and delivered, a valid, binding and legal instrument, enforceable in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Agreement in the form and with the terms hereof have been in all respects duly authorized; WHEREAS, to facilitate the sale of Equipment Notes to, and the purchase of Equipment Notes by, the Trustee on behalf of the 2002-1B Trust, (i) the Company has duly authorized the execution and delivery of this Agreement as the "issuer", as such term is defined in and solely for purposes of the Securities Act of 1933, as amended, of the Certificates to be issued pursuant hereto, and as the "obligor", as such term is defined in and solely for purposes of the Trust Indenture Act or 1939, as amended, and (ii) the Guarantor has duly authorized the execution and delivery of this Agreement with respect to all such Certificates and the Company and the Guarantor are undertaking to perform certain administrative and ministerial duties hereunder and are also undertaking to pay the fees and expenses of the Trustee; WHEREAS, the Trustee, the Other Trustee, the Investors (as defined in the Registration Rights Agreement), the Guarantor and the Company, have contemporaneously herewith entered into a Registration Rights Agreement that provides for, among other things, the possible issuance of Exchange Certificates; and WHEREAS, upon issuance of the Exchange Certificates, if any, or the effectiveness of the Shelf Registration Statement, this Agreement, as amended or supplemented from time to time, will be subject to the provisions of the Trust Indenture Act of 1939, and shall, to the extent applicable, be governed by such provisions. 2 NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms used herein that are defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference herein, have the meanings assigned to them therein; (3) all references in this Agreement to designated "Articles", "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement; (4) the words "herein", "hereof' and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; and (5) unless the context otherwise requires, whenever the words "including", "include" or "includes" are used herein, it shall be deemed to be followed by the phrase "without limitation". Accountants: Has the meaning specified in Section 7.15(b). Affiliate: With respect to any specified Person, means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. Agent Members: Has the meaning specified in Section 3.05(a). Aircraft: Means each of the Aircraft or Substitute Aircraft in respect of which a Participation Agreement is entered into in accordance with the Note Purchase Agreement. Applicable Delivery Date: Has the meaning specified in Section 2.01(b). Applicable Participation Agreement: Has the meaning specified in Section 2.01(b). 3 Authorized Agent: Means any Paying Agent or Registrar for the Certificates. Avoidable Tax: Has the meaning specified in Section 7.08(e) hereof. Book-Entry Certificates: With respect to the Certificates, means a beneficial interest in the Certificates, ownership and transfers of which shall be made through book entries as described in Section 3.04. Business Day: Means any day other than a Saturday, a Sunday or a day on which commercial banks are required or authorized to close in Indianapolis, Indiana or New York, New York or so long as any such Certificate is outstanding, the city and state in which the Trustee or any related Loan Trustee maintains its Corporate Trust Office or receives and disburses funds. Certificate: Means any one of the Initial Certificates or Exchange Certificates and any Initial Certificates or Exchange Certificates issued in exchange therefor or replacement thereof pursuant to this Agreement and authenticated hereunder substantially in the form of Exhibit A hereto. Certificate Account: Means the account or accounts created and maintained pursuant to Section ------------------- 4.01(a). Certificateholder or Holder: Means the Person in whose name a Certificate is registered in the Register. Certificate Purchase Agreement: Has the meaning specified in the fifth recital to this Agreement. Class C Certificateholder: Means, at any time, any holder of one or more pass through certificates issued by the American Trans Air Pass Through Trust, Series 2002-1C, if and when established. Clearing Agency: Means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. Clearing Agency Participant: Means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects, directly or indirectly, book-entry transfers and pledges of securities deposited with the Clearing Agency. Code: Means the Internal Revenue Code of 1986, as amended. Company: Means American Trans Air, Inc., an Indiana corporation, or its successor in interest pursuant to Section 5.02. Controlling Party: Has the meaning specified in the Intercreditor Agreement. 4 Corporate Trust Office: With respect to the Trustee or any Loan Trustee, means the office of such trustee in the city at which at any particular time its corporate trust business shall be principally administered. Cut-off Date: Means the earlier of (a) the Delivery Period Termination Date and (b) the date on which a Triggering Event occurs. Delayed Funding Implementation Agreement: Has the meaning specified in the sixth recital to this Agreement. Delivery Date: Has the meaning specified in Annex A to the Note Purchase Agreement. Delivery Notice: Has the meaning specified in Section 1(b) of the Note Purchase Agreement. Delivery Period Termination Date: Has the meaning specified in Annex A to the Note Purchase Agreement. Deposit Agreement: Means (i) prior to the Delayed Funding Date (as defined in the Delayed Funding Implementation Agreement) the Deposit Agreement (Class B) and (ii) on and after the Delayed Funding Date, such Deposit Agreement (to the extent of any payment to be made by the Depositary thereunder on or after the Delayed Funding Date) and the Delayed Deposit Agreement (Class B), each dated as of March 28, 2002 relating to the Certificates, between the Depositary and the Escrow Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms and shall include any Replacement Deposit Agreement (as defined in the Note Purchase Agreement). Depositary: Means IntesaBci S.p.A., acting through its New York Branch. Deposits: Has the meaning specified in the Deposit Agreement. Direction: Has the meaning specified in Section 1.04(a). Distribution Date: Means each Regular Distribution Date and each Special Distribution Date. DTC: Means The Depository Trust Company, its nominees and their respective successors. Equipment Note: Means the Series B Equipment Notes issued under (and as defined in) the Indentures. ERISA: Means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor federal statute. 5 Escrow Agent: Means, initially, Wells Fargo Bank Northwest, National Association, and any replacement or successor therefor appointed in accordance with the Escrow Agreement. Escrow Agreement: Means the Escrow and Paying Agent Agreement (Class B) dated as of March 28, 2002 relating to the Certificates, among the Escrow Agent, the Escrow Paying Agent, the Purchaser and the Trustee, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. Escrow Paying Agent: Means the Person acting as paying agent under the Escrow Agreement. Escrow Receipt: Means the receipt substantially in the form annexed to the Escrow Agreement representing a fractional undivided interest in the funds held in escrow thereunder. Euroclear: Means the Euroclear System. Event of Default: Means the occurrence of an Indenture Default under any Indenture. Exchange Act: Has the meaning specified in Section 5.03. Exchange Certificates: Means the pass through certificates substantially in the form of Exhibit A hereto issued in exchange for the Initial Certificates or upon sale of the Initial Certificates under the Shelf Registration Statement, in each case pursuant to the Registration Rights Agreement and authenticated hereunder. Exchange Offer: Means the exchange offer which may be made pursuant to the Registration Rights Agreement to exchange Initial Certificates for Exchange Certificates. Exchange Offer Registration Statement: Means the registration statement that, pursuant to the Registration Rights Agreement, is filed by the Company with the SEC with respect to the exchange of Initial Certificates for Exchange Certificates. FAA: Has the meaning specified in Section 5.02(a). Final Withdrawal: Has the meaning specified in the Escrow Agreement. Final Withdrawal Date: Has the meaning specified in the Escrow Agreement. Final Withdrawal Notice: Has the meaning specified in Section 2.02. Fractional Undivided Interest: Means the fractional undivided interest in the Trust that is evidenced by a Certificate. Funding Date: Has the meaning specified in Annex A to the Note Purchase Agreement. 6 Global Certificates: Has the meaning assigned to such term in Section 3.01(d). Global Exchange Certificate: Has the meaning specified in Section 3.01(h). Guarantor: Means Amtran, Inc., an Indiana corporation, or its successor in interest. Indenture: Means each separate trust indenture and mortgage agreement relating to the Aircraft, each entered into pursuant to the related Participation Agreement, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. Indenture Default: With respect to an Indenture, a Mortgage Event of Default under (and as defined in) any Indenture relating to a Leased Aircraft or an Event of Default under (and as defined in ) an Indenture relating to an Owned Aircraft. Initial Certificates: Means the certificates issued and authenticated hereunder substantially in the form of Exhibit A hereto (including the Additional Certificates (as defined in the Delayed Funding Implementation Agreement)), other than the Exchange Certificates. Initial Regular Distribution Date: Means the first Regular Distribution Date on which a Scheduled Payment is to be made. Institutional Accredited Investor: Means an institutional investor that is an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act. Intercreditor Agreement: Means the Intercreditor Agreement dated March 28, 2002 among the Trustee, the Other Trustee, the Liquidity Provider, the liquidity provider relating to the Certificates issued under (and as defined in) the Other Pass Through Trust Agreement, and Wilmington Trust Company, as Subordination Agent thereunder, as amended, supplemented or otherwise modified from time to time in accordance with its terms. Issuance Date: Means the initial date of the issuance of the Certificates. Lease: Means, with respect to each Leased Aircraft, the lease between an Owner Trustee, as the lessor, and the Company, as the lessee, referred to in the related Indenture, as each such lease may be amended, supplemented or otherwise modified in accordance with its terms. Leased Aircraft: Has the meaning specified in the second recital to this Agreement. Letter of Representations: Means the agreement dated the Issuance Date among the Company, the Trustee and the initial Clearing Agency. Liquidity Facility: Means the Revolving Credit Agreement (2002-1B) dated March 28, 2002 relating to the Certificates between the Liquidity Provider and the Subordination 7 Agent, as amended, replaced, supplemented or otherwise modified from time to time in accordance with its terms and the terms of the Intercreditor Agreement. Liquidity Provider: Means, initially, AIG Matched Funding Corp., and any replacement or successor therefor appointed in accordance with the Liquidity Facility and the Intercreditor Agreement. Loan Trustee: With respect to any Equipment Note or the Indenture applicable thereto, means the bank or trust company designated as loan or indenture trustee under such Indenture, not in its individual capacity but solely as trustee; and any successor to such Loan Trustee as such trustee; and Loan Trustees means all of the Loan Trustees under the Indentures. Non-U.S. Person: Means a Person that is not a U.S. Person as defined in Regulation S. Note Documents: With respect to any Equipment Note, means the related Indenture, Lease (if the related Aircraft is leased to the Company) and Participation Agreement. Note Purchase Agreement: Means the Note Purchase Agreement dated as of March 28, 2002 among the Trustee, the Other Trustee, the Company, the Guarantor, the Escrow Agent, the Escrow Paying Agent and the Subordination Agent, providing for, among other things, the purchase of Equipment Notes by the Trustee on behalf of the Trust, as the same may be amended, supplemented or otherwise modified from time to time, in accordance with its terms. Notice of Purchase Withdrawal: Has the meaning specified in the Deposit Agreement. Officer's Certificate: Means a certificate signed (a) in the case of the Guarantor or the Company, by (i) the President or any Executive Vice President or Senior Vice President of the Guarantor or the Company, respectively, signing alone or (ii) any Vice President of the Guarantor or the Company signing together with the Secretary, the Assistant Secretary, the Treasurer or any Assistant Treasurer of the Guarantor or the Company, respectively, or (b) in the case of the Trustee or an Owner Trustee or a Loan Trustee, a Responsible Officer of the Trustee or such Owner Trustee or such Loan Trustee, as the case may be. Offshore Global Certificates: Has the meaning assigned to such term in Section 3.01(d). Offshore Physical Certificates: Means the Initial Certificates, issued pursuant to Section 3.05(b) in exchange for interests in any Offshore Global Certificate, in the form of permanent certificated Certificates in registered form substantially in the form set forth in Exhibit A hereto. Opinion of Counsel: Means a written opinion of legal counsel who (a) in the case of counsel for the Guarantor or the Company, may be (i) a senior attorney in rank of the officers of the Guarantor or the Company a principal duty of which is furnishing advice as to legal 8 matters or (ii) such other counsel designated by the Guarantor or the Company and reasonably acceptable to the Trustee and (b) in the case of any Owner Trustee or any Loan Trustee, may be such counsel as may be designated by any of them whether or not such counsel is an employee of any of them, and who shall be reasonably acceptable to the Trustee. Other Pass Through Trust Agreement: Means the American Trans Air 2002-1A Pass Through Trust Agreement relating to the American Trans Air 2002-1B Pass Through Trust, dated the date hereof. Other Trust: Means the American Trans Air 2002-1A Pass Through Trust. Other Trustee: Means the trustee under the Other Pass Through Trust Agreement, and any successor or other trustee appointed as provided therein. Outstanding: With respect to Certificates, means, as of the date of determination, all Certificates theretofore authenticated and delivered under this Agreement, except: (i) Certificates theretofore canceled by the Registrar or delivered to the Trustee or the Registrar for cancellation; (ii) Certificates for which money in the full amount required to make the final distribution with respect to such Certificates pursuant to Section 11.01 hereof has been theretofore deposited with the Trustee in trust for the Holders of such Certificates as provided in Section 4.01 pending distribution of such money to such Certificateholders pursuant to payment of such final distribution; and (iii) Certificates in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to this Agreement. Owned Aircraft: Has the meaning specified in the second recital to this Agreement. Owner Participant: With respect to any Equipment Note, means the "Owner Participant" as referred to in the Indenture pursuant to which such Equipment Note is issued and any permitted successor or assign of such Owner Participant; and Owner Participants at any time of determination means all of the Owner Participants thus referred to in the Indentures. Owner Trustee: With respect to any Equipment Note relating to a Leased Aircraft, means the "Owner Trustee", as referred to in the Indenture pursuant to which such Equipment Note is issued, not in its individual capacity but solely as trustee; and Owner Trustees means all of the Owner Trustees party to any of the Indentures. Participation Agreement: Means each Participation Agreement to be entered into by the Trustee and the Other Trustee pursuant to the Note Purchase Agreement, as the same may be amended, supplemented or otherwise modified in accordance with its terms; and Participation Agreements means all such agreements. 9 Paying Agent: Means the paying agent maintained and appointed for the Certificates pursuant to Section 7.11. Permitted Investments: Means obligations of the United States of America or agencies or instrumentalities thereof for the payment of which the full faith and credit of the United States of America is pledged, maturing in not more than 60 days after the acquisition thereof or such lesser time as is required for the distribution of any Special Payments on a Special Distribution Date. Person: Means any person, including any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, trustee, unincorporated organization, or government or any agency or political subdivision thereof. Physical Certificates: Has the meaning specified in Section 3.01(e). Pool Balance: Has the meaning specified in the Intercreditor Agreement. Pool Factor: Means, as of any date, the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance as at such date by (ii) the original aggregate face amount of the Certificates. The Pool Factor as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property and the distribution thereof to be made on such Distribution Date and the distribution of the Final Withdrawal to be made on such Distribution Date. Private Placement Memorandum: Means the Private Placement Memorandum dated March 26, 2002 relating to the offering of the Certificates and the certificates issued under the Other Pass Through Trust Agreement. Private Placement Legend: Has the meaning specified in Section 3.02. PTC Event of Default: Means any failure to pay within 10 Business Days of the due date thereof: (i) the outstanding Pool Balance on the Final Legal Distribution Date or (ii) interest due on the Certificates on any Distribution Date (unless the Subordination Agent shall have made an Interest Drawing (as defined in the Intercreditor Agreement) or a withdrawal or withdrawals from a cash collateral account pursuant to Section 3.6(f) of the Intercreditor Agreement with respect thereto in an amount sufficient to pay such interest (or such Pool Balance, as the case may be) and shall have distributed such amount to the Trustee entitled thereto). QIB: Means a qualified institutional buyer as defined in Rule 144A. Rating Agency: Means Moody's Investor Service, Inc. and its successors in interest. Record Date: Means (i) for Scheduled Payments to be distributed on any Regular Distribution Date, other than the final distribution, the 15th day (whether or not a Business Day) preceding such Regular Distribution Date, and (ii) for Special Payments to be distributed on any 10 Special Distribution Date, other than the final distribution, the 15th day (whether or not a Business Day) preceding such Special Distribution Date. Register and Registrar: Mean the register maintained and the registrar appointed pursuant to Sections 3.04 and 7.11. Registration Rights Agreement: Means the Registration Rights Agreement dated March 26, 2002, among the Trustee, the Other Trustee, the Investors (as defined in the Registration Rights Agreement), the Guarantor and the Company, as amended, supplemented or otherwise modified from time to time in accordance with its terms. Regular Distribution Date: With respect to distributions of Scheduled Payments in respect of the Certificates, means each date designated as a Regular Distribution Date in the Certificates issued pursuant to this Agreement, until payment of all the Scheduled Payments to be made under the Equipment Notes held in the Trust have been made; provided, however, that, if any such day shall not be a Business Day, the related distribution shall be made on the next succeeding Business Day without additional interest. Regulation S: Means Regulation S under the Securities Act and any successor regulation thereto. Regulation S Restricted Date: Means, with respect to each Initial Certificate, the date 40 days after the later of the commencement of the initial offering of such Initial Certificate and the date of initial issuance thereof. Request: Means a request by the Company setting forth the subject matter of the request accompanied by an Officer's Certificate and an Opinion of Counsel as provided in Section 1.02 of this Agreement. Responsible Officer: With respect to the Trustee, any Loan Trustee and any Owner Trustee, means any officer in the Corporate Trust Office of the Trustee, Loan Trustee or Owner Trustee or any other officer customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject. Rule 144A: Means Rule 144A under the Securities Act and any successor rule thereto. Scheduled Payment: With respect to any Equipment Note, means (i) any payment of principal or interest on or in respect of such Equipment Note (other than any such payment which is not in fact received by the Trustee or any Subordination Agent within five days of the date on which such payment is scheduled to be made) due from the obligor thereon or (ii) any payment of interest on the Certificates with funds drawn under the Liquidity Facility, which payment in any such case represents the installment of principal at the stated maturity of such installment of principal on such Equipment Note, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Note, or both; provided that any 11 payment of principal, premium, if any, or interest resulting from the redemption or purchase of any Equipment Note shall not constitute a Scheduled Payment. SEC: Means the Securities and Exchange Commission as from time to time constituted or created under the United States Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. Securities Act: Means the United States Securities Act of 1933, as amended from time to time, or any successor thereto. Shelf Registration Statement: Means the shelf registration statement which may be required to be filed by the Company with the SEC pursuant to the Registration Rights Agreement, other than an Exchange Offer Registration Statement. Special Distribution Date: Means each date on which a Special Payment is to be distributed as specified in this Agreement; provided, however, that, if any such day shall not be a Business Day, the related distribution shall be made on the next succeeding Business Day without additional interest. Special Redemption Premium: Means the premium payable by the Company in respect of a Prepayment Withdrawal (as defined in the Escrow Agreement) or the Final Withdrawal pursuant to the Note Purchase Agreement. Special Payment: Means any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture) or the Special Redemption Premium (if applicable). Special Payments Account: Means the account or accounts created and maintained pursuant to Section 4.01(b). Subordination Agent: Has the meaning specified therefor in the Intercreditor Agreement. Substitute Aircraft: Has the meaning specified in Section 1(g) of the Note Purchase Agreement. Triggering Event: Has the meaning specified therefor in the Intercreditor Agreement. Trust: Means the trust created by this Agreement, the estate of which consists of Trust Property. Trust Indenture Act: Means the United States Trust Indenture Act of 1939, as amended from time to time. 12 Trust Property: Means (i) the Equipment Notes held as the property of the Trust and, subject to the Intercreditor Agreement, all monies at any time paid thereon and all monies due and to become due thereunder, (ii) all rights of the Trust and the Trustee, on behalf of the Trust, under the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement and the Liquidity Facilities, including, without limitation, all rights to receive certain payments thereunder, and all monies paid to the Trustee on behalf of the Trust pursuant to the Intercreditor Agreement or the Liquidity Facilities, provided, that rights with respect to the Deposits or under the Escrow Agreement, except for the right to direct withdrawals for the purchase of Equipment Notes to be held herein, will not constitute Trust Property, and (iii) the funds from time to time deposited in the Certificate Account and the Special Payments Account and, subject to the Intercreditor Agreement, any proceeds from the sale by the Trustee pursuant to Article VI hereof of any such Equipment Note. Trustee: Means Wilmington Trust Company, not in its individual capacity but solely as trustee, or its successor in interest, and any successor trustee appointed as provided herein. Trustee's Lien: Has the meaning specified in section 7.16. U.S. Global Certificate: Has the meaning specified in Section 3.01(c). U.S. Physical Certificates: Means the Initial Certificates offered and sold to Institutional Accredited Investors issued in the form of permanent certificated Certificates in registered form in substantially the form set forth as Exhibit A hereto with such applicable legends as are provided for in clauses (a) and (b) of Section 3.02 hereto. Section 1.02. Compliance Certificates and Opinions. Upon any application or request (except with respect to matters set forth in Article II) by the Company, any Owner Trustee or any Loan Trustee to the Trustee to take any action under any provision of this Agreement, the Company, such Owner Trustee or such Loan Trustee, as the case may be, shall furnish to the Trustee (i) an Officer's Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Agreement relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Agreement relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Agreement (other than a certificate provided pursuant to Section 8.04(d)) shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions in this Agreement relating thereto; 13 (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.03. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters and any such Person may certify or give an opinion as to such matters in one or several documents. Any Opinion of Counsel stated to be based on the opinion of other counsel shall be accompanied by a copy of such other opinion. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Agreement, they may, but need not, be consolidated and form one instrument. Section 1.04. Directions of Certificateholders. (a) Any direction, consent, request, demand, authorization, notice, waiver or other action provided by this Agreement to be given or taken by Certificateholders (a "Direction") may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Certificateholders in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required pursuant to this Agreement, to the Company or any Loan Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the Directions of the Certificateholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent or proxy shall be sufficient for any purpose of this Agreement and conclusive in favor of the Trustee, the Company and any Loan Trustee, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or such other officer and where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such 14 corporation, association or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient. (c) In determining whether the Certificateholders of the requisite Fractional Undivided Interests of Certificates Outstanding have given any Direction under this Agreement, Certificates owned by the Company, the Guarantor, any Owner Trustee, any Owner Participant or any Affiliate of any such Person (other than an Affiliate of any Owner Participant) shall be disregarded and deemed not to be Outstanding for purposes of any such determination. In determining whether the Trustee shall be protected in relying upon any such Direction, only Certificates which the Trustee knows to be so owned shall be so disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of the Certificates Outstanding, such Certificates shall not be so disregarded as aforesaid, and (ii) if any amount of Certificates so owned by any such Person have been pledged in good faith, such Certificates shall not be disregarded as aforesaid if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Company, the Guarantor, any Owner Trustee, any Owner Participant or any Affiliate of any such Person. (d) The Company may, at its option by delivery of an Officer's Certificate to the Trustee, set a record date to determine the Certificateholders entitled to give a Direction. Notwithstanding Section 316(c) of the Trust Indenture Act, such record date shall be the record date specified in such Officer's Certificate which shall be a date not more than 30 days prior to the first solicitation of Certificateholders in connection therewith. If such a record date is fixed, such Direction may be given before or after such record date, but only the Certificateholders of record at the close of business on such record date shall be deemed to be Certificateholders for the purposes of determining whether Certificateholders of the requisite proportion of Outstanding Certificates have authorized or agreed or consented to such Direction, and for that purpose the Outstanding Certificates shall be computed as of such record date; provided that no such Direction by the Certificateholders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Agreement not later than one year after the record date. (e) Any Direction by the Holder of any Certificate shall bind the Holder of every Certificate issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of such Direction is made upon such Certificate. (f) Except as otherwise provided in Section 1.04(c), Certificates owned by or pledged to any Person shall have an equal and proportionate benefit under the provisions of this Agreement, without preference, priority, or distinction as among all of the Certificates. (g) For all purposes of this Agreement, all Initial Certificates and all Exchange Certificates shall vote and take all actions of Certificateholders together as one series of Certificates. 15 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES; ACQUISITION OF EQUIPMENT NOTES Section 2.01. Issuance of Certificates; Acquisition of Equipment Notes. (a) The Trustee is hereby (i) authorized and directed to execute and deliver the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement and the Note Purchase Agreement on or prior to the Issuance Date, each in the form delivered to the Trustee by the Company and (ii) authorized, subject to the respective terms thereof, to perform its obligations thereunder. Upon the request of the Company and the satisfaction or waiver of the closing conditions specified in the Certificate Purchase Agreement, the Trustee shall, execute, deliver, authenticate, issue and sell Certificates in authorized denominations equaling in the aggregate the amount set forth in Schedule A to the Certificate Purchase Agreement, and evidencing the entire ownership interest in the Trust, which amount equals the maximum aggregate principal amount of Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. Except as provided in Sections 3.04, 3.05, 3.06, 3.07 and 3.10 hereof and subject to the Delayed Funding Implementation Agreement, the Trustee shall not execute, authenticate or deliver Certificates in excess of the aggregate amount specified in this paragraph. (b) On or after the Issuance Date, the Company may deliver from time to time to the Trustee (but in any case no later than one Business Day prior to the date on which the Trustee must instruct the Escrow Agent as described below) a Delivery Notice relating to one or more Equipment Notes. After receipt of a Delivery Notice and in any case no later than one Business Day prior to a Delivery Date or Funding Date as to which such Delivery Notice relates (the "Applicable Delivery Date") (or, if the Issuance Date is an Applicable Delivery Date, on the Issuance Date), the Trustee shall (as and when specified in the Delivery Notice) instruct the Escrow Agent to provide a Notice of Purchase Withdrawal to the Depositary requesting (i) the withdrawal of one or more Deposits on the Applicable Delivery Date in accordance with and to the extent permitted by the terms of the Escrow Agreement and the Deposit Agreement and (ii) the payment of all, or a portion, of such Deposit or Deposits, in an aggregate amount equal to the purchase price of the Equipment Notes relating to the Aircraft to be delivered on such Applicable Delivery Date, to or on behalf of the Owner Trustee or the Company, as the case may be, issuing such Equipment Notes, all as shall be described in the Delivery Notice; provided that, if the Issuance Date is an Applicable Delivery Date, such purchase price shall be paid from a portion of the proceeds of the sale of the Certificates. The Trustee shall (as and when specified in such Delivery Notice), subject to the conditions set forth in Sections 1 and 2 of the Note Purchase Agreement, enter into and perform its obligations under the Participation Agreement specified in such Delivery Notice (the "Applicable Participation Agreement") and cause such certificates, documents and legal opinions relating to the Trustee to be duly delivered as required by the Applicable Participation Agreement. If at any time prior to the Applicable Delivery Date, the Trustee receives a notice of postponement pursuant to Section 1(d) or 1(e) of the Note Purchase Agreement, then the Trustee shall give the Depositary (with a copy to the Escrow Agent) a notice of cancellation of such Notice of Purchase Withdrawal relating to such Deposit 16 or Deposits on such Applicable Delivery Date. Upon satisfaction of the conditions specified in the Note Purchase Agreement and the Applicable Participation Agreement, the Trustee shall purchase the applicable Equipment Notes with the proceeds of the withdrawals of one or more Deposits made on the Applicable Delivery Date in accordance with the terms of the Deposit Agreement and the Escrow Agreement (or, if the Issuance Date is the Applicable Delivery Date with respect to such Applicable Participation Agreement, from a portion of the proceeds of the sale of the Certificates). The purchase price of such Equipment Notes shall equal the principal amount of such Equipment Notes. Amounts withdrawn from such Deposit or Deposits in excess of the purchase price of the Equipment Notes or to the extent not applied on the Applicable Delivery Date to the purchase price of the Equipment Notes, shall be re-deposited with the Depositary on the Applicable Delivery Date in accordance with the terms of the Deposit Agreement. Section 2.02. Withdrawal of Deposits. (a) If the Trustee is notified that any Deposits remain outstanding on the Business Day next succeeding the Cut-Off Date, (i) the Trustee shall give the Escrow Agent notice that the Trustee's obligation to purchase Equipment Notes under the Note Purchase Agreement has terminated and instruct the Escrow Agent to provide a notice of Final Withdrawal to the Depositary substantially in the form of Exhibit B to the Deposit Agreement (the "Final Withdrawal Notice") and (ii) the Trustee will make a demand upon the Company under the Note Purchase Agreement for an amount equal to the Special Redemption Premium, if applicable, such payment to be made on the Final Withdrawal Date. (b) If (i) as a result of a downgrading of the Company's corporate credit ratings, General Electric Capital Corporation has elected to exercise its contractual rights not to act as an Owner Participant with respect to a GE Aircraft (as defined in the Note Purchase Agreement), (ii) pursuant to the separate aircraft financing agreement between the Company and General Electric Capital Corporation, the Company will not own or lease such GE Aircraft and (iii) the Company will not identify and substitute a Substitute Aircraft for such GE Aircraft, the Company may deliver to the Trustee written notice requesting that the Trustee deliver to the Escrow Agent a Prepayment Withdrawal Certificate (as defined in the Escrow Agreement) pursuant to the Escrow Agreement directing the Escrow Agent to provide a Notice of Prepayment Withdrawal (as defined in the Deposit Agreement) to the Depositary requesting the withdrawal of all or a portion of the Deposit relating to the Equipment Notes in respect of such GE Aircraft in accordance with and to the extent permitted by the terms of the Escrow Agreement and the Deposit Agreement. In connection with the Trustee's delivery of a Prepayment Withdrawal Certificate, the Trustee shall make a demand upon the Company under the Note Purchase Agreement for an amount equal to the Special Redemption Premium, if applicable, to be payable on the Prepayment Withdrawal Date (as defined in the Escrow Agreement). Section 2.03. Acceptance by Trustee. The Trustee, upon the execution and delivery of this Agreement, acknowledges its acceptance of all right, title, and interest in and to the Trust Property and declares that the Trustee holds and will hold such right, title, and interest for the benefit of all then present and future Certificateholders, upon the trusts herein set forth. Subject to Section 7.13, the Trustee shall take all actions reasonably necessary to effect the registration of all such Equipment Notes in the name of the Subordination Agent. By its payment 17 for and acceptance of each Certificate issued to it under this Agreement, each Certificateholder as grantor of the Trust thereby joins in the creation and declaration of the Trust. Section 2.04. Limitation of Powers. The Trust is constituted solely for the purpose of making the investment in the Equipment Notes, and, except as set forth herein, the Trustee shall not be authorized or empowered to acquire any other investments or engage in any other activities and, in particular, the Trustee shall not be authorized or empowered to do anything that would cause such Trust to fail to qualify as a "grantor trust" for federal income tax purposes (including as subject to this restriction acquiring the Aircraft (as defined in the respective related Indentures) by bidding such Equipment Notes or otherwise, or taking any action with respect to any such Aircraft once acquired). ARTICLE III THE CERTIFICATES Section 3.01. Title, Form, Denomination and Execution of Certificates. (a) The Initial Certificates shall be known as the "10.699% Initial Pass Through Certificates, Series 2002-1B" and the Exchange Certificates shall be known as the "10.699% Exchange Pass Through Certificates, Series 2002-1B." Each Certificate will represent a fractional undivided interest in the Trust and shall be substantially in the form set forth as Exhibit A hereto, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Agreement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the Trustee or the officers executing such Certificates, as evidenced by the Trustee's or the officer's execution of the Certificates. Any portion of the text of any Certificate may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. At the Escrow Agent's request under the Escrow Agreement, the Trustee shall affix the corresponding Escrow Receipt to each Certificate. Any transfer or exchange of any Certificate shall also effect a transfer or exchange of the related Escrow Receipt. Prior to the Final Withdrawal Date, no transfer or exchange of any Certificate shall be permitted unless the corresponding Escrow Receipt is attached thereto and also is so transferred or exchanged. By acceptance of any Certificate to which an Escrow Receipt is attached, each Holder of such a Certificate acknowledges and accepts the restrictions on transfer of the Escrow Receipt set forth herein and in the Escrow Agreement. (b) The Initial Certificates shall be issued only in fully registered form without coupons in minimum denominations of $100,000 or integral multiples of $1,000 in excess thereof, except that one Certificate may be issued in a denomination of less than $100,000. The Exchange Certificates shall be issued only in fully registered form without coupons in minimum denominations of $1,000 or integral multiples thereof. Each Certificate shall be dated the date of its authentication. The aggregate Fractional Undivided Interest of Certificates shall not at any time exceed $31,131,000. 18 (c) The Initial Certificates shall be issued initially in the form of one or more permanent global Certificates in registered form, substantially in the form set forth as Exhibit A hereto with such applicable legends as are provided for in clauses (a) and (b) of Section 3.02 (each, a "U.S. Global Certificate"), duly executed and authenticated by the Trustee as hereinafter provided. Each U.S. Global Certificate will be registered in the name of a nominee for DTC and deposited with the Trustee, as custodian for DTC. The aggregate principal amount of any U.S. Global Certificate may from time to time be increased or decreased by adjustments made on the records of DTC or its nominee, or of the Trustee, as custodian for DTC or its nominee, as hereinafter provided. (d) Any Initial Certificates transferred in reliance on Regulation S shall be issued in the form of a single global Certificate in registered form, substantially in the form set forth as Exhibit A hereto with such applicable legends as are provided for in clause (b) of Section 3.02 (the "Offshore Global Certificate") duly executed and authenticated by the Trustee as hereinafter provided. The U.S. Global Certificates and the Offshore Global Certificates are sometimes referred to as the "Global Certificates". (e) [Reserved] (f) [Reserved] (g) The Certificates shall be in registered form and shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner, all as determined by the officers executing such Certificates, as evidenced by their execution of such Certificates. (h) The Exchange Certificates shall be issued in the form of one or more Global Certificates substantially in the form of Exhibit A hereto (each, a "Global Exchange Certificate"), except that (i) the Private Placement Legend (hereinafter defined) shall be omitted and (ii) such Exchange Certificates shall contain such appropriate insertions, omissions, substitutions and other variations from the form set forth in Exhibit A hereto relating to the nature of the Exchange Certificates as the Responsible Officer of the Trustee executing such Exchange Certificates on behalf of the Trust may determine, as evidenced by such officer's execution on behalf of the Trust of such Exchange Certificates. Such Global Exchange Certificates shall be in registered form and be registered in the name of DTC and deposited with the Trustee, at its Corporate Trust Office, as custodian for DTC. The aggregate principal amount of any Global Exchange Certificate may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC for such Global Exchange Certificate, which adjustments shall be conclusive as to the aggregate principal amount of any such Global Exchange Certificate. Subject to clause (i) and (ii) of the first sentence of this Section 3.01(h), the terms hereof applicable to U.S. Global Certificates and/or Global Certificates shall apply to the Global Exchange Certificates mutatis mutandis. Section 3.02. Restrictive Legends. 19 (a) Subject to Section 3.01 and 3.06, each U.S. Global Certificate and each U.S. Physical Certificate shall bear the following legend (the "Private Placement Legend") on the face thereof: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO ATA OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CASE THIS CERTIFICATE IS IN DEFINITIVE FORM, IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE APPLICABLE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE CERTIFICATES PURSUANT TO CLAUSE 2(E) ABOVE OR UPON ANY TRANSFER OF THE CERTIFICATES UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "OFFSHORE 20 TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS. (b) Each Global Certificate shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN. Section 3.03. Authentication of Certificates. (a) On the Issuance Date, the Trustee shall duly execute, authenticate and deliver Certificates in authorized denominations in the aggregate amount of $31,131,000, evidencing the entire ownership interest of the Trust, which amount equals the maximum aggregate principal amount of Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. (b) No Certificate shall be entitled to any benefit under this Agreement or be valid or obligatory for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. 21 Section 3.04. Transfer and Exchange. (a) The Trustee shall cause to be kept at the office or agency to be maintained by it in accordance with the provisions of Section 7.11 of this Agreement a register (the "Register") for the Certificates in which, subject to such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of the Certificates and of transfers and exchanges of the Certificates as herein provided. The Trustee shall initially be the registrar (the "Registrar") for the purpose of registering the Certificates and transfers and exchanges of the Certificates as herein provided. A Certificateholder may transfer a Certificate by written application to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Agreement, including providing a written certificate or other evidence of compliance with any restrictions on transfer, in form satisfactory to the Trustee and the Registrar. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Certificateholder only upon, final acceptance and registration of the transfer by the Registrar in the Register. Prior to the registration of any transfer by a Certificateholder as provided herein, the Trustee shall treat the person in whose name the Certificate is registered as the owner thereof for all purposes, and the Trustee shall not be affected by notice to the contrary. Furthermore, DTC shall, by acceptance of a Global Certificate, agree that transfers of beneficial interests in such Global Certificate may be effected only through a book-entry system maintained by DTC (or its agent), and that ownership of a beneficial interest in the Certificate shall be required to be reflected in a book entry. When Certificates are presented to the Registrar with a request to register the transfer thereof or to exchange them for an equal face amount of Certificates of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges in accordance with the terms, conditions and restrictions hereof, the Trustee shall execute and authenticate Certificates at the Registrar's request. No service charge shall be made to a Certificateholder for any registration of transfer or exchange of the Certificates, but the Trustee shall require payment of a sum sufficient to cover any tax or similar governmental charge payable in connection therewith. All Certificates surrendered for registration of transfer or exchange shall be canceled and subsequently destroyed by the Trustee. Section 3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates. (a) Members of, or participants in, DTC ("Agent Members") shall have no rights under this Agreement with respect to any Global Certificate held on their behalf by DTC, or the Trustee as its custodian, and DTC may be treated by the Trustee and any agent of the Trustee as the absolute owner of such Global Certificate for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Trustee or any agent of the Trustee from giving effect to any written certification, proxy or other authorization furnished by DTC or shall impair, as between DTC and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Certificate. Upon the issuance of any Global Certificate, the Registrar or its duly appointed agent shall record a nominee of DTC as the registered holder of such Global Certificate. 22 (b) Transfers of any Global Certificate shall be limited to transfers of such Global Certificate in whole, but not in part, to nominees of DTC, its successor or such successor's nominees. Beneficial interests in the U.S. Global Certificate and any Offshore Global Certificate may be transferred in accordance with the rules and procedures of DTC and the provisions of Section 3.06. Beneficial interests in the U.S. Global Certificate or an Offshore Global Certificate shall be delivered to all beneficial owners in the form of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, if (i) the Company notifies the Trustee in writing that DTC is unwilling or unable to discharge properly its responsibilities as depositary for the U.S. Global Certificate or such Offshore Global Certificate, as the case may be, and the Company is unable to locate a qualified successor depositary within 90 days of such notice or (ii) after the occurrence of an Event of Default, beneficial owners of the U.S. Global Certificate or Offshore Global Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust, by Direction of such Certificateholders delivered to the Company and the Trustee, advise the Company, the Trustee and DTC through its Clearing Agency Participants in writing that the continuation of a book-entry system through DTC is no longer in the best interests of the Certificateholders, then the Trustee shall notify all owners of beneficial interests in the U.S. Global Certificate or an Offshore Global Certificate, through DTC, of the occurrence of any such event and the availability of definitive Certificates. (c) Any beneficial interest in one of the Global Certificates that is transferred to a Person who takes delivery in the form of an interest in the other Global Certificate will, upon such transfer, cease to be an interest in such Global Certificate and become an interest in another Global Certificate and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Certificate for as long as it remains such an interest. (d) In connection with the transfer of the entire U.S. Global Certificate or an entire Offshore Global Certificate to the beneficial owners thereof pursuant to paragraph (b) of this Section 3.05, such U.S. Global Certificate or Offshore Global Certificate, as the case may be, shall be deemed to be surrendered to the Trustee for cancellation, and the Trustee shall execute, authenticate and deliver, to each beneficial owner identified by DTC in exchange for its beneficial interest in such U.S. Global Certificate or Offshore Global Certificate, as the case may be, an equal aggregate principal amount of U.S. Physical Certificates or Offshore Physical Certificates, as the case may be, of authorized denominations. (e) Any U.S. Physical Certificate delivered in exchange for an interest in the U.S. Global Certificate pursuant to paragraph (b) of this Section 3.05 shall, except as otherwise provided by paragraph (f) of Section 3.06, bear the Private Placement Legend. (f) Any Offshore Physical Certificate delivered in exchange for an interest in an Offshore Global Certificate pursuant to paragraph (b) of this Section shall, except as otherwise provided by paragraph (f) of Section 3.06, bear the applicable legend regarding transfer restrictions set forth in Section 3.02(a). (g) The registered holder of the U.S. Global Certificate or any Offshore Global Certificate may grant proxies and otherwise authorize any Person, including Agent 23 Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Agreement or the Certificates. Section 3.06. Special Transfer Provisions. Unless and until (i) an Initial Certificate is sold under an effective Shelf Registration Statement, or (ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to an effective Exchange Offer Registration Statement, in each case pursuant to the terms of the Registration Rights Agreement, the following provisions shall apply to the Initial Certificates: (a) [Reserved] (b) Transfers to QIBS. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Certificate to a QIB (excluding Non-U.S. Persons): (i) If the Initial Certificate to be transferred consists of an interest in any Offshore Global Certificate prior to the Regulation S Restricted Date, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of U.S. Physical Certificate or delivered a certificate to the Trustee in the form of Exhibit E hereto stating, or has otherwise advised the Trustee and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who, in the case of an Offshore Global Certificate transferred prior to the Regulation S Restricted Date, has signed the certification provided for in Exhibit E hereto, stating, or has otherwise advised the Trustee and the Registrar in writing, that it is purchasing the Initial Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it, or the Person on whose behalf it is acting with respect to any such account, is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and has been advised of the applicable transfer restrictions relating to the Initial Certificates and acknowledges that it has received such information regarding the Trust and/or the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) Upon receipt by the Registrar of the documents referred to in clause (i) above and instructions given in accordance with DTC's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date of such transfer and an increase in the principal amount of the U.S. Global Certificate in an amount equal to the principal amount of the interests in the Offshore Global Certificate being transferred, and the Trustee shall decrease the amount of such Offshore Global Certificate so transferred. (c) Transfers of Interests in the Offshore Global Certificate on or after the Regulation S Restricted Date. The Registrar shall register any transfer of interests in the 24 Offshore Global Certificate on or after the Regulation S Restricted Date without requiring any additional certification. (d) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any registration of any transfer of an Initial Certificate to a Non-U.S. Person: (i) The Registrar shall register any proposed transfer of a U.S. Global Certificate to any Non-U.S. Person, upon receipt of a certificate substantially in the form of Exhibit B hereto from the proposed transferor. The Registrar shall promptly send a copy of such certificate to the Company. (ii) (A) Upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions in accordance with DTC's and the Registrar's procedures, the Registrar shall reflect on its books and records the date of such transfer and shall decrease the principal amount of any such U.S. Global Certificate in an amount equal to the principal amount of the beneficial interest in such U.S. Global Certificate to be transferred, and (B) upon receipt by the Registrar of instructions given in accordance with DTC's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Offshore Global Certificate in an amount equal to the principal amount of the U.S. Global Certificate to be transferred, and the Trustee shall decrease the amount of such U.S. Global Certificate. (e) Private Placement Legend. Upon the transfer, exchange or replacement of Certificates not bearing the Private Placement Legend, the Registrar shall deliver Certificates that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Certificates bearing the Private Placement Legend, the Registrar shall deliver only Certificates that bear the Private Placement Legend unless either (i) the circumstances contemplated by paragraph (a)(i)(x) or (e)(ii) of this Section 3.06 exist or (ii) there is delivered to the Registrar an Opinion of Counsel to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (f) General. By its acceptance of any Certificate bearing the Private Placement Legend, each Holder of such a Certificate acknowledges the restrictions on transfer of such Certificate set forth in this Agreement and agrees that it will transfer such Certificate only as provided in this Agreement. The Registrar shall not register a transfer of any Certificate unless such transfer complies with the restrictions on transfer of such Certificate set forth in this Agreement. In connection with any transfer of Certificates, each Certificateholder agrees by its acceptance of the Certificates to furnish the Registrar or the Trustee such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine the sufficiency of any such certifications, legal opinions or other information. 25 Until such time as no Certificates remain Outstanding, the Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 3.05 or this Section 3.06. The Trustee, if not the Registrar at such time, shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate is surrendered to the Registrar, or the Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate, and (b) there is delivered to the Registrar and the Trustee such security, indemnity or bond, as may be required by them to save each of them harmless, then, in the absence of notice to the Registrar or the Trustee that such destroyed, lost or stolen Certificate has been acquired by a protected purchaser, and provided that the requirements of Section 8-405 of the Uniform Commercial Code in effect in any applicable jurisdiction are met, the Trustee shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate or Certificates, in authorized denominations and of like Fractional Undivided Interest. In connection with the issuance of any new Certificate under this Section 3.07, the Trustee shall require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and the Registrar) connected therewith. Any duplicate Certificate issued pursuant to this Section 3.07 shall constitute conclusive evidence of the appropriate Fractional Undivided Interest in the related Trust, as if originally issued, whether or not the lost stolen or destroyed Certificate shall be found at any time. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates. Section 3.08. Persons Deemed Owners. Prior to due presentment of a Certificate for registration of transfer, the Trustee, the Registrar, and any Paying Agent of the Trustee may treat the Person in whose name any Certificate is registered (as of the day of determination) as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 4.02 and for all other purposes whatsoever, and neither the Trustee, the Registrar, nor any Paying Agent of the Trustee shall be affected by any notice to the contrary. Section 3.09. Cancellation. All Certificates surrendered for payment or transfer or exchange shall, if surrendered to any Person party hereto other than the Registrar, be delivered to the Registrar for cancellation. No Certificates shall be authenticated in lieu of or in exchange for any Certificates cancelled as provided in this Section, except as expressly permitted by this Agreement. All cancelled Certificates held by the Registrar shall be destroyed and a certification of their destruction delivered to the Trustee. Section 3.10. Limitation of Liability for Payments. All payments or distributions made to Certificateholders shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such 26 payments in accordance with the terms of Article IV of this Agreement. Each Certificateholder, by its acceptance of a Certificate, agrees that it will look solely to the income and proceeds from the Trust Property for any payment or distribution due to such Certificateholder pursuant to the terms of this Agreement and that it will not have any recourse to the Company, the Trustee, the Loan Trustee, the Liquidity Provider, the Owner Trustees or the Owner Participants, except as otherwise expressly provided herein or in the Intercreditor Agreement. The Company is a party to this Agreement solely for purposes of meeting the requirements of the Trust Indenture Act. Section 3.11. Temporary Certificates. Until definitive Certificates are ready for delivery, the Trustee shall authenticate temporary Certificates. Temporary Certificates shall be substantially in the form of definitive Certificates but may have insertions, substitutions, omissions and other variations determined to be appropriate by the officers executing the temporary Certificates, as evidenced by their execution of such temporary Certificates. If temporary Certificates are issued, the Trustee will cause definitive Certificates to be prepared without unreasonable delay. After the preparation of definitive Certificates, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of the temporary Certificates at the office or agency of the Trustee designated for such purpose pursuant to Section 7.11, without charge to the Certificateholder. Upon surrender for cancellation of any one or more temporary Certificates, the Trustee shall execute, authenticate and deliver in exchange therefor a like face amount of definitive Certificates of authorized denominations. Until so exchanged, the temporary Certificates shall be entitled to the same benefits under this Agreement as definitive Certificates. ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account. (a) The Trustee shall establish and maintain on behalf of the Certificateholders a Certificate Account as one or more non-interest-bearing accounts. The Trustee shall hold the Certificate Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when a Scheduled Payment is made to the Trustee under the Intercreditor Agreement, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Scheduled Payment into the Certificate Account. (b) The Trustee shall establish and maintain on behalf of the Certificateholders a Special Payments Account as one or more accounts, which shall be non-interest-bearing except as provided in Section 4.04. The Trustee shall hold the Special Payments Account in trust for the benefit of the Certificateholders, and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when one or more Special Payments are made to the Trustee under the Intercreditor Agreement, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Special Payments into the Special Payments Account. 27 (c) The Trustee shall cause the Subordination Agent to present to the Loan Trustee to which an Equipment Note relates such Equipment Note on the date of its stated final maturity or, in the case of any Equipment Note which is to be redeemed in whole pursuant to the relevant Indenture, on the applicable redemption date under such Indenture. Section 4.02. Distributions from Certificate Account and Special Payments Account. (a) On each Regular Distribution Date or as soon thereafter as the Trustee has confirmed receipt of the payment of all or any part of the Scheduled Payments due on such date, the Trustee shall distribute out of the Certificate Account the entire amount deposited therein pursuant to Section 4.01 (a). There shall be so distributed to each Certificateholder of record on the Record Date with respect to such Regular Distribution Date (other than as provided in Section 11.01 concerning the final distribution), by check mailed to such Certificateholder at the address appearing in the Register, such Certificateholder's pro rata share (based on the aggregate Fractional Undivided Interest in the Trust held by such Certificateholder) of the aggregate amount in the Certificate Account, except that, with respect to Certificates registered on the Record Date in the name of the nominee of DTC (initially, such nominee to be Cede & Co.), such distribution shall be made by wire transfer in immediately available funds to the account designated by such nominee. (b) On each Special Distribution Date with respect to any Special Payment or as soon thereafter as the Trustee has confirmed receipt of any Special Payments due on the Equipment Notes or realized upon the sale of such Equipment Notes, the Trustee shall distribute out of the Special Payments Account the entire amount deposited therein pursuant to Section 4.01(b) of such Special Payment. There shall be so distributed to each Certificateholder of record on the Record Date with respect to such Special Distribution Date (other than as provided in Section 11.01 concerning the final distribution), by check mailed to such Certificateholder at the address appearing in the Register, such Certificateholder's pro rata share (based on the aggregate Fractional Undivided Interest in the Trust held by such Certificateholder) of the aggregate amount in the Special Payments Account on account of such Special Payment, except that, with respect to Certificates registered on the Record Date in the name of the nominee of DTC (initially, such nominee to be Cede & Co.), such distribution shall be made by wire transfer in immediately available funds to the account designated by such nominee. (c) The Trustee shall, at the expense of the Company, cause notice of each Special Payment to be mailed to each Certificateholder at his address as it appears in the Register. In the event of redemption or purchase of Equipment Notes held in the Trust, such notice shall be mailed not less than 15 days prior to the date any such Special Payment is scheduled to be distributed. In the event the Company is required to pay a Special Redemption Premium to the Trustee under the Note Purchase Agreement, such notice shall be mailed, together with the notice by the Escrow Paying Agent under Section 2.06 of the Escrow Agreement, not less than 20 days prior to the Special Distribution Date for such amount, which Special Distribution Date shall be the date of a Prepayment Withdrawal (as defined in the Escrow Agreement) or the Final Withdrawal Date. In the case of any other Special Payments, such notice shall be mailed as soon as practicable after the Trustee has confirmed that it has received 28 funds for such Special Payment, stating the Special Distribution Date for such Special Payment which shall occur not less than 20 days after the date of such notice and as soon as practicable thereafter. Notices mailed by the Trustee shall set forth: (i) the Special Distribution Date and the Record Date therefor (except as otherwise provided in Section 11.01), (ii) the amount of the Special Payment for each $1,000 face amount Certificate and the amount thereof constituting principal, premium, if any, and interest, (iii) the reason for the Special Payment, and (iv) if the Special Distribution Date is the same date as a Regular Distribution Date for the Certificates, the total amount to be received on such date for each $1,000 face amount Certificate. If the amount of (i) premium, if any, payable upon the redemption or purchase of an Equipment Note or (ii) the Special Redemption Premium, if any, has not been calculated at the time that the Trustee mails notice of a Special Payment, it shall be sufficient if the notice sets forth the other amounts to be distributed and states that any premium received will also be distributed. If any redemption of the Equipment Notes held in the Trust is cancelled, the Trustee, as soon as possible after learning thereof, shall cause notice thereof to be mailed to each Certificateholder at its address as it appears on the Register. Section 4.03. Statements to Certificateholders. (a) On each Regular Distribution Date and Special Distribution Date, the Trustee will include with each distribution to Certificateholders a statement, giving effect to such distribution to be made on such Regular Distribution Date or Special Distribution Date, as the case may be, setting forth the following information (in the case of a Special Payment, including any Special Redemption Premium, reflecting in part the information provided by the Escrow Paying Agent under the Escrow Agreement) (per a $1,000 face amount Certificate as to clauses (ii), (iii), (iv) and (v) below): (i) the aggregate amount of funds distributed on such Distribution Date hereunder and under the Escrow Agreement, indicating the amount allocable to each source including any portion thereof paid by the Liquidity Provider; (ii) the amount of such distribution allocable to principal and the amount allocable to premium (including any Special Redemption Premium), if any; (iii) the amount of such distribution hereunder allocable to interest; (iv) the amount of such distribution under the Escrow Agreement allocable to interest on the Deposits; 29 (v) the amount of such distribution under the Escrow Agreement allocable to the principal of the unused Deposits; and (vi) the Pool Balance and the Pool Factor. With respect to the Certificates registered in the name of a Clearing Agency or its nominee, on the Record Date prior to each Distribution Date, the Trustee will request from the Clearing Agency a securities position listing setting forth the names of all the Clearing Agency Participants reflected on the Clearing Agency's books as holding interests in the Certificates on such Record Date. On each Distribution Date, the Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of Certificates. (b) Within a reasonable period of time after the end of each calendar year but not later than the latest date permitted by law, the Trustee shall furnish to each Person who at any time during such calendar year was a Certificateholder of record a statement containing the sum of the amounts determined pursuant to clauses (a)(i) through (a)(v), inclusive, above with respect to the Trust for such calendar year or, in the event such Person was a Certificateholder of record during a portion of such calendar year, for the applicable portion of such year, and such other items as are readily available to the Trustee and which a Certificateholder shall reasonably request as necessary for the purpose of such Certificateholder's preparation of its federal income tax returns. With respect to Certificates registered in the name of a Clearing Agency or its nominee, such report and such other items shall be prepared on the basis of information supplied to the Trustee by the Clearing Agency Participants and shall be delivered by the Trustee to such Clearing Agency Participants to be available for forwarding by such Clearing Agency Participants. (c) Promptly following (i) the Delivery Period Termination Date, if there has been any change in the information set forth in clauses (x), (y) and (z) below from that set forth on pages 34 and Appendix III of the Private Placement Memorandum, and (ii) any early redemption or purchase of, or any default in the payment of principal or interest in respect of, any of the Equipment Notes held in the Trust, or any Final Withdrawal, the Trustee shall furnish to Certificateholders of record on such date a statement setting forth (x) the expected Pool Balances for each subsequent Regular Distribution Date following the Delivery Period Termination Date, (y) the related Pool Factors for such Regular Distribution Dates and (z) the expected principal distribution schedule of the Equipment Notes, in the aggregate, held as Trust Property at the date of such notice. With respect to the Certificates registered in the name of a Clearing Agency or its nominee, on the Delivery Period Termination Date, the Trustee will request from the Clearing Agency a securities position listing setting forth the names of all the Clearing Agency Participants reflected on the Clearing Agency's books as holding interests in the Certificates on such date. The Trustee will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of Certificates. Section 4.04. Investment of Special Payment Moneys. Any money received by the Trustee pursuant to Section 4.01(b) representing a Special Payment which is not to be 30 promptly distributed shall, to the extent practicable, be invested in Permitted Investments by the Trustee (and such Permitted Investments shall be registered in the name of the Trustee) as directed in writing by the Company pending distribution of such Special Payment pursuant to Section 4.02. Any investment made pursuant to this Section 4.04 shall be in such Permitted Investments having maturities not later than the date that such moneys are required to be used to make the payment required under Section 4.02 on the applicable Special Distribution Date and the Trustee shall hold any such Permitted Investments until maturity. The Trustee shall have no liability with respect to any investment made pursuant to this Section 4.04, other than by reason of the willful misconduct or negligence of the Trustee. All income and earnings from such investments shall be distributed on such Special Distribution Date as part of such Special Payment. ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence. The Company, at its own cost and expense, will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises, except as otherwise specifically permitted in Section 5.02; provided, however, that the Company shall not be required to preserve any right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company. Section 5.02. Consolidation, Merger, Etc. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease substantially all of its assets as an entirety to any Person unless: (a) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall be organized and validly existing under the laws of the United States of America or any state thereof or the District of Columbia and a "citizen of the United States" (as defined in Section 40102(a)(15) of Title 49 of the United States Code) holding an air carrier operating certificate issued by the Federal Aviation Administration, or any successor agency thereto (the "FAA"), pursuant to Chapter 447 of Title 49, United States Code, authorizing the operation in air transportation of aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo pursuant to Part 121 of the FAA's regulations (14 CFR Part 121); (b) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall execute and deliver to the Trustee a duly authorized, valid, binding and enforceable agreement in form and substance reasonably satisfactory to the Trustee containing an assumption by such successor corporation or Person of the due and punctual performance and observance of each covenant and condition of the Note Documents, the Note Purchase Agreement, the Other Pass Through Trust Agreements and this Agreement to be performed or observed by the Company; 31 (c) immediately after giving effect to such transaction, no Event of Default applicable to the Certificates shall have occurred and be continuing; and (d) the Company shall have delivered to the Trustee an Officers' Certificate of the Company and an Opinion of Counsel of the Company (which may be the Company's General Counsel) reasonably satisfactory to the Trustee, each stating that such consolidation, merger, conveyance, transfer or lease and the assumption agreement mentioned in clause (b) above comply with this Section 5.02 and that all conditions precedent herein provided for relating to such transaction have been complied with. (e) Upon any consolidation or merger, or any conveyance, transfer or lease of substantially all of the assets of the Company as an entirety in accordance with this Section 5.02, the successor corporation or Person formed by such consolidation or into which the Company is merged or to which such conveyance, offer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Agreement with the same effect as if such successor corporation or Person had been named as the Company herein. No such conveyance, transfer or lease of substantially all of the assets of the Company as an entirety shall have the effect of releasing the Company or any successor corporation or Person which shall theretofore have become such in the manner prescribed in this Section 5.02 from its liability in respect of this Agreement, the Note Purchase Agreement or any Note Document to which it is a party. Section 5.03. Rule 144A(d)(4) Information. So long as any of the Certificates are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, at any time when the Guarantor is neither subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company and the Guarantor will provide to any holder of such restricted securities, or to any prospective purchaser of such restricted securities designated by a holder, upon the request of such holder or prospective purchaser, any information required to be delivered to holders and prospective purchasers of the Certificates pursuant to Rule 144A(d)(4) under the Securities Act. ARTICLE VI DEFAULT Section 6.01. Events of Default. (a) Exercise of Remedies. Upon the occurrence and during the continuation of any Indenture Default under any Indenture, the Trustee may, to the extent it is the Controlling Party at such time (as determined pursuant to the Intercreditor Agreement), direct the exercise of remedies as provided in the Intercreditor Agreement. (b) Purchase Rights of Certificateholders. By acceptance of its Certificate, each Certificateholder agrees that at any time after the occurrence and during the continuation of a Triggering Event: 32 (i) each Certificateholder shall have the right to purchase all, but not less than all, of the Class A Certificates upon ten days' written notice to the Class A Trustee and each other Certificateholder, provided that (A) if prior to the end of such ten-day period any other Certificateholder notifies such purchasing Certificateholder that such other Certificateholder wants to participate in such purchase, then such other Certificateholder may join with the purchasing Certificateholder to purchase all, but not less than all, of the Class A Certificates pro rata based on the Fractional Undivided Interest in the Trust held by each such Certificateholder and (B) if prior to the end of such ten-day period any other Certificateholder fails to notify the purchasing Certificateholder of such other Certificateholder's desire to participate in such a purchase, then such other Certificateholder shall lose its right to purchase the Class A Certificates pursuant to this Section 6.01(b); and (ii) each Class C Certificateholder shall have the right (which shall not expire upon any purchase of the Class A Certificates pursuant to clause (i) above) to purchase all, but not less than all, of the Certificates and the Class A Certificates upon ten days' written notice to the Trustee, the Class A Trustee and each other Class C Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class C Certificateholder notifies such purchasing Class C Certificateholder that such other Class C Certificateholder wants to participate in such purchase, then such other Class C Certificateholder may join with the purchasing Class C Certificateholder to purchase all, but not less than all, of the Certificates and the Class A Certificates pro rata based on the Fractional Undivided Interest in the Class C Trust, taken as a whole, held by each such Class C Certificateholder and (B) if prior to the end of such ten-day period any other Class C Certificateholder fails to notify the purchasing Class C Certificateholder of such other Class C Certificateholder's desire to participate in such a purchase, then such other Class C Certificateholder shall lose its right to purchase the Certificates and the Class A Certificates pursuant to this Section 6.01(b); The purchase price with respect to the Certificates shall be equal to the Pool Balance of the Certificates, together with accrued and unpaid interest thereon to the date of such purchase, without premium, but including any other amounts then due and payable to the Certificateholders under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement or any Note Document or on or in respect of the Certificates; provided, however, that (i) if such purchase occurs after the Record Date with respect to the Final Withdrawal Date, such purchase price shall be reduced by the aggregate amount of unused Deposits and interest to be distributed under the Escrow Agreement (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date) and (ii) if such purchase occurs after a Record Date but prior to the Distribution Date relating to such Record Date, such purchase price shall be reduced by the amount to be distributed hereunder on such related Distribution Date (which deducted amounts shall remain distributable to, and may be retained by, the Certificateholder as of such Record Date); provided, further, that no such purchase of Certificates shall be effective unless the purchaser shall certify to the Trustee that contemporaneously with such purchase, such purchaser is purchasing, pursuant to the terms of this Agreement and the Other Pass Through Trust Agreement, the Certificates and the Class A Certificates which are senior to the securities held by such purchaser. 33 Each payment of the purchase price of the Certificates referred to in the first sentence hereof shall be made to an account or accounts designated by the Trustee and each such purchase shall be subject to the terms of this Section. Each Certificateholder agrees by its acceptance of its Certificate that it will, subject to Section 3.04 hereof, upon payment from such Class C Certificateholder(s), of the purchase price set forth in the first sentence of this paragraph, forthwith sell, assign, transfer and convey to the purchaser thereof (without recourse, representation or warranty of any kind except for its own acts), all of the right, title, interest and obligation of such Certificateholder in, this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facility, the Note Documents, the Note Purchase Agreement and all Certificates and Escrow Receipts held by such Certificateholder (excluding all right, title and interest under any of the foregoing to the extent such right, title or interest is with respect to an obligation not then due and payable as respects any action or inaction or state of affairs occurring prior to such sale) and the purchaser shall assume all of such Certificateholder's obligations under this Agreement, the Escrow Agreement, the Deposit Agreement, the Intercreditor Agreement, the Liquidity Facility, the Note Documents and the Note Purchase Agreement and all such Certificates and Escrow Receipts. The Certificates will be deemed to be purchased on the date payment of the purchase price is made notwithstanding the failure of the Certificateholders to deliver any Certificates (whether in the form of Physical Certificates or beneficial interests in Global Certificates) and, upon such a purchase, (i) the only rights of the Certificateholders will be to deliver the Certificates to the purchaser and receive the purchase price for such Certificates and (ii) if the purchaser shall so request such Certificateholder will comply with all of the provisions of Section 3.04 hereof to enable new Certificates to be issued to the purchaser in such denominations as it shall request. All charges and expenses in connection with the issuance of any such new Certificates shall be borne by the purchaser thereof. As used in this Section 6.01(b), the terms "Class A Certificate", "Class A Trustee", "Class C Certificate" and "Class C Trust", shall have the respective meanings assigned to such terms in the Intercreditor Agreement. Section 6.02. Incidents of Sale of Equipment Notes. Upon any sale of all or any part of the Equipment Notes made either under the power of sale given under this Agreement or otherwise for the enforcement of this Agreement, the following shall be applicable: (1) Certificateholders and Trustee May Purchase Equipment Notes. Any Certificateholder, the Trustee in its individual or any other capacity or any other Person may bid for and purchase any of the Equipment Notes, and upon compliance with the terms of sale, may hold, retain, possess and dispose of such Equipment Notes in their own absolute right without further accountability. (2) Receipt of Trustee Shall Discharge Purchaser. The receipt of the Trustee or of the officer making such sale shall be a sufficient discharge to any purchaser for his purchase money, and, after paying such purchase money and receiving such receipt, such purchaser or its personal representative or assigns shall not be obliged to see to the application of such purchase money, or be in any way answerable for any loss, misapplication or non-application thereof. 34 (3) Application of Moneys Received upon Sale. Any moneys collected by the Trustee upon any sale made either under the power of sale given by this Agreement or otherwise for the enforcement of this Agreement shall be applied as provided in Section 4.02. Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit. If there shall be a failure to make payment of the principal of, premium, if any, or interest on any Equipment Note, or if there shall be any failure to pay Rent (as defined in the relevant Lease) under any Lease when due and payable, then the Trustee, in its own name, and as trustee of an express trust, as holder of such Equipment Notes, to the extent permitted by and in accordance with the terms of the Intercreditor Agreement and the rights of the Controlling Party thereunder, the Note Purchase Agreement and the Note Documents (subject to the rights of the applicable Owner Trustee or Owner Participant to cure any such failure to pay principal of, or premium, if any, or interest on any Equipment Note or to pay Rent under any Lease in accordance with the applicable Indenture), shall be entitled and empowered to institute any suits, actions or proceedings at law, in equity or otherwise, for the collection of the sums so due and unpaid on such Equipment Notes or under such Lease and may prosecute any such claim or proceeding to judgment or final decree with respect to the whole amount of any such sums so due and unpaid. Section 6.04. Control by Certificateholders. Subject to Section 6.03 and the Intercreditor Agreement and the rights of the Controlling Party thereunder, the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to the Trust or pursuant to the terms of the Intercreditor Agreement, or exercising any trust or power conferred on the Trustee under this Agreement or the Intercreditor Agreement, including any right of the Trustee as Controlling Party under the Intercreditor Agreement or as holder of the Equipment Notes, provided that: (1) such Direction shall not be in conflict with any rule of law or with this Agreement and would not involve the Trustee in personal liability or expense, (2) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the Certificateholders not taking part in such Direction, and (3) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such Direction. Section 6.05. Waiver of Past Defaults. Subject to the Intercreditor Agreement and the rights of the Controlling Party thereunder, the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust (i) may on behalf of all of the Certificateholders waive any past Event of Default hereunder and its consequences or (ii) if the Trustee is the Controlling Party, may direct the Trustee to instruct the applicable Loan Trustee to waive any past Indenture Default under any Indenture and its consequences, and thereby annul any Direction given by such Certificateholders or the Trustee to such Loan Trustee with respect thereto, except a default: 35 (1) in the deposit of any Scheduled Payment or Special Payment under Section 4.01 or in the distribution of any payment under Section 4.02 on the Certificates, or (2) in the payment of the principal of (premium, if any) or interest on the Equipment Notes, or (3) in respect of a covenant or provision hereof which under Article IX hereof cannot be modified or amended without the consent of each Certificateholder holding an Outstanding Certificate affected thereby. Upon any such waiver, such default shall cease to exist with respect to the Certificates and any Event of Default arising therefrom shall be deemed to have been cured for every purpose and any direction given by the Trustee on behalf of the Certificateholders to the relevant Loan Trustee shall be annulled with respect thereto; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Upon any such waiver, the Trustee shall vote the Equipment Notes issued under the relevant Indenture to waive the corresponding Indenture Default. Section 6.06. Right of Certificateholders to Receive Payments Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding, including, without limitation, Section 6.07 hereof, but subject to the Intercreditor Agreement, the right of any Certificateholder to receive distributions of payments required pursuant to Section 4.02 hereof on the Certificates when due, or to institute suit for the enforcement of any such payment on or after the applicable Regular Distribution Date or Special Distribution Date, shall not be impaired or affected without the consent of such Certificateholder. Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions. A Certificateholder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise with respect to this Agreement, for the appointment of a receiver or for the enforcement of any other remedy under this Agreement, unless: (1) such Certificateholder previously shall have given written notice to the Trustee of a continuing Event of Default; (2) Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than 25% of the Trust shall have requested the Trustee in writing to institute such action, suit or proceeding and shall have offered to the Trustee indemnity as provided in Section 7.02(e); (3) the Trustee shall have refused or neglected to institute such an action, suit or proceeding for 60 days after receipt of such notice, request and offer of indemnity; and (4) no Direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. 36 (5) It is understood and intended that no one or more of the Certificateholders shall have any right in any manner whatsoever hereunder or under the Certificates to (i) surrender, impair, waive, affect, disturb or prejudice any property in the Trust Property or the lien of any Indenture on any property subject thereto, or the rights of the Certificateholders or the holders of the related Equipment Notes, (ii) obtain or seek to obtain priority over or preference with respect to any other such Certificateholder or (iii) enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all the Certificateholders subject to the provisions of this Agreement. Section 6.08. Remedies Cumulative. Every remedy given hereunder to the Trustee or to any of the Certificateholders shall not be exclusive of any other remedy or remedies, and every such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter given by statute, law, equity or otherwise. Section 6.09. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Agreement, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company or the Guarantor. ARTICLE VII THE TRUSTEE Section 7.01. Notice of Defaults. As promptly as practicable after, and in any event within 90 days after the occurrence of any default (as such term is defined below) hereunder actually known to the Trustee, the Trustee shall transmit by mail to the Company, the related Owner Trustees, the related Loan Trustees and the Certificateholders in accordance with Section 313(c) of the Trust Indenture Act, notice of such default hereunder actually known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (premium, if any) or interest on any Equipment Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Certificateholders. For the purpose of this Section, the term "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default. Section 7.02. Certain Rights of Trustee. Subject to the provisions of Section 315 of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any resolution, certificate, statement, instrument, opinion, report, 37 notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Request; (c) whenever in the administration of this Agreement or the Intercreditor Agreement the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate of the Company, any Owner Trustee or any Loan Trustee; (d) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or the Intercreditor Agreement at the request or direction of any of the Certificateholders pursuant to this Agreement or the Intercreditor Agreement unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the cost, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, or report, notice, request, direction, consent, order, bond, debenture or other paper or document; (g) the Trustee may execute any of the trusts or powers under this Agreement or the Intercreditor Agreement or perform any duties under this Agreement or the Intercreditor Agreement either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it under this Agreement or the Intercreditor Agreement; (h) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement or the Intercreditor Agreement; (i) the Trustee shall not be required to expend or risk its own funds in the performance of any of its duties under this Agreement, or in the exercise of any of its 38 rights or powers, if it shall have reason to believe that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it; and (j) except during the continuance of an Event of Default, the Trustee undertakes and shall be responsible to perform only such duties as are specifically set forth herein and no implied covenants or obligations shall be read into this Agreement or be enforceable against Trustee. Section 7.03. Not Responsible for Recitals or Issuance of Certificates. The recitals contained herein and in the Certificates, except the certificates of authentication, shall not be taken as the statements of the Trustee, and the Trustee assumes no responsibility for their correctness. Subject to Section 7.14, the Trustee makes no representations as to the validity or sufficiency of this Agreement, the Note Purchase Agreement, any Note Documents, any Participation Agreement or any Intercreditor Agreement, the Delayed Funding Implementation Agreement, the Deposit Agreement, the Escrow Agreement and Equipment Notes or the Certificates, except that the Trustee hereby represents and warrants that this Agreement has been, and each Certificate, the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Note Purchase Agreement, the Escrow Agreement and each Certificate will be, executed, authenticated and delivered by one of its officers who is duly authorized to execute, authenticate and deliver such document on its behalf. Section 7.04. May Hold Certificates. The Trustee, any Paying Agent, Registrar or any of their Affiliates or any other agent, in their respective individual or any other capacity, may become the owner or pledgee of Certificates and subject to Sections 310(b) and 311 of the Trust Indenture Act, if applicable, may otherwise deal with the Company, the Guarantor, the Owner Trustees or the Loan Trustees with the same rights it would have if it were not Trustee, Paying Agent, Registrar or such other agent. Section 7.05. Money Held in Trust. Money held by the Trustee or the Paying Agent in trust hereunder need not be segregated from other funds except to the extent required herein or by law and neither the Trustee nor the Paying Agent shall have any liability for interest upon any such moneys except as provided for herein. Section 7.06. Compensation and Reimbursement. The Company agrees with respect to the trustee in its individual capacity: (1) to pay, or cause to be paid, to the Trustee compensation (as set out in a separate fee agreement between the Trustee and the Company) for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein to reimburse, or cause to be reimbursed, the Trustee upon its request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Agreement or the Intercreditor Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any 39 such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith or as may be incurred due to the Trustee's breach of its representations and warranties set forth in Section 7.14; (3) to indemnify, or cause to be indemnified, the Trustee for, and to hold it harmless against, any loss, liability or expense (other than for or with respect to any tax) incurred without negligence, willful misconduct or bad faith, on its part, arising out of or in connection with the acceptance or administration of this Trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except for any such loss, liability or expense incurred by reason of the Trustee's breach of its representations and warranties set forth in Section 7.14. The Trustee shall notify the Company and the Guarantor promptly of any claim for which it may seek indemnity. The Company and the Guarantor shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel with the consent of the Company and the Guarantor and the Company and the Guarantor will pay the reasonable fees and expenses of such counsel. Neither the Company nor the Guarantor need pay for any settlement made without its consent; and (4) to indemnify, or cause to be indemnified, the Trustee, solely in its individual capacity, for, and to hold it harmless against, any tax (except to the extent the Trustee actually receives reimbursement therefor pursuant to the next paragraph, provided that no indemnification shall be available with respect to any tax attributable to the Trustee's compensation for serving as such) incurred without negligence, willful misconduct or bad faith, on its part, arising out of or in connection with the acceptance or administration of this Trust, including any costs and expenses incurred in contesting the imposition of any such tax. The Trustee, in its individual capacity, shall notify the Company and the Guarantor promptly of any claim for any tax for which it may seek indemnity. The Trustee shall permit the Company and the Guarantor to contest the imposition of such tax and the Trustee, in its individual capacity, shall cooperate in the defense. The Trustee, in its individual capacity, may have separate counsel with the consent of the Company and the Guarantor and the Company and the Guarantor will pay the reasonable fees and expenses of such counsel. Neither the Company nor the Guarantor need pay for any taxes paid, in settlement or otherwise, without its consent. (5) The Trustee shall be entitled to reimbursement from, and shall have a lien prior to the Certificates upon, the Trust Property for any tax incurred without negligence, bad faith or willful misconduct on its part, arising out of or in connection with the acceptance or administration of such Trust (other than any tax attributable to the Trustee's compensation for serving as such), including any costs and expenses incurred in contesting the imposition of any such tax. The Trustee shall notify the Company of any claim for any tax for which it may seek reimbursement. The Trustee shall cooperate in the contest by the Company of any such claim. If the Trustee reimburses itself from the Trust Property for any such tax it will within 30 days mail a brief report setting forth the amount of such tax and the circumstances thereof to all Certificateholders as their names and addresses appear in the Register. 40 As security for the performance of the obligations of the Company under this Section the Trustee shall have a lien prior to the Certificates upon the Trust Property. Section 7.07. Corporate Trustee Required, Eligibility. There shall at all times be a Trustee hereunder which shall be eligible to act as a trustee under Section 310(a) of the Trust Indenture Act and shall have a combined capital and surplus of at least $75,000,000 (or a combined capital and surplus in excess of $5,000,000 and the obligations of which, whether now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws of the United States, any State or Territory thereof or of the District of Columbia that has a combined capital and surplus of at least $75,000,000). If such corporation publishes reports of conditions at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 7.07, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of conditions so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.07 to act as Trustee, the Trustee shall resign immediately as Trustee in the manner and with the effect specified in Section 7.08. Section 7.08. Resignation and Removal: Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 7.09. (b) The Trustee may resign at any time as trustee by giving written notice thereof to the Company, the Authorized Agents, the Owner Trustees and the Loan Trustees. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Company, the Authorized Agents, the Owner Trustees, the Loan Trustees and the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust delivered to the Trustee, the Company, the Owner Trustees and the Loan Trustees. (d) If at any time: (1) the Trustee shall fail to comply with Section 310 of the Trust Indenture Act after written request therefor by the Company or by any Certificateholder who has been a bona fide Certificateholder for at least six months; or (2) the Trustee shall cease to be eligible under Section 7.07 and shall fail to resign after written request therefor by the Company or by any such Certificateholder; or 41 (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any case, (i) the Company may remove the Trustee or (ii) any Certificateholder who has been a bona fide Certificateholder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If a Responsible Officer of the Trustee shall obtain actual knowledge of an Avoidable Tax (as hereinafter defined) which has been or is likely to be asserted, the Trustee shall promptly notify the Company and shall, within 30 days of such notification, resign as Trustee hereunder unless within such 30-day period the Trustee shall have received notice that the Company has agreed to pay such tax. The Company shall promptly appoint a successor Trustee in a jurisdiction where there are no Avoidable Taxes. As used herein, an "Avoidable Tax" means a state or local tax: (i) upon (w) the Trust, (x) the Trust Property, (y) Certificateholders or (z) the Trustee for which the Trustee is entitled to seek reimbursement from the Trust Property, and (ii) which would be avoided if the Trustee were located in another state, or jurisdiction within a state, within the United States. A tax shall not be an Avoidable Tax if the Company or any Owner Trustee shall agree to pay, and shall pay, such tax. (f) If the Trustee shall resign, be removed or become incapable of acting as trustee or if a vacancy shall occur in the office of the Trustee for any cause, the Company shall promptly appoint a successor Trustee. If, within 90 days after such resignation, removal or incapability, or other occurrence of such vacancy, a successor Trustee shall be appointed by Direction of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust delivered to the Company, the Owner Trustees, the Loan Trustee and the retiring Trustee, the successor Trustees so appointed shall, with the approval of the Company, which approval shall not be unreasonably withheld, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed as provided above. If no successor Trustee shall have been so appointed as provided above and accepted appointment in the manner hereinafter provided, the resigning Trustee or any Certificateholder who has been a bona fide Certificateholder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (g) The successor Trustee of a Trust shall give notice of the resignation and removal of the Trustee and appointment of the successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Certificateholders as their names and addresses appear in the Register. Each notice shall include the name of such successor Trustee and the address of its Corporate Trust Office. Section 7.09. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or 42 removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall execute and deliver an instrument transferring to such successor Trustee all such rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee, subject nevertheless to its lien, if any, provided for in Section 7.06. Upon request of any such successor Trustee, the Company, the retiring Trustee and such successor Trustee shall execute and deliver any and all instruments containing such provisions as shall be necessary or desirable to transfer and confirm to, and for more fully and certainly vesting in, such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 7.10. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Certificates shall have been executed or authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such execution or authentication and deliver the Certificates so executed or authenticated with the same effect as if such successor Trustee had itself executed or authenticated such Certificates. Section 7.11. Maintenance of Agencies. (a) There shall at all times be maintained an office or agency where Certificates may be presented or surrendered for registration of transfer or for exchange, and for payment thereof and where notices and demands to or upon the Trustee in respect of such Certificates may be served. Presentations and demands may be made and notices may be served at the Corporate Trust Office of the Trustee. (b) There shall at all times be a Registrar and a Paying Agent hereunder with respect to the Certificates. Each such Authorized Agent shall be a bank or trust company, shall be a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, or a corporation having a combined capital and surplus in excess of $5,000,000 the obligations of which are guaranteed by a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, and shall be authorized under such laws to exercise corporate trust powers, subject to supervision by federal or state authorities. The Trustee shall initially be the Paying Agent and, as provided in Section 3.04, Registrar hereunder with respect to the Certificates. Each Registrar shall furnish to the Trustee, at stated intervals of 43 not more than six months, and at such other times as the Trustee may request in writing, a copy of the Register maintained by such Registrar. (c) Any corporation into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authorized Agent, shall be a party, or any corporation succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent hereunder, if such successor corporation is otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor corporation. (d) Any Authorized Agent may at any time resign by giving written notice of resignation to the Trustee, the Company, the Owner Trustees and the Loan Trustees. The Company may, and at the request of the Trustee shall, at any time terminate the agency of any Authorized Agent by giving written notice of termination to such Authorized Agent and to the Trustee. Upon the resignation or termination of an Authorized Agent or in case at any time any such Authorized Agent shall cease to be eligible under this Section (when in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the Company shall promptly appoint one or more qualified successor Authorized Agents, reasonably satisfactory to the Trustee, to perform the functions of the Authorized Agent which has resigned or whose agency has been terminated or who shall have ceased to be eligible under this Section. The Company shall give written notice of any such appointment made by it to the Trustee, the Owner Trustees and the Loan Trustees; and in each case the Trustee shall mail notice of such appointment to all Certificateholders as their names and addresses appear on the Register. (e) The Company agrees to pay, or cause to be paid, from time to time to each Authorized Agent reasonable compensation for its services and to reimburse it for its reasonable expenses. Section 7.12. Money for Certificate Payments to Be Held in Trust. All moneys deposited with any Paying Agent for the purpose of any payment on Certificates shall be deposited and held in trust for the benefit of the Certificateholders entitled to such payment, subject to the provisions of this Section. Moneys so deposited and held in trust shall constitute a separate trust fund for the benefit of the Certificateholders with respect to which such money was deposited. The Trustee may at any time, for the purpose of obtaining the satisfaction and discharge of this Agreement or for any other purpose, direct any Paying Agent to pay to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by such Paying Agent and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Section 7.13. Registration of Equipment Notes in Name of Subordination Agent. The Trustee agrees that all Equipment Notes to be purchased by the Trust shall be issued in the 44 name of the Subordination Agent or its nominee and held by the Subordination Agent in trust for the benefit of the Certificateholders, or, if not so held, the Subordination Agent or its nominee shall be reflected as the owner of such Equipment Notes in the register of the issuer of such Equipment Notes. Section 7.14. Representations and Warranties of Trustee. The Trustee hereby represents and warrants that: (a) the Trustee is a Delaware banking corporation organized and validly existing, and in good standing under the laws of the State of Delaware; (b) the Trustee has full corporate power, authority and legal right to execute, deliver and perform this Agreement, the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement, the Note Purchase Agreement and the Note Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance by it of this Agreement, the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement, the Note Purchase Agreement and the Note Documents to which it is a party; (c) the execution, delivery and performance by the Trustee of this Agreement, the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement, the Note Purchase Agreement and the Note Documents to which it is a party (i) will not violate any provision of the law of the State of Delaware or governing the banking and trust powers of the Trustee or any order, writ, judgment, or decree of any court, arbitrator, or governmental authority applicable to the Trustee or any of its assets, (ii) will not violate any provision of the articles of association or by-laws of the Trustee, or (iii) will not violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on any properties included in the Trust Property pursuant to the provisions of, any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have an adverse effect on the Trustee's performance or ability to perform its duties hereunder or thereunder or on the transactions contemplated herein or therein; (d) the execution, delivery and performance by the Trustee of this Agreement, the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement, the Note Purchase Agreement and the Note Documents to which it is a party will not require the authorization, consent, or approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any governmental authority or agency of the State of Delaware or the United States regulating the banking and corporate trust activities of the Trustee; and (e) this Agreement, the Intercreditor Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement, the Note Purchase Agreement and 45 the Note Documents to which it is a party have been duly executed and delivered by the Trustee and constitute the legal, valid, and binding agreements of the Trustee, enforceable against it in accordance with their respective terms, provided that enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and (ii) general principles of equity, regardless of whether applied in a proceeding at equity or at law. Section 7.15. Withholding Taxes, Information Reporting. (a) The Trustee, as trustee of the grantor trust created by this Agreement, shall exclude and withhold from each distribution of principal, premium, if any, and interest and other amounts due under this Agreement or under the Certificates any and all federal United States withholding taxes applicable thereto as required by law. The Trustee agrees to act as such withholding agent and, in connection therewith, whenever any taxes or similar charges are required to be withheld with respect to any amounts paid by or on behalf of the Trustee in respect of the Certificates, to withhold such amounts and timely pay the same to the authority in the name of and on behalf of the Certificateholders, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Certificateholder necessary documentation showing the payment thereof, together with such additional documentary evidence as such Certificateholders may reasonably request from time to time. The Trustee agrees to file any other information reports as it may be required to file under United States law. In the event that any withholding tax is imposed on a payment to a Certificateholder, such tax shall reduce the amount otherwise distributable to the Certificateholder in accordance with this Section. (b) Any Certificateholder which is organized under the laws of a jurisdiction outside the United States shall, on or prior to the date such Certificateholder becomes a Certificateholder, (a) so notify the Trustee, (b)(i) provide the Trustee with Internal Revenue Service form W-8BEN, W-8ECI, W-8IMY or W-8EXP, or any substitute or successor form, or (ii) notify the Trustee that it is not entitled to an exemption from United States withholding tax or a reduction in the rate thereof on payments of interest. Any such Certificateholder agrees by its acceptance of a Trust Security, on an ongoing basis, to provide like certification should any previously provided form become invalid and to notify the Trustee should subsequent circumstances arise affecting the information provided the Trustee in clauses (a) and (b) above. The Trustee shall be fully protected in relying upon, and each Certificateholder by its acceptance of a Security agrees to indemnify and hold the Trustee harmless against all claims or liability of any kind arising in connection with or related to the Trustee's reliance upon any documents, forms or information provided by any Certificateholder to the Trustee. In addition, if the Trustee has not withheld taxes on any payment made to any Certificateholder, and the Trustee is subsequently required to remit to any taxing authority any such amount not withheld, such Certificateholder shall return such amount to the Trustee upon written demand by the Trustee. The Trustee shall be liable only for direct (but not consequential) damages to any Certificateholder due to the Trustee's violation of the Code and only to the extent such liability is caused by the Trustee's gross negligence or willful misconduct. (c) The Trustee may satisfy certain of its obligations with respect to this Agreement by retaining, at the expense of the Company, a firm of independent public 46 accountants (the "Accountants") which shall (i) be responsible for all tax filing requirements and (ii) perform the obligations of the Trustee in respect of tax filing requirements. The Trustee shall be deemed to have discharged its tax filing obligations under this Agreement upon its retention of the Accountants, and, if the Trustee shall have selected the Accountants in good faith and without gross negligence or with the prior approval of or notice to the Company, the Trustee shall not have any liability with respect to the default or misconduct of the Accountants. (d) The Trustee, at the request and instruction of the Company, will make such United States federal income tax elections as may be necessary to prevent the Trust from being classified for federal income tax purposes as an association taxable as a corporation. Section 7.16. Trustee's Liens. The Trustee in its individual capacity agrees that it will at its own cost and expense promptly take any action as may be necessary to duly discharge and satisfy in full any mortgage, pledge, lien, charge, encumbrance, security interest or claim ("Trustee's Liens") on or with respect to the Trust Property which is attributable to the Trustee either (i) in its individual capacity and which is unrelated to the transactions contemplated by this Agreement, the Registration Rights Agreement, the Intercreditor Agreement, the Participation Agreements, the Note Purchase Agreement or the Note Documents, or (ii) in its individual capacity and which arises out of acts or omissions of the Trustee in its individual capacity which are not contemplated by this Agreement. Section 7.17. Preferential Collection of Claims. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. If the Trustee shall resign or be removed as Trustee, it shall be subject to Section 311(a) of the Trust Indenture Act to the extent provided therein. ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders. The Company will furnish or cause to be furnished to the Trustee within 15 days after each Record Date with respect to a Scheduled Payment, and at such other times as the Trustee may request in writing, within 30 days after receipt by the Company of any such request, a list, in such form as the Trustee may reasonably require, of all information in the possession or control of the Company as to the names and addresses of the Certificateholders, in each case as of a date not more than 15 days prior to the time such list is furnished; provided, however, that so long as the Trustee is the sole Registrar, no such list need be furnished; and provided further, however, that no such list need be furnished for so long as a copy of the Register is being furnished to the Trustee pursuant to Section 7.11. Section 8.02. Preservation of Information; Communications to Certificateholders. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Certificateholders contained in the most recent list furnished to the Trustee as provided in Section 7.11 or Section 8.01, as the case may be, and the names and addresses of Certificateholders received by the Trustee in its capacity as Registrar, if so acting. 47 The Trustee may destroy any list furnished to it as provided in Section 7.11 or Section 8.01, as the case may be, upon receipt of a new list so furnished. Section 8.03. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first full year following the issuance of the Certificates, the Trustee shall transmit to the Certificateholders, as provided in Section 313(c) of the Trust Indenture Act, a brief report dated as of such May 15, if required by Section 313(a) of the Trust Indenture Act. Section 8.04. Reports by the Guarantor and Company. The Guarantor and the Company each shall: (a) file with the Trustee, within 30 days after the Guarantor or the Company is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which the Guarantor or the Company is required to file with the SEC pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Guarantor or the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the SEC, in accordance with rules and regulations prescribed by the SEC, such of the supplementary and periodic information, documents and reports which may be required pursuant to section 13 of the Securities Exchange Act of 1934, as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed in such rules and regulations; (b) file with the Trustee and the SEC, in accordance with the rules and regulations prescribed by the SEC, such additional information, documents and reports with respect to compliance by the Guarantor and the Company with the conditions and covenants of the Guarantor and the Company provided for in this Agreement, as may be required by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 1.02; (c) transmit to all Certificateholders, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, such summaries of any information, documents and reports required to be filed by the Guarantor and the Company pursuant to subsections (a) and (b) of this Section 8.04 as may be required by rules and regulations prescribed by the SEC; and (d) furnish to the Trustee, not less often than annually, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Guarantor's and the Company's compliance with all conditions and covenants under this Agreement (it being understood that for purposes of this paragraph (d), such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Agreement). 48 ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders. Without the consent of the Certificateholders, the Guarantor and the Company may, and the Trustee (subject to Section 9.03) shall, at any time and from time to time, enter into one or more agreements supplemental hereto or, if applicable, to the Indenture, the Lease, the Participation Agreement, Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or the Liquidity Facility in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another corporation to the Company or the Guarantor and the assumption by any such successor of the covenants of the Company or the Guarantor contained herein or in each of the other related documents to which the Company or the Guarantor is a party or of the Company's or the Guarantor's obligations under the Note Purchase Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or the Liquidity Facility; or (2) to add to the covenants of the Guarantor or the Company for the benefit of the Certificateholders, or to surrender any right or power in this Agreement, the Note Purchase Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or the Liquidity Facility conferred upon the Guarantor or the Company; or (3) to correct or supplement any provision in this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or the Liquidity Facility which may be defective or inconsistent with any other provision herein or therein or to cure any ambiguity or correct any mistake or to modify any other provision with respect to matters or questions arising under this Agreement, the Intercreditor Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement or the Liquidity Facility, provided that any such action shall not materially adversely affect the interests of the Certificateholders; or to cure any ambiguity or correct any mistake in such documents, or as provided in the Intercreditor Agreement, to give effect to or provide for a Replacement Liquidity Facility (as defined in the Intercreditor Agreement); or (4) to comply with any requirement of the SEC, any applicable law, rules or regulations of any exchange or quotation system on which the Certificates are listed, or any regulatory body or the Registration Rights Agreement or the Delayed Funding Implementation Agreement to effectuate the Exchange Offer; or 49 (5) to modify, eliminate or add to the provisions of this Agreement to such extent as shall be necessary to qualify, or to continue the qualification of, this Agreement (including any supplemental agreement) under the Trust Indenture Act, or under any similar Federal statute hereafter enacted, and to add to this Agreement such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this instrument was executed or any corresponding provision in any similar Federal statute hereafter enacted; or (6) to evidence and provide for the acceptance of appointment under this Agreement by the Trustee of a successor Trustee and to add to or change any of the provisions of this Agreement as shall be necessary to provide for or facilitate the administration of the Trust, pursuant to the requirements of Section 7.09; or (7) if with respect to any Owned Aircraft any "Class C" pass through certificates are issued, to modify, eliminate or add to the provisions of this Agreement to the extent necessary to provide for the subordination of such "Class C" pass through certificates to the Certificates; or (8) to modify or eliminate provisions relating to the transfer or exchange of Exchange Certificates or the Initial Certificates upon the consummation of the Exchange Offer (as defined in the Registration Rights Agreement) or effectiveness of the Shelf Registration Statement or the Exchange Offer Registration Statement; provided that no such action described in this Section 9.01 shall adversely affect the interests of the Certificateholders. Notwithstanding any provision of this Agreement, upon and simultaneously with the issuance of the Additional Certificates (as defined in the Delayed Funding Implementation Agreement), this Agreement shall be forthwith amended as provided in the Delayed Funding Implementation Agreement, without any need for further action on the part of any party hereto and without any consent of any of the Certificateholders. Section 9.02. Supplemental Agreements with Consent of Certificateholders. With the consent of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust, by Direction of said Certificateholders delivered to the Guarantor, the Company and the Trustee, the Guarantor and the Company may (with the consent of the Owner Trustees, if any, which consent shall not be unreasonably withheld), and the Trustee (subject to Section 9.03) shall, enter into an agreement or agreements supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement, the Note Purchase Agreement, the Deposit Agreement or the Liquidity Facility to the extent applicable to such Certificateholders or of modifying in any manner the rights and obligations of such Certificateholders under this Agreement, the Intercreditor Agreement, the Liquidity Facility, the Registration Rights Agreement, the Delayed Funding Implementation 50 Agreement, the Escrow Agreement, the Deposit Agreement or the Note Purchase Agreement; provided, however, that no such supplemental agreement shall, without the consent of the Certificateholder of each Outstanding Certificate affected thereby: (1) reduce in any manner the amount of, or delay the timing of, any receipt by the Trustee (or, with respect to the Deposits, the Certificateholders) of payments on the Equipment Notes or other Trust Property held in the Trust or on the Deposits or distributions that are required to be made herein on any Certificate, or change any date of payment on any Certificate, or change the place of payment where, or the coin or currency in which, any Certificate is payable, or impair the right to institute suit for the enforcement of any such payment or distribution on or after the Regular Distribution Date or Special Distribution Date applicable thereto; or (2) permit the disposition of any Equipment Note included in the Trust Property except as permitted by this Agreement, or otherwise deprive such Certificateholder of the benefit of the ownership of the Equipment Notes in the Trust; or (3) alter the priority of distributions specified in the Intercreditor Agreement; or (4) modify any of the provisions of this Section or Section 6.05, except to increase any percentage or to provide that certain other provisions of this Agreement cannot be modified or waived without the consent of the Certificateholder of each Certificate affected thereby; or (5) adversely affect the status of the Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. It shall not be necessary for any Direction of Certificateholders under this Section to approve the particular form of any proposed supplemental agreement but it shall be sufficient if such Direction shall approve the substance thereof. Section 9.03. Documents Affecting Immunity or Indemnity. If in the opinion of the Trustee any document required to be executed by it pursuant to the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or indemnity in favor of the Trustee under this Agreement, the Trustee may in its discretion decline to execute such document. Section 9.04. Execution of Supplemental Agreements. In executing, or accepting the additional trusts created by, any supplemental agreement permitted by this Article or the modifications thereby of the trust created by this Agreement, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, written advice of counsel or an Opinion of Counsel stating that the execution of such supplemental agreement is authorized or permitted by this Agreement. Section 9.05. Effect of Supplemental Agreements. Upon the execution of any supplemental agreement under this Article, this Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of this Agreement for all purposes; 51 and every Certificateholder theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 9.06. Conformity with Trust Indenture Act. Every supplemental agreement executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 9.07. Reference in Certificates to Supplemental Agreements. Certificates authenticated and delivered after the execution of any supplemental agreement pursuant to this Article may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental agreement; and, in such case, suitable notation may be made upon Outstanding Certificates after proper presentation and demand. ARTICLE X AMENDMENTS TO INDENTURES AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indentures and Other Note Documents. In the event that the Trustee, as holder (or beneficial owner through the Subordination Agent) of any Equipment Note in trust for the benefit of the Certificateholders or as Controlling Party under the Intercreditor Agreement, receives (directly or indirectly through the Subordination Agent) a request for a consent to any amendment, modification, waiver or supplement under any Indenture, any other Note Document, any Equipment Note, the Note Purchase Agreement or any other related document, the Trustee shall forthwith send a notice of such proposed amendment, modification, waiver or supplement to each Certificateholder registered on the Register as of the date of such notice. The Trustee shall request from the Certificateholders a Direction as to (a) whether or not to take or refrain from taking (or direct the Subordination Agent to take or refrain from taking) any action which a holder of such Equipment Note has the option to direct, (b) whether or not to give or execute (or direct the Subordination Agent to give or execute) any waivers, consents, amendments, modifications or supplements as a holder of such Equipment Note or a Controlling Party and (c) how to vote (or direct the Subordination Agent to vote) any Equipment Note if a vote has been called for with respect thereto. Provided such a request for Certificateholder Direction shall have been made, in directing any action or casting any vote or giving any consent as the holder of any Equipment Note (or in directing the Subordination Agent in any of the foregoing), (i) other than as Controlling Party, the Trustee shall vote for or give consent to any such action with respect to such Equipment Note in the same proportion as that of (A) the aggregate face amounts of all Certificates actually voted in favor of or for giving consent to such action by such Direction of Certificateholders to (B) the aggregate face amount of all Outstanding Certificates and (ii) as Controlling Party, the Trustee shall vote as directed in such Certificateholder Direction by the Certificateholders evidencing a Fractional Undivided Interest aggregating not less than a majority in interest in the Trust. For purposes of the immediately preceding sentence, a Certificate shall have been "actually voted" if the Holder of such Certificate has delivered to the Trustee an instrument evidencing such Holder's consent to such Direction prior to two Business Days before the Trustee directs such action or casts such vote or gives such consent. Notwithstanding the foregoing, but subject to Section 6.04 and the Intercreditor Agreement, the Trustee may, in its 52 own discretion and at its own direction, consent and notify the relevant Loan Trustee of such consent (or direct the Subordination Agent to consent and notify the Loan Trustee of such consent) to any amendment, modification, waiver or supplement under the relevant Indenture, any other Note Document, any Equipment Note, the Note Purchase Agreement or any other related document, if an Event of Default hereunder shall have occurred and be continuing, or if such amendment, modification, waiver or supplement will not materially adversely affect the interests of the Certificateholders. ARTICLE XI TERMINATION OF TRUST Section 11.01. Termination of the Trust. The respective obligations and responsibilities of the Company, the Guarantor and the Trustee with respect to the Trust shall terminate upon distribution to all Holders of the Certificates and the Trustee of all amounts required to be distributed to them pursuant to this Agreement and the disposition of all property held as part of the Trust Property; provided, however, that in no event shall the Trust continue beyond one hundred ten (110) years following the date of the earliest execution of this Agreement. Notice of such termination, specifying the Regular Distribution Date (or Special Distribution Date, as the case may be) upon which the Certificateholders may surrender their Certificates to the Trustee for payment of the final distribution and cancellation, shall be mailed promptly, upon notice to the Trustee, by the Trustee to Certificateholders not earlier than the 60th day and not later than the 20th day next preceding such final distribution specifying (A) the Regular Distribution Date (or Special Distribution Date, as the case may be) upon which the proposed final payment of the Certificates will be made upon presentation and surrender of Certificates at the office or agency of the Trustee therein specified, (B) the amount of any such proposed final payment, and (C) that the Record Date otherwise applicable to such Regular Distribution Date (or Special Distribution Date, as the case may be) is not applicable, payments being made only upon presentation and surrender of the Certificates at the office or agency of the Trustee therein specified. The Trustee shall give such notice to the Registrar at the time such notice is given to Certificateholders. Upon presentation and surrender of the Certificates in accordance with such notice, the Trustee shall cause to be distributed to Certificateholders amounts distributable on such final payments. In the event that all of the Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above-mentioned written notice, the Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. No additional interest shall accrue on the Certificates after the Regular Distribution Date (or Special Distribution Date, as the case may be). In the event that any money held by the Trustee for the payment of distributions on the Certificates shall remain unclaimed for two years (or such lesser time as the Trustee shall be satisfied, after sixty days' notice from the Company, is one month prior to the escheat period provided under applicable law) after the final distribution date with respect thereto, the Trustee shall pay to each Loan Trustee the appropriate amount of money 53 relating to such Loan Trustee and shall give written notice thereof to the related Owner Trustees, Owner Participants and the Company. ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders. The death or incapacity of any Certificateholder shall not operate to terminate this Agreement, or the Trust, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations, and liabilities of the parties hereto or any of them. Section 12.02. Liabilities of Certificateholders. Neither the existence of the Trust nor any provision in this Agreement is intended to or shall limit the liability the Certificateholders would otherwise incur if the Certificateholders owned Trust Property as co-owners, or incurred any obligations of the Trust, directly rather than through the Trust. Section 12.03. Certificates Nonassessable and Fully Paid. Subject to Section 12.02, Certificateholders shall not be personally liable for obligations of the Trust, the Fractional Undivided Interests represented by the Certificates shall be nonassessable for any losses or expenses of the Trust or for any reason whatsoever, and Certificates upon authentication thereof by the Trustee pursuant to Section 3.03 are and shall be deemed fully paid. No Certificateholder shall have any right (except as expressly provided herein) to vote or in any manner otherwise control the operation and management of the Trust Property, the Trust, or the obligations of the parties hereto, nor shall anything set forth herein, or contained in the terms of the Certificates, be construed so as to constitute the Certificateholders from time to time as partners or members of an association. Section 12.04. Notices. (a) Unless otherwise specifically provided herein, all notices required under the terms and provisions of this Agreement shall be in English and in writing, and any such notice may be given by United States mail, courier service, telecopy (confirmed by telephone or in writing in the case of notice by telecopy) or any other customary means of communication, and any such notice shall be effective upon receipt, if to the Company or the Guarantor, to: American Trans Air, Inc. 7337 West Washington Street Indianapolis International Airport Indianapolis, Indiana 06927 Attention: Executive Vice President and Chief Financial Officer Facsimile: (317) 240-7087 54 if to the Trustee, to: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Facsimile: (302) 636-4140 (b) The Company, the Guarantor or the Trustee, by notice to the other, may designate additional or different addresses for subsequent notices or communications. (c) Any notice or communication to Certificateholders shall be mailed by first-class mail to the addresses for Certificateholders shown on the Register kept by the Registrar and to addresses filed with the Trustee. Failure so to mail a notice or communication or any defect in such notice or communication shall not affect its sufficiency with respect to other Certificateholders. (d) If a notice or communication is mailed in the manner provided above within the time prescribed, it is conclusively presumed to have been duly given, whether or not the addressee receives it. (e) If the Company mails a notice or communication to the Certificateholders, it shall mail a copy to the Trustee and to each Paying Agent at the same time. (f) Notwithstanding the foregoing, all communications or notices to the Trustee shall be deemed to be given only when received by a Responsible Officer of the Trustee. (g) The Trustee shall promptly furnish the Company with a copy of any demand, notice or written communication received by the Trustee hereunder from any Certificateholder, Owner Trustee or Loan Trustee. Section 12.05. Governing Law. THIS AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND THIS AGREEMENT AND THE CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section 12.06. Severability of Provisions. If any one or more of the covenants, agreements, provisions, or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, or terms of this Agreement and shall in no way 55 affect the validity or enforceability of the other provisions of this Agreement or the Trust or of the Certificates or the rights of the Certificateholders thereof. Section 12.07. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 12.08. Successors and Assigns. All covenants, agreements, representations and warranties in this Agreement by the Trustee, the Guarantor and the Company shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and assigns, whether so expressed or not. Section 12.09. Benefits of Agreement. Nothing in this Agreement or in the Certificates, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the Certificateholders and the Liquidity Providers, any benefit or any legal or equitable right, remedy or claim under this Agreement. Section 12.10. Legal Holidays. In any case where any Regular Distribution Date or Special Distribution Date relating to any Certificate shall not be a Business Day, then (notwithstanding any other provision of this Agreement) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date, and no interest shall accrue during the intervening period. Section 12.11. Counterparts. For the purpose of facilitating the execution of this Agreement and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which counterparts shall constitute but one and the same instrument. Section 12.12. Communication by Certificateholders with Other Certificateholders. Certificateholders may communicate with other Certificateholders with respect to their rights under this Agreement or the Certificates pursuant to Section 312(b) of the Trust Indenture Act. The Company, the Guarantor, the Trustee and any and all other persons benefited by this Agreement shall have the protection afforded by Section 312(c) of the Trust Indenture Act. Section 12.13. Intention of Parties. The parties hereto intend that the Trust be classified for U.S. federal income tax purposes as a grantor trust under Subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as amended, and not as a trust or association taxable as a corporation or as a partnership. Each Certificateholder, by its acceptance of its Certificate or a beneficial interest therein, agrees to treat the Trust as a grantor trust for all U.S. federal, state and local income tax purposes. The powers granted and obligations undertaken pursuant to this Agreement shall be so construed so as to further such intent. 56 IN WITNESS WHEREOF, the Guarantor, the Company and the Trustee have caused this Agreement to be duly executed by their respective officers, all as of the day and year first written above. AMTRAN, INC. By: --------------------------------- Executive Vice President and Chief Financial Officer AMERICAN TRANS AIR, INC. By: --------------------------------- Chief Financial Officer WILMINGTON TRUST COMPANY, as Trustee By: --------------------------------- Title: 57 EXHIBIT A FORM OF CERTIFICATE REGISTERED No.________ [THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO ATA OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CASE THIS CERTIFICATE IS IN DEFINITIVE FORM, IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE APPLICABLE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR IS A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE, SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. A-1 THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE CERTIFICATES PURSUANT TO CLAUSE 2(E) ABOVE OR UPON ANY TRANSFER OF THE CERTIFICATES UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION). AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS; AND](1) [BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT EITHER (A) NO PLAN ASSETS AND NO NON-ERISA PLAN ASSETS HAVE BEEN USED TO PURCHASE THIS CERTIFICATE OR (B) THE PURCHASE AND HOLDING OF THIS CERTIFICATE ARE EXEMPT FROM THE PROHIBITED TRANSACTION RESTRICTIONS OF ERISA AND THE CODE AND WILL BE PERMISSIBLE UNDER ALL APPLICABLE SIMILAR LAWS PURSUANT TO ONE OR MORE PROHIBITED TRANSACTION STATUTORY, CLASS OR INDIVIDUAL, EXEMPTIONS. AS USED HEREIN, THE TERM "PLAN ASSETS" MEANS THE ASSETS OF ANY "PLAN" (WITHIN THE MEANING OF SECTION 3(3) OF ERISA OR SECTION 4975(e)(1) OF THE CODE) THAT IS SUBJECT TO ERISA OR SECTION 4975 OF THE CODE, INCLUDING PLAN ASSETS WITHIN THE MEANING OF DEPARTMENT OF LABOR REGULATION SECTION 2510.3-101, AND THE TERM "NON-ERISA PLAN ASSETS" MEANS THE ASSETS OF ANY PLAN (INCLUDING, WITHOUT LIMITATION, "GOVERNMENTAL PLANS" (WITHIN THE MEANING OF SECTION 3(32) OF ERISA OR SECTION 414(d) OF THE CODE), "CHURCH PLANS" (WITHIN THE MEANING OF SECTION 3(33) OF ERISA OF SECTION 414(e) OF THE CODE) AND FOREIGN PLANS) THAT IS NOT SUBJECT TO ERISA OR SECTION 4975 OF THE CODE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED - ---------------- (1) Not to be included on the face of the Offshore Global Certificate or any Offshore Physical Certificates. A-2 OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN.](2) - ------------------- (2) To be included on the face of each Global Certificate. A-3 AMERICAN TRANS AIR 2002-1B PASS THROUGH TRUST Pass Through Certificate, Series 2002-1B Issuance Date: ____________, 2002 Final Legal Distribution Date: August 20, 2009 Evidencing a Fractional Undivided Interest in the American Trans Air 2002-1B Pass Through Trust, the Property of Which Includes Certain Equipment Notes each secured by Aircraft leased to or owned by American Trans Air, Inc. $[ ] Fractional Undivided Interest representing [ ] % of the Trust per $1,000 of Reference Principal Amount THIS CERTIFIES THAT Cede & Co., for value received, is the registered owner of a Fractional Undivided Interest in the amount of $ [ ] (_____________________ dollars), as such amount may be adjusted from time to time in accordance with the Agreement (the "Reference Principal Amount"), in the American Trans Air 2002-1B Pass Through Trust (the "Trust") pursuant to a Pass Through Trust Agreement dated as of March 28, 2002 (as amended, supplemented or otherwise modified from time to time, the "Agreement"), among Wilmington Trust Company, not in its individual capacity but solely as trustee (the "Trustee"), Amtran, Inc., a corporation incorporated under Indiana law (the "Guarantor"), and American Trans Air, Inc., a corporation incorporated under Indiana law (the "Company"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Agreement. This Certificate is one of the duly authorized Certificates designated as "Pass Through Certificates, Series 2002-1B" (herein called the "Certificates"). This Certificate is issued under and is subject to the terms, provisions, and conditions of the Agreement and the Intercreditor Agreement, to which agreements the Certificateholder of this Certificate by virtue of the acceptance hereof assents and by which such Certificateholder is bound. The property of the Trust includes certain Equipment Notes and all rights of the Trust to receive any payments under the Intercreditor Agreement and the Liquidity Facility (the "Trust Property"). Each issue of the Equipment Notes is secured by a security interest in The Aircraft leased to or owned by the Company. Each of the Certificates represents a fractional undivided interest in the Trust and the Trust Property, and has no rights, benefits or interest in respect of any assets or property other than the Trust Property. The undivided percentage interest in the Trust represented by each of this Certificate (as specified above) and the other Pass Through Certificates, Series 2002-1B, was determined on the basis of (x) the aggregate of the Reference Principal Amount of this Certificate (as specified above) and of the other Pass Through Certificates, Series 2002-1B and (y) the A-1 aggregate original principal amounts of the Equipment Notes constituting the Trust Property. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, from funds then available to the Trustee, there will be distributed on each February 20, May 20, August 20 and November 20 (a "Regular Distribution Date"), commencing May 20, 2002, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Notes due on such Regular Distribution Date, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, in the event that Special Payments on the Equipment Notes are received by the Trustee, from funds then available to the Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Special Distribution Date, an amount in respect of such Special Payments on the Equipment Notes, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Special Payments so received. If a Regular Distribution Date or Special Distribution Date is not a Business Day, distribution shall be made on the immediately following Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date and no interest shall accrue during the intervening period. The Trustee shall mail notice of each Special Payment and the Special Distribution Date therefor to the Certificateholder of this Certificate. Subject to the terms of the Agreement, distributions on this Certificate will be made by the Trustee by check mailed to the Person entitled thereto, without the presentation or surrender of this Certificate or the making of any notation hereon. Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Trustee specified in such notice. The Certificates do not represent a direct obligation of, or an obligation guaranteed by, or an interest in, the Guarantor, the Company or the Trustee or any affiliate thereof. The Certificates are limited in right of payment, all as more specifically set forth on the face hereof and in the Agreement. All payments or distributions made to Certificateholders under the Agreement shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Agreement. Each Certificateholder of this Certificate, by its acceptance hereof, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Certificateholder as provided in the Agreement. This Certificate does not purport to summarize the Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may be examined during normal business hours at the principal office of the Trustee, and at such other places, if any, designated by the Trustee, by any Certificateholder upon request. A-2 The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Agreement at any time by the Guarantor, the Company and the Trustee with the consent of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. Any such consent by the Certificateholder of this Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Certificate and of any Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Certificates. Upon and simultaneously with the issuance of the Additional Certificates, the Agreement shall be forthwith amended as provided in the Delayed Funding Implementation Agreement without any need for further action on the part of any party thereto. As provided in the Agreement and subject to certain limitations set forth, the transfer of this Certificate is registrable in the Register upon surrender of this Certificate for registration of transfer at the offices or agencies maintained by the Trustee in its capacity as Registrar, or by any successor Registrar duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee and the Registrar, duly executed by the Certificateholder hereof or such Certificateholder's attorney duly authorized in writing, and thereupon one or more new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust will be issued to the designated transferee or transferees. [THE HOLDER OF THIS CERTIFICATE IS ENTITLED TO THE BENEFITS OF THE REGISTRATION RIGHTS AGREEMENT, DATED AS OF MARCH 28, 2002, AMONG THE TRUSTEE, THE OTHER TRUSTEE, THE INVESTORS (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT), THE GUARANTOR AND THE COMPANY (AS AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME IN ACCORDANCE WITH ITS TERMS, THE "REGISTRATION RIGHTS AGREEMENT"). THE INTEREST RATE PER ANNUM APPLICABLE TO THIS CERTIFICATE SHALL BE INCREASED BY 0.50% PER ANNUM FOR ANY PERIOD REQUIRED BY THE REGISTRATION RIGHTS AGREEMENT.]* The Certificates are issuable only as registered Certificates without coupons in minimum denominations of [$100,000] [$1,000]** Fractional Undivided Interest and integral multiples of $1,000 in excess thereof, except that one Certificate may be issued in a denomination of less than [$100,000] [$1,000].** As provided in the Agreement and subject to certain limitations therein set forth, the Certificates are exchangeable for new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust, as requested by the Certificateholder surrendering the same. - --------------- * TO BE INCLUDED ONLY ON EACH INITIAL CERTIFICATE. ** To be included only on each Exchange Certificate. ** To be included only on each Exchange Certificate. A-3 No service charge will be made for any such registration of transfer or exchange, but the Trustee shall require payment by the Holder of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Trustee, the Registrar, and any agent of the Trustee or the Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. Any person acquiring or accepting this Certificate or an interest herein will, by such acquisition or acceptance, be deemed to have represented and warranted to and for the benefit of each Owner Participant and the Company that either: (i) no Plan Assets and no Non-ERISA Plan Assets have been used to purchase this Certificate or (ii) the purchase and holding of this Certificate are exempt from the prohibited transaction restrictions of ERISA and the Code and will be permissible under all applicable similar laws pursuant to one or more prohibited transaction, statutory, class or individual exemptions. As used in the preceding paragraph, the term "Plan Assets" means the assets of any "Plan"(within the meaning of Section 3(3) of ERISA or Section 4975(e)(1) of the Code) that is subject to ERISA or Section 4975 of the Code, including Plan Assets within the meaning of Department of Labor Regulation Section 2510.3-101, and the term "Non-ERISA Plan Assets" means the assets of any plan (including, without limitation, "Governmental Plans" (within the meaning of Section 3(32) of ERISA or Section 414(d) of the Code), "Church Plans" (within the meaning of Section 3(33) of ERISA of Section 414(e) of the Code) and Foreign Plans) that is not subject to ERISA or Section 4975 of the Code. Each Certificateholder or Investor that is not a United States person within the meaning of Section 7701(a)(30) of the Internal Revenue Code, as amended, by its acceptance of a Certificate or a beneficial interest therein, agrees to indemnify and hold harmless the Trust and the Trustee from and against any improper failure to withhold taxes from amounts payable to it or for its benefit. Each Certificateholder and Investor, by its acceptance of this Certificate or a beneficial interest herein, agrees to treat the Trust as a grantor trust for all U.S. federal, state and local income tax purposes. Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Trustee specified in such notice. The obligations and responsibilities created by the Agreement and the Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Agreement and the disposition of all property held as part of the Trust Property. THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK A-4 AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Unless the certificate of authentication hereon has been executed by the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. All payments or distributions made to Certificateholders shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of Article IV of this Agreement. Each Certificateholder, by its acceptance of a Certificate, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Certificateholder as provided in this Agreement. A-5 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed. Dated ____________, _____ WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee for AMERICAN TRANS AIR 2002-1B PASS THROUGH TRUST By: --------------------------------------- Title: A-6 [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Certificates referred to in the within-mentioned Agreement. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee By: --------------------------------------- Authorized Officer A-7 FORM OF TRANSFER NOTICE FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto [Insert Taxpayer Identification No.] - ------------------------- - ------------------------- please print or typewrite name and address including zip code of assignee - -------------------------------------------------------------------------------- the within Certificate and all rights thereunder, hereby irrevocably constituting and appointing - -------------------------------------------------------------------------------- attorney to transfer said Certificate on the books of the Trustee with full power of substitution in the premises. [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL U.S. PHYSICAL CERTIFICATES] In connection with any transfer of this Certificate occurring prior to the date that is the earlier of the date of an effective Registration Statement or the end of the two year period referred to in the Private Placement Legend, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] [ ] (a) this Certificate is being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder. or [ ] (b) this Certificate is being transferred other than in accordance with (a) above and documents are being furnished that comply with the conditions of transfer set forth in this Certificate and the Agreement. A-8 If neither of the foregoing boxes is checked, the Trustee or other Registrar shall not be obligated to register this Certificate in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 3.06 of the Agreement shall have been satisfied. Date: [Name of Transferor] NOTE: The signature must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. Signature Guarantee: TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and has been advised of the applicable transfer restrictions relating to the Certificates and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. [Name of Transferee] Dated: ---------------------------- NOTE: To be executed by an executive officer. A-9 EXHIBIT B FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S [date] Wilmington Trust Company, not in its individual capacity but solely as Trustee Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Re: American Trans Air 2002-1B Pass Through Trust (the "Trust"), [ ]% American Trans Air Pass Through Certificates Series 2002-1B (the Certificates") ------------------------------------------------------------------ Sirs: In connection with our proposed sale of $[ ] Fractional Undivided Interest of the Certificates, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended, and, accordingly, we represent that: (1) the offer of the Certificates was not made to a person in the United States; (2) either (a) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. In addition, if the sale is made during a restricted period and the provisions of B-1 Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be. You and American Trans Air, Inc. are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: --------------------------------- Authorized Signature B-2 EXHIBIT E FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS TO QIBs [date] Wilmington Trust Company, not in its individual capacity but solely as Trustee Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration AMERICAN TRANS AIR PASS-THROUGH TRUST, SERIES 2002-1B (the "Trust") Pass Through Certificates, Series 2002-1B (the "Certificates") ------------------------ Ladies and Gentlemen: In connection with our proposed sale of $[ ] Fractional Undivided Interest of the Certificates, we confirm that without utilizing any general solicitation or general advertising that such Certificates are being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder. Date:____________ [Name of Transferor NOTE: The signature must correspond with the name as written upon the face of the within-mentioned Certificate in every particular, without alteration or any change whatsoever. Signature Guarantee: TO BE COMPLETED BY PURCHASER: The undersigned represents and warrants that it is purchasing the within-mentioned Certificate for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and has been advised of the applicable transfer restrictions relating to the Certificates and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated:__________________ NOTE: To be executed by an executive officer. E-2 EX-4.7 7 file006.txt REVOLVING CREDIT AGREEMENT CLASS A EXECUTION COPY - -------------------------------------------------------------------------------- REVOLVING CREDIT AGREEMENT (2002-1A) Dated as of March 28, 2002 between WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the American Trans Air 2002-1A Pass Through Trust as Borrower and AIG MATCHED FUNDING CORP. as Liquidity Provider Relating to American Trans Air 2002-1A Pass Through Trust, Series 2002-1A 8.328 % American Trans Air Pass Through Certificates, Series 2002-1A - --------------------------------------------------------------------------------
Table of Contents Page Article 1 DEFINITIONS..................................................................................1 Section 1.1 Certain Defined Terms............................................................1 Article 2 AMOUNT AND TERMS OF THE COMMITMENT...........................................................7 Section 2.1 The Advances.....................................................................7 Section 2.2 Making the Advances..............................................................7 Section 2.3 Fees ............................................................................9 Section 2.4 Adjustments or Termination of the Maximum Commitment.............................9 Section 2.5 Repayments of Interest Advances or the Final Advance............................10 Section 2.6 Repayments of Provider Advances.................................................10 Section 2.7 Payments to the Liquidity Provider Under the Intercreditor Agreement............11 Section 2.8 Book Entries....................................................................11 Section 2.9 Payments from Available Funds Only..............................................11 Section 2.10 Non-Extension Advance..........................................................12 Article 3 OBLIGATIONS OF THE BORROWER.................................................................12 Section 3.1 Increased Costs.................................................................12 Section 3.2 Capital Adequacy................................................................13 Section 3.3 Payments Free of Deductions.....................................................14 Section 3.4 Payments........................................................................14 Section 3.5 Computations....................................................................14 Section 3.6 Payment on Non-Business Days....................................................15 Section 3.7 Interest........................................................................15 Section 3.8 Replacement of Borrower.........................................................16 Section 3.9 Funding Loss Indemnification....................................................16 Section 3.10 Illegality.....................................................................17 Article 4 CONDITIONS PRECEDENT........................................................................17 Section 4.1 Conditions Precedent to Effectiveness of Section 2.1............................17 Section 4.2 Conditions Precedent to Borrowing...............................................18 Article 5 COVENANTS...................................................................................19 Section 5.1 Affirmative Covenants of the Borrower...........................................19 Section 5.2 Negative Covenants of the Borrower..............................................19 Article 6 LIQUIDITY EVENTS OF DEFAULT.................................................................20 Section 6.1 Liquidity Events of Default.....................................................20 Article 7 MISCELLANEOUS...............................................................................20 Section 7.1 Amendments, Etc.................................................................20 Section 7.2 Notices, Etc....................................................................20 Section 7.3 No Waiver; Remedies.............................................................21 i Section 7.4 Further Assurances..............................................................21 Section 7.5 Indemnification; Survival of Certain Provisions.................................21 Section 7.6 Limitations on Liability........................................................22 Section 7.7 Costs, Expenses and Taxes.......................................................23 Section 7.8 Binding Effect; Participations..................................................23 Section 7.9 Severability....................................................................25 Section 7.10 GOVERNING LAW..................................................................25 Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity...........25 Section 7.12 Execution in Counterparts......................................................26 Section 7.13 Entirety.......................................................................26 Section 7.14 Headings.......................................................................26 Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES...............................26 ANNEX I Interest Advance Notice of Borrowing ANNEX II Non-Extension Advance Notice of Borrowing ANNEX III Downgrade Advance Notice of Borrowing ANNEX IV Final Advance Notice of Borrowing ANNEX V Notice of Termination ANNEX VI Notice of Replacement Subordination Agent EXHIBIT A Form of Class A Guarantee Agreement
ii REVOLVING CREDIT AGREEMENT (2002-1A) This REVOLVING CREDIT AGREEMENT dated as of March 28, 2002, between WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity but solely as Subordination Agent under the Intercreditor Agreement (each as defined below), as agent and trustee for the Class A Trust (as defined below) (the "Borrower"), and AIG MATCHED FUNDING CORP., a Delaware Corporation ("AIG" or the "Liquidity Provider"). W I T N E S S E T H: WHEREAS, pursuant to the Class A Trust Agreement (such term and all other capitalized terms used in these recitals having the meanings set forth or referred to in Section 1.1), the Class A Trust is issuing the Class A Certificates; WHEREAS, the Borrower, in order to support the timely payment of a portion of the interest on the Class A Certificates in accordance with their terms, has requested the Liquidity Provider to enter into this Agreement, providing in part for the Borrower to request in specified circumstances that Advances be made hereunder; WHEREAS, the Company, the Subordination Agent, the Escrow Agent, the Liquidity Provider, the Depositary and certain other parties concurrently herewith are entering into a Delayed Funding Implementation Agreement, dated as of the date hereof pursuant to which the parties agree to supplement and modify the Operative Agreements; and WHEREAS, the Liquidity Provider has requested American International Group, Inc. (the "LP Guarantor") to execute a guarantee in the form in Exhibit A hereto providing for the full and unconditional guarantee of the Liquidity Provider's payment obligations under this Agreement (the "Class A Guarantee Agreement"). NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Section 1.1 Certain Defined Terms. (a) Definitions. As used in this Agreement and unless otherwise expressly indicated, or unless the context clearly requires otherwise, the following capitalized terms shall have the following respective meanings for all purposes of this Agreement: "Additional Certificates" has the meaning assigned to such term in the Delayed Funding Implementation Agreement. "Additional Cost" has the meaning assigned to such term in Section 3.1. "Advance" means an Interest Advance, a Final Advance, a Provider Advance or an Applied Provider Advance, as the case may be. "Applicable Liquidity Rate" has the meaning assigned to such term in Section 3.7(g). "Applicable Margin" means (x) with respect to any Unpaid Advance or Applied Provider Advance, 2.25%, or (y) with respect to any Unapplied Provider Advance, 0.65 %. "Applied Downgrade Advance" has the meaning assigned to such term in Section 2.6(a). "Applied Non-Extension Advance" has the meaning assigned to such term in Section 2.6(a). "Applied Provider Advance" has the meaning assigned to such term in Section 2.6(a). "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall on any day be equal to (a) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Liquidity Provider from three Federal funds brokers of recognized standing selected by it, plus (b) one-quarter of one percent (1/4 of 1%). "Base Rate Advance" means an Advance that bears interest at a rate based upon the Base Rate. "Borrower" has the meaning assigned to such term in the recital of parties to this Agreement. "Borrowing" means the making of Advances requested by delivery of a Notice of Borrowing. "Business Day" means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in Indianapolis, Indiana, or New York, New York, or, so long as any Class A Certificate is outstanding, the city and state in which the Class A Trustee, the Borrower or any Loan Trustee maintains its Corporate Trust Office or receives or disburses funds, and, if the applicable Business Day relates to any Advance or other amount bearing interest based on the LIBOR Rate, on which dealings are carried on in the London interbank market. 2 "Certificate Purchase Agreement" means the two Certificate Purchase Agreements, each dated March 26, 2002 among the Company and Amtran and Nyala Funding LLC or PK AirFinance US, Inc., respectively, relating to the purchase of the Class A Certificates and the Class B Certificates, respectively, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class A Guarantee Agreement" has the meaning assigned to such term in the recital of parties to this Agreement. "Class A Guarantee Event" has the meaning assigned to such term in Section 2.02(c). "Deposits" has the meaning assigned to such term in the Deposit Agreement. "Depositary" means IntesaBCI, S.p.A., acting through its New York Branch. "Deposit Agreement" means, prior to the Delayed Funding Date (as defined in the Delayed Funding Implementation Agreement), the Deposit Agreement (Class A) dated March 28, 2002 between Wells Fargo Bank Northwest N.A., as Escrow Agent and IntesaBCI, S.p.A., acting through its New York Branch, as Depositary, pertaining to the Class A Certificates, and on and after the Delayed Funding Date, such Deposit Agreement (to the extent of any payment to be made by the Depositary thereunder on or after the Delayed Funding Date) and the Delayed Deposit Agreement (Class A) dated March 28, 2002 between Wells Fargo Bank Northwest N.A., as Escrow Agent and IntesaBCI, S.p.A., New York Branch, as Depositary, in each case, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Downgrade Advance" means an Advance made pursuant to Section 2.2(c). "Effective Date" has the meaning specified in Section 4.1. The delivery of the certificate of the Liquidity Provider contemplated by Section 4.1 (e) shall be conclusive evidence that the Effective Date has occurred. "Excluded Taxes" means (i) Taxes imposed on the overall net income of the Liquidity Provider or of its Principal Office, and (ii) Excluded Withholding Taxes. "Excluded Withholding Taxes" means (i) withholding Taxes imposed by the United States except to the extent that such United States withholding Taxes are imposed as a result of any change in applicable law after the date hereof (excluding from change in applicable law for this purpose a change in an applicable treaty or other change in law affecting the applicability of a treaty), or in the case of a successor Liquidity Provider (including a transferee of an Advance) or Principal Office, after the date on which such successor Liquidity Provider obtains its interest or on which the Principal Office is changed, and (ii) any withholding Taxes imposed by the United States which are imposed or increased as a result of the Liquidity Provider failing to deliver to the Borrower any certificate or document (which certificate or document in the good faith judgment of the Liquidity Provider it is legally entitled to provide) which is reasonably requested by the Borrower to establish that payments under this Agreement are exempt from (or entitled to a reduced rate of) withholding Tax. 3 "Expenses" means liabilities, obligations, damages, settlements, penalties, claims, actions, suits, costs, expenses and disbursements (including, without limitation, reasonable fees and disbursements of legal counsel and costs of investigation), provided that Expenses shall not include any Taxes. "Expiry Date" means December 5, 2014. "Final Advance" means an Advance made pursuant to Sections 2.2(d) and 6.1. "Intercreditor Agreement" means the Intercreditor Agreement dated the date hereof, among the Trustees, the Liquidity Provider, the liquidity provider under each Liquidity Facility (other than this Agreement) and the Subordination Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Interest Advance" means an Advance made pursuant to Section 2.2(a). "Interest Period" means, with respect to any LIBOR Advance, each of the following periods: (i) the period beginning on the third Business Day following either (x) the Liquidity Provider's receipt of the Notice of Borrowing for such LIBOR Advance or (y) the withdrawal of funds from the Class A Cash Collateral Account for the purpose of paying interest on the Class A Certificates as contemplated by Section 2.6(a) hereof and, in either case, ending on the next Regular Distribution Date; and (ii) each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on but excluding the next Regular Distribution Date. "LIBOR Advance" means an Advance bearing interest at a rate based upon the LIBOR Rate. "LIBOR Rate" means, with respect to any Interest Period, (i) the rate per annum appearing on display page 3750 (British Bankers Association - LIBOR) of the Dow Jones Markets Service (or any successor or substitute therefor) at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period, or (ii) if the rate calculated pursuant to clause (i) above is not available, the average (rounded upwards, if necessary, to the next higher 1/16 of 1%) of the rates per annum at which deposits in dollars are offered for the relevant Interest Period by three banks of recognized standing selected by the Liquidity Provider in the London interbank market at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the LIBOR Advance to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Liquidity Event of Default" means the occurrence of either (a) the Acceleration of all of the Equipment Notes or (b) an ATA Bankruptcy Event. 4 "Liquidity Indemnitee" means (i) the Liquidity Provider, (ii) the LP Guarantor, (iii) each Affiliate of the Liquidity Provider, (iv) the respective directors, officers, employees and agents of the Liquidity Provider, the LP Guarantor and their Affiliates, and (v) the successors and permitted assigns of the persons described in clauses (i) to (iv), inclusive. "Liquidity Provider" shall mean AIG Matched Funding Corp., a Delaware corporation, and its successors and permitted assigns. "LP Guarantor" has the meaning assigned to such term in the recital of parties to this Agreement. "Maximum Available Commitment" shall mean, subject to the proviso contained in the third sentence of Section 2.2(a), at any time of determination, (a) the Maximum Commitment at such time less (b) the aggregate amount of each Interest Advance outstanding at such time; provided that following a Provider Advance or a Final Advance, the Maximum Available Commitment shall be zero. "Maximum Commitment" means, for any day, the lesser of (x) $14,793,433 and (y) the Required Amount on such day, provided that if a Downgrade Advance is made prior to the Delayed Funding Date (as defined in the Delayed Funding Implementation Agreement), for the purpose of determining the amount of such Downgrade Advance only, the Maximum Commitment shall be $26,828,366. "Non-Excluded Taxes" has the meaning specified in Section 3.3. "Non-Extension Advance" `means an Advance made pursuant to Section 2.2(b). "Notice of Borrowing" has the meaning specified in Section 2.2(e). "Notice of Replacement Subordination Agent" has the meaning specified in Section 3.8. "Private Placement Memorandum" means the Private Placement Memorandum dated March 26, 2002 of ATA and Amtran relating to the Certificates, as such Private Placement Memorandum may be amended or supplemented. "Performing Note Deficiency" means any time that less than 65% of the then aggregate outstanding principal amount of all Equipment Notes are Performing Equipment Notes. "Principal Office" means the principal office of the Liquidity Provider presently located in Westport, Connecticut, or such other principal office as the Liquidity Provider from time to time shall notify the Borrower as its principal office hereunder; provided that the Liquidity Provider shall not change its Principal Office to a Principal Office outside the United States of America except in accordance with Section 3.1, 3.2 or 3.3 hereof. "Provider Advance" means a Downgrade Advance or a Non-Extension Advance. 5 "Regulatory Change" has the meaning assigned to such term in Section 3.1. "Replenishment Amount" has the meaning assigned to such term in Section 2.6(b). "Required Amount" means, for any day, the sum of the aggregate amount of interest, calculated at the rate per annum equal to the Stated Interest Rate for the Class A Certificates, that would be payable on the Class A Certificates on each of the six successive quarterly Regular Distribution Dates immediately following such day or, if such day is a Regular Distribution Date, on such day and the succeeding five quarterly Regular Distribution Dates, in each case calculated on the basis of the Pool Balance of the Class A Certificates on such day and without regard to expected future payments of principal on the Class A Certificates. "Termination Date" means the earliest to occur of the following: (i) the Expiry Date; (ii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that all of the Class A Certificates have been paid in full (or provision has been made for such payment in accordance with the Intercreditor Agreement and the Trust Agreements) or are otherwise no longer entitled to the benefits of this Agreement; (iii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that a Replacement Liquidity Facility has been substituted for this Agreement in full pursuant to Section 3.6(e) of the Intercreditor Agreement; (iv) the fifth Business Day following the receipt by the Borrower of a Termination Notice from the Liquidity Provider pursuant to Section 6.1 hereof; and (v) the date on which no Advance is or may (including by reason of reinstatement as herein provided) become available for a Borrowing hereunder. "Termination Notice" means the Notice of Termination substantially in the form of Annex V to this Agreement. "Transferee" has the meaning assigned to such term in Section 7.8(b). "Unapplied Downgrade Advance" means any Downgrade Advance other than an Applied Downgrade Advance. "Unapplied Provider Advance" means any Provider Advance other than an Applied Provider Advance. "Unpaid Advance" has the meaning assigned to such term in Section 2.5. (b) Terms Defined in the Intercreditor Agreement. For all purposes of this Agreement, the following terms shall have the respective meanings assigned to such terms in the Intercreditor Agreement: "Acceleration,", "Affiliate", "Amtran", "ATA", "ATA Bankruptcy Event", "Certificates", "Class A Cash Collateral Account", "Class A Certificates", "Class A Trust", "Class A Trust Agreement", "Class A Trustee", "Class B Certificates", "Closing Date", "Controlling Party", "Corporate Trust Office", "Delayed Funding Implementation Agreement", "Downgraded Facility", "Equipment Notes", "Escrow Agent", "Escrow and 6 Paying Agent Agreement", "Fee Letter", "Final Legal Distribution Date", "Financing Agreement", "Indenture", "Liquidity Facility", "Liquidity Obligations", "Loan Trustee", "Moody's", "Non-Extended Facility", "Note Purchase Agreement", "Operative Agreements", "Participation Agreement", "Performing Equipment Note", "Person", "Pool Balance", "Regular Distribution Date", "Replacement Liquidity Facility", "Responsible Officer", "Standard & Poor's", "Scheduled Payment", "Series A Equipment Notes", "Special Payment", "Stated Interest Rate", "Subordination Agent", "Taxes", "Threshold Rating", "Trust", "Trust Agreements" and "Trustee". (c) Interpretation. Each Scheduled Payment with respect to the Class A Certificates shall be deemed to be comprised of interest and principal components, with the interest component equaling interest accrued at the Stated Interest Rate for the Class A Certificates from (i) the later of (x) the date of the issuance thereof and (y) the most recent but preceding Regular Distribution Date to (ii) the Regular Distribution Date on which such Scheduled Payment is being made, such interest to be considered payable in arrears on such Regular Distribution Date and to be calculated and allocated in the same manner as interest on the Series A Equipment Notes. ARTICLE 2 AMOUNT AND TERMS OF THE COMMITMENT Section 2.1 The Advances. The Liquidity Provider hereby irrevocably agrees, on the terms and conditions hereinafter set forth, to make Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until 12:00 noon (New York City time) on the Expiry Date (unless the obligations of the Liquidity Provider shall be earlier terminated in accordance with the terms of Section 2.4(b)) in an aggregate amount at any time outstanding not to exceed the Maximum Commitment. Section 2.2 Making the Advances. (a) Interest Advances shall be made in one or more Borrowings by delivery to the Liquidity Provider of one or more written and completed Notices of Borrowing in substantially the form of Annex I attached hereto, signed by a Responsible Officer of the Borrower, in an amount not exceeding the Maximum Available Commitment at such time and shall be used solely for the payment when due of the interest on the Class A Certificates at the Stated Interest Rate therefor in accordance with Section 3.6(a) of the Intercreditor Agreement. Each Interest Advance made hereunder shall automatically reduce the Maximum Available Commitment and the amount available to be borrowed hereunder by subsequent Advances by the amount of such Interest Advance (subject to reinstatement as provided in the next sentence). Upon repayment to the Liquidity Provider of all or any part of the amount of any Interest Advance made pursuant to this Section 2.2(a), together with accrued interest thereon (as provided herein), the Maximum Available Commitment shall be reinstated by the amount of such repaid Interest Advance, but not to exceed the Maximum Commitment; provided, however, that the Maximum Available Commitment shall not be so reinstated at any time if (i) a Liquidity 7 Event of Default shall have occurred and be continuing and (ii) there is a Performing Note Deficiency. (b) A Non-Extension Advance shall be made in a single Borrowing if the Liquidity Provider gives notice of termination of this Agreement pursuant to Section 2.10 of this Agreement and Section 3.6(d) of the Intercreditor Agreement (unless a Replacement Liquidity Facility to replace this Agreement shall have been previously delivered to the Borrower in accordance with said Section 3.6(d)) by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex II attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Maximum Available Commitment at such time, and shall be used to fund the Class A Cash Collateral Account in accordance with said Section 3.6(d) and Section 3.6(f) of the Intercreditor Agreement. (c) A Downgrade Advance shall be made in a single Borrowing upon (i) a downgrading of the Liquidity Provider's short-term debt rating issued by Moody's below the applicable Threshold Rating or (ii) upon a downgrading of the LP Guarantor's short term debt rating issued by Standard & Poor's below the applicable Threshold Rating or if the Class A Guarantee Agreement ceases to be in full force and effect, becomes invalid or unenforceable or the LP Guarantor denies its liability thereunder (any such occurrence described in clause (ii), a "Class A Guarantee Event") unless a Replacement Liquidity Facility to replace this Agreement shall have been previously delivered to the Borrower in accordance with Section 3.6(c) of the Intercreditor Agreement, by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex III attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Maximum Available Commitment at such time, and shall be used to fund the Class A Cash Collateral Account in accordance with said Section 3.6(c) and Section 3.6(f) of the Intercreditor Agreement. (d) A Final Advance shall be made in a single Borrowing upon the receipt by the Borrower of a Termination Notice from the Liquidity Provider pursuant to Section 6.1 hereof by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex IV attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Maximum Available Commitment at such time, and shall be used to fund the Class A Cash Collateral Account (in accordance with Sections 3.6(f) and 3.6(i) of the Intercreditor Agreement). (e) Each Borrowing shall be made on notice in writing (a "Notice of Borrowing") in substantially the form required by Section 2.2(a), 2.2(b), 2.2(c) or 2.2(d), as the case may be, given by the Borrower to the Liquidity Provider. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing no later than 1:00 p.m. (New York City time) on a Business Day, upon satisfaction of the conditions precedent set forth in Section 4.2 with respect to a requested Borrowing, the Liquidity Provider shall make available to the Borrower, in accordance with its payment instructions, the amount of such Borrowing in U.S. dollars and immediately available funds, before 4:00 p.m. (New York City time) on such Business Day or on such later Business Day specified in such Notice of Borrowing. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing after 1:00 p.m. (New York City time) on a Business Day, upon satisfaction of the conditions precedent set forth in Section 4.2 with respect to a requested Borrowing, the Liquidity Provider shall make available to 8 the Borrower, in accordance with its payment instructions, the amount of such Borrowing in U.S. dollars and in immediately available funds, before 4:00 p.m. (New York City time) on the first Business Day next following the day of receipt of such Notice of Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing. Payments of proceeds of a Borrowing shall be made by wire transfer of immediately available funds to the Borrower in accordance with such wire transfer instructions as the Borrower shall furnish from time to time to the Liquidity Provider for such purpose. Each Notice of Borrowing shall be irrevocable and binding on the Borrower. The Liquidity Provider acknowledges and confirms that there are no grace periods applicable to its obligations to make Advances in accordance with this Section 2.2. (f) Upon the making of any Advance requested pursuant to a Notice of Borrowing, in accordance with the Borrower's payment instructions, the Liquidity Provider shall be fully discharged of its obligation hereunder with respect to such Notice of Borrowing, and the Liquidity Provider shall not thereafter be obligated to make any further Advances hereunder in respect of such Notice of Borrowing to the Borrower or to any other Person. Following the making of any Advance pursuant to Section 2.2(b), (c) or (d) hereof to fund the Class A Cash Collateral Account, the Liquidity Provider shall have no interest in or rights to the Class A Cash Collateral Account, such Advance or any other amounts from time to time on deposit in the Class A Cash Collateral Account; provided that the foregoing shall not affect or impair the obligations of the Subordination Agent to make the distributions contemplated by Section 3.6(e) or (f) of the Intercreditor Agreement. By paying to the Borrower proceeds of Advances requested by the Borrower in accordance with the provisions of this Agreement, the Liquidity Provider makes no representation as to, and assumes no responsibility for, the correctness or sufficiency for any purpose of the amount of the Advances so made and requested. Section 2.3 Fees. The Borrower agrees to pay to the Liquidity Provider the fees set forth in the Fee Letter. Section 2.4 Adjustments or Termination of the Maximum Commitment. (a) Automatic Adjustments. Promptly following each date on which the Required Amount is (i) reduced as a result of a reduction in the Pool Balance of the Class A Certificates or otherwise, (ii) increased as a result of an increase in the Stated Interest Rate, or (iii) subsequent to an increase described in clause (ii), reduced pursuant to the definition of "Stated Interest Rate", the Maximum Commitment shall automatically be reduced or increased, as the case may be, to an amount equal to the Required Amount (as calculated by the Borrower). The Borrower shall give notice of any such automatic adjustment of the Maximum Commitment to the Liquidity Provider (with a copy to Amtran) within two Business Days thereof. The failure by the Borrower to furnish any such notice shall not affect such automatic reduction or increase of the Maximum Commitment. (b) Termination. Upon the making of any Provider Advance or Final Advance hereunder or the occurrence of the Termination Date, the obligation of the Liquidity Provider to make further Advances hereunder shall automatically and irrevocably terminate, and the Borrower shall not be entitled to request any further Borrowing hereunder. 9 Section 2.5 Repayments of Interest Advances or the Final Advance. Subject to Sections 2.6, 2.7 and 2.9 hereof, the Borrower hereby agrees, without notice of an Advance or demand for repayment from the Liquidity Provider (which notice and demand are hereby waived by the Borrower), to pay, or to cause to be paid, to the Liquidity Provider on each date on which the Liquidity Provider shall make an Interest Advance or the Final Advance, an amount equal to (a) the amount of such Advance (any such Advance, until repaid, is referred to herein as an "Unpaid Advance"), plus (b) interest on the amount of each such Unpaid Advance as provided in Section 3.7 hereof; provided that if (i) the Liquidity Provider shall make a Provider Advance at any time after making one or more Interest Advances which shall not have been repaid in accordance with this Section 2.5 or (ii) this Liquidity Facility shall become a Downgraded Facility or Non-Extended Facility at any time when unreimbursed Interest Advances have reduced the Maximum Available Commitment to zero, then such Interest Advances shall cease to constitute Unpaid Advances and shall be deemed to have been converted into an Applied Downgrade Advance or an Applied Non-Extension Advance, as the case may be, for all purposes of this Agreement (including, without limitation, for the purpose of determining when such Interest Advance is required to be repaid to the Liquidity Provider in accordance with Section 2.6 and for the purposes of Section 2.6(b)). The Borrower and the Liquidity Provider agree that the repayment in full of each Interest Advance and Final Advance on the date such Advance is made is intended to be a contemporaneous exchange for new value given to the Borrower by the Liquidity Provider. Section 2.6 Repayments of Provider Advances. (a) Amounts advanced hereunder in respect of a Provider Advance shall be deposited in the Class A Cash Collateral Account, invested and withdrawn from the Class A Cash Collateral Account as set forth in Sections 3.6(c), (d) and (f) of the Intercreditor Agreement. The Borrower agrees to pay to the Liquidity Provider, on each Regular Distribution Date, commencing on the first Regular Distribution Date after the making of a Provider Advance, interest on the principal amount of any such Provider Advance as provided in Section 3.7; provided, however, that amounts in respect of a Provider Advance withdrawn from the Class A Cash Collateral Account for the purpose of paying interest on the Class A Certificates in accordance with Section 3.6(f) of the Intercreditor Agreement (the amount of any such withdrawal being (y) in the case of a Downgrade Advance, an "Applied Downgrade Advance" and (z) in the case of a Non-Extension Advance, an "Applied Non-Extension Advance" and, together with an Applied Downgrade Advance, an "Applied Provider Advance") shall thereafter (subject to Section 2.6(b)) be treated as an Interest Advance under this Agreement for purposes of determining the Applicable Liquidity Rate for interest payable thereon; provided further, however, that if, following the making of a Provider Advance, the Liquidity Provider delivers a Termination Notice to the Borrower pursuant to Section 6.1 hereof, such Provider Advance shall thereafter be treated as a Final Advance under this Agreement for purposes of determining the Applicable Liquidity Rate for interest payable thereon. Subject to Sections 2.7 and 2.9 hereof, immediately upon the withdrawal of any amounts from the Class A Cash Collateral Account on account of a reduction in the Required Amount, the Borrower shall repay to the Liquidity Provider a portion of the Provider Advances in a principal amount equal to the amount of such reduction, plus interest on the principal amount prepaid as provided in Section 3.7 hereof. 10 (b) At any time when an Applied Provider Advance (or any portion thereof) is outstanding, upon the deposit in the Class A Cash Collateral Account of any amount pursuant to clause "third" of Section 2.4(b) of the Intercreditor Agreement, clause "third" of Section 3.2 of the Intercreditor Agreement or clause "fourth" of Section 3.3 of the Intercreditor Agreement (any such amount being a "Replenishment Amount") for the purpose of replenishing or increasing the balance thereof up to the Required Amount at such time, (i) the aggregate outstanding principal amount of all Applied Provider Advances (and of Provider Advances treated as an Interest Advance for purposes of determining the Applicable Liquidity Rate for interest payable thereon) shall be automatically reduced by the amount of such Replenishment Amount and (ii) the aggregate outstanding principal amount of all Unapplied Provider Advances shall be automatically increased by the amount of such Replenishment Amount. (c) Upon the provision of a Replacement Liquidity Facility in replacement of this Agreement in accordance with Section 3.6(e) of the Intercreditor Agreement, amounts remaining on deposit in the Class A Cash Collateral Account after giving effect to any Applied Provider Advance on the date of such replacement shall be reimbursed to the Liquidity Provider, but only to the extent such amounts are necessary to repay in full to the Liquidity Provider all amounts owing to it hereunder. Section 2.7 Payments to the Liquidity Provider Under the Intercreditor Agreement. In order to provide for payment or repayment to the Liquidity Provider of any amounts hereunder, the Intercreditor Agreement provides that amounts available and referred to in Articles II and III of the Intercreditor Agreement, to the extent payable to the Liquidity Provider pursuant to the terms of the Intercreditor Agreement (including, without limitation, Section 3.6(f) of the Intercreditor Agreement), shall be paid to the Liquidity Provider in accordance with the terms thereof. Amounts so paid to the Liquidity Provider shall be applied by the Liquidity Provider to Liquidity Obligations then due and payable in accordance with the Intercreditor Agreement or, if not provided for in the Intercreditor Agreement, then in such manner as the Liquidity Provider shall deem appropriate. Section 2.8 Book Entries. The Liquidity Provider shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from Advances made from time to time and the amounts of principal and interest payable hereunder and paid from time to time in respect thereof; provided, however, that the failure by the Liquidity Provider to maintain such account or accounts shall not affect the obligations of the Borrower in respect of Advances. Section 2.9 Payments from Available Funds Only. All payments to be made by the Borrower under this Agreement shall be made only from the amounts received by it that constitute Scheduled Payments, Special Payments or payments under Section 7 (Owned Aircraft) or Section 9 (Leased Aircraft) of the Participation Agreements and Section 6 of the Note Purchase Agreement and only to the extent that the Borrower shall have sufficient income or proceeds therefrom to enable the Borrower to make payments in accordance with the terms hereof after giving effect to the priority of payments provisions set forth in the Intercreditor Agreement. The Liquidity Provider agrees that it will look solely to such amounts to the extent available for distribution to it as provided in the Intercreditor Agreement and this Agreement and that the Borrower, in its individual capacity, is not personally liable to it for any amounts payable 11 or liability under this Agreement except as expressly provided in this Agreement, the Intercreditor Agreement or any Participation Agreement. Amounts on deposit in the Class A Cash Collateral Account shall be available to the Borrower to make payments under this Agreement only to the extent and for the purposes expressly contemplated in Section 3.6(f) of the Intercreditor Agreement. Section 2.10 Non-Extension Advance. At any time after the second anniversary of the date of this Agreement, the Liquidity Provider may, at its option notify the Borrower and ATA of the early termination of this Agreement, specifying the date of early termination, which shall be not earlier than the 40th day after the date of such notice (the "Early Termination Date"). If on or prior to the 15th day prior to the Early Termination Date there shall not have been delivered to the Borrower a Replacement Liquidity Facility as provided in Section 3.6(e) of the Intercreditor Agreement, the Borrower shall be entitled on and after such 15th day (but prior to the Early Termination Date) to request a Non-Extension Advance in accordance with Section 2.2(b) hereof and Section 3.6(d) of the Intercreditor Agreement. ARTICLE 3 OBLIGATIONS OF THE BORROWER Section 3.1 Increased Costs. Subject to the Fee Letter, the Borrower shall pay to the Liquidity Provider, upon demand by the Liquidity Provider (such demand to be made not later than 180 days after a Responsible Officer of the Liquidity Provider obtains actual knowledge of any event referred to in clause (1) or (2) below), such amounts as may be necessary to compensate the Liquidity Provider for any increased costs incurred by the Liquidity Provider which are attributable to its making or maintaining any LIBOR Advances hereunder or its obligation to make any such Advances hereunder, or any reduction in any amount receivable by the Liquidity Provider under this Agreement or the Intercreditor Agreement in respect of any such Advances or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any change after the date of this Agreement in U.S. federal, state, municipal, or foreign laws or regulations (including Regulation D), or the adoption or making after the date of this Agreement of any interpretations, directives, or requirements applying to a class of banks including the Liquidity Provider under any U.S. federal, state, municipal, or any foreign laws or regulations (whether or not having the force of law) by any court, central bank or monetary authority charged with the interpretation or administration thereof (a "Regulatory Change"), which: (1) changes the basis of taxation of any amounts payable to the Liquidity Provider under this Agreement in respect of any such Advances (other than Excluded Taxes); or (2) imposes or modifies any reserve, special deposit, compulsory loan or similar requirements relating to any extensions of credit or other assets of, or any deposits with other liabilities of, the Liquidity Provider (including any such Advances or any deposits referred to in the definition of LIBOR Rate or related definitions); provided that if such demand for payment is made after such 180-day period, the Borrower shall be obligated to pay such amounts only with respect to such increased cost actually incurred or effected on or after the 180th day prior to the date of such demand. The Liquidity Provider agrees to use reasonable efforts (consistent with applicable legal and regulatory restrictions) to change the jurisdiction of 12 its Principal Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.1 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider. The Liquidity Provider agrees that if it shall make a demand for payment of additional amounts under this Section 3.1, the Borrower shall have the right to obtain a Replacement Liquidity Facility in replacement of this Agreement in accordance with Section 3.6(e) of the Intercreditor Agreement provided that such replacement would eliminate or reduce the obligation of the Borrower to pay such additional amounts. The Liquidity Provider will notify the Borrower of any event occurring after the date of this Agreement that will entitle the Liquidity Provider to compensation pursuant to this Section 3.1 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, which notice shall describe in reasonable detail the calculation of the amounts owed under this Section. Determinations by the Liquidity Provider for purposes of this Section 3.1 of the effect of any Regulatory Change on its costs of making or maintaining Advances or on amounts receivable by it in respect of Advances, and of the additional amounts required to compensate the Liquidity Provider in respect of any Additional Costs, shall be prima facie evidence of the amount owed under this Section. Section 3.2 Capital Adequacy. Subject to the Fee Letter, if (1) the adoption, after the date hereof, of any applicable governmental law, rule or regulation regarding capital adequacy, (2) any change, after the date hereof, in the interpretation or administration of any such law, rule or regulation by any central bank or other governmental authority charged with the interpretation or administration thereof or (3) compliance by the Liquidity Provider or any corporation controlling the Liquidity Provider with any applicable guideline or request of general applicability, issued after the date hereof, by any central bank or other governmental authority (whether or not having the force of law) that constitutes a change of the nature described in clause (2), has the effect of requiring an increase in the amount of capital required to be maintained by the Liquidity Provider or any corporation controlling the Liquidity Provider, and such increase is based upon the Liquidity Provider's obligations hereunder and other similar obligations and has the effect of reducing the rate of return on the Liquidity Provider's capital as a consequence of issuing or maintaining its commitment hereunder or its funding or maintaining Advances to a level below that which the Liquidity Provider could have achieved but for such adoption, change or compliance (taking into consideration the Liquidity Provider's policies with respect to capital adequacy) by an amount deemed by the Liquidity Provider to be material, then, upon demand by the Liquidity Provider, the Borrower shall pay to the Liquidity Provider from time to time such additional amount or amounts as are necessary to compensate the Liquidity Provider for such portion of such increase as shall be reasonably allocable to the Liquidity Provider's obligations to the Borrower hereunder. The Liquidity Provider agrees to use reasonable efforts (consistent with applicable legal and regulatory restrictions) to change the jurisdiction of its Principal Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise materially disadvantageous to the Liquidity Provider. 13 The Liquidity Provider agrees that if it shall make a demand for payment of additional amounts under this Section 3.2 the Borrower shall have the right to obtain a Replacement Liquidity Facility in replacement of this Agreement in accordance with Section 3.6(c) of the Intercreditor Agreement provided that such replacement would eliminate or reduce the obligation of the Borrower to pay such additional amounts. The Liquidity Provider will notify the Borrower of any event occurring after the date of this Agreement that will entitle the Liquidity Provider to compensation pursuant to this Section 3.2 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, which notice shall describe in reasonable detail the calculation of the amounts owed under this Section. Determinations by the Liquidity Provider for purposes of this Section 3.2 of the effect of any increase in the amount of capital required to be maintained by the Liquidity Provider and of the amount allocable to the Liquidity Provider's obligations to the Borrower hereunder shall be prima facie evidence of the amounts owed under this Section. Section 3.3 Payments Free of Deductions. All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction for or on account of; any present or future stamp or other taxes, levies, imposts, duties, charges, fees, deductions, withholdings, restrictions or conditions of any nature whatsoever now or hereafter imposed, levied, collected, withheld or assessed, excluding Excluded Taxes (such non-excluded taxes being referred to herein, collectively, as "Non-Excluded Tax" and, individually, as a "Non-Excluded Tax"). If any Non-Excluded Taxes are required to be withheld from any amounts payable to the Liquidity Provider under this Agreement, the amounts so payable to the Liquidity Provider shall be increased to the extent necessary to yield to the Liquidity Provider (after payment of all Non-Excluded Taxes and taxes imposed on the receipt of such increase) interest or any other such amounts payable under this Agreement at the rates or in the amounts specified in this Agreement. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Principal Office if making such change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider. The Liquidity Provider is duly organized and validly existing as a corporation under the laws of the State of Delaware. Section 3.4 Payments. The Borrower shall make or cause to be made each payment to the Liquidity Provider under this Agreement so as to cause the same to be received by the Liquidity Provider not later than 1:00 p.m. (New York City time) on the day when due. The Borrower shall make all such payments in lawful money of the United States of America to the Liquidity Provider in immediately available funds, by wire transfer to the account of AIG Matched Funding Corp. at Bank of New York, New York, CHIPS ABA 001, ABA 021000018, SWIFT IRVTUS3N, Ultimate Beneficiary Account # 8900416130/UID 376460, Reference: American Trans Air Pass Through Trust, Series 2002-1A. Section 3.5 Computations. All computations of interest based on the Base Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the LIBOR Rate shall be made on the basis of a year of 360 days, in each 14 case 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. Section 3.6 Payment on Non-Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and no additional interest shall be due as a result (and if so made, shall be deemed to have been made when due). If any payment in respect of interest on an Advance is so deferred to the next succeeding Business Day, such deferral shall not delay the commencement of the next Interest Period for such Advance or reduce the number of days for which interest will be payable on such Advance on the next interest payment date for such Advance. Section 3.7 Interest. (a) Subject to Section 2.9, the Borrower shall pay, or shall cause to be paid, without duplication, interest on (i) the unpaid principal amount of each Advance from and including the date of such Advance (or, in the case of an Applied Provider Advance, from and including the date on which the amount thereof was withdrawn from the Class A Cash Collateral Account to pay interest on the Class A Certificates) to but excluding the date such principal amount shall be paid in full (or, in the case of an Applied Provider Advance, the date on which the Class A Cash Collateral Account is fully replenished in respect of such Advance) and (ii) any other amount due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by law, installments of interest on Advances or any such other amount) which is not paid when due (whether at stated maturity, by acceleration or otherwise) from and including the due date thereof to but excluding the date such amount is paid in full, in each such case, at a fluctuating interest rate per annum for each day equal to the Applicable Liquidity Rate (as defined below) for such Advance or such other amount as in effect for such day, but in no event at a rate per annum greater than the maximum rate permitted by applicable law; provided, however, that, if at any time the otherwise applicable interest rate as set forth in this Section 3.7 shall exceed the maximum rate permitted by applicable law, then any subsequent reduction in such interest rate will not reduce the rate of interest payable pursuant to this Section 3.7 below the maximum rate permitted by applicable law until the total amount of interest accrued equals the amount of interest that would have accrued if such otherwise applicable interest rate as set forth in this Section 3.7 had at all times been in effect. (b) Each Advance (including, without limitation, each outstanding Unapplied Provider Advance) will be either a Base Rate Advance or a LIBOR Advance as provided in this Section. Each such Advance will be a Base Rate Advance for the period from the date of its borrowing to (but excluding) the third Business Day following the Liquidity Provider's receipt of the Notice of Borrowing for such Advance. Thereafter, such Advance shall be a LIBOR Advance; provided that the Borrower (at the direction of the Controlling Party, so long as the Liquidity Provider is not the Controlling Party) may (x) convert the Final Advance into a Base Rate Advance on the last day of an Interest Period for such Advance by giving the Liquidity Provider no less than four Business Days' prior written notice of such election or (y) elect to maintain the Final Advance as a Base Rate Advance by not requesting a conversion of the Final Advance to a LIBOR Advance under Clause (5) of the applicable Notice of Borrowing (or, if such Final Advance is deemed to have been made, without delivery of a Notice of Borrowing 15 pursuant to Section 2.6, by requesting, prior to 11:00 a.m. on the first Business Day immediately following the Borrower's receipt of the applicable Termination Notice, that such Final Advance not be converted from a Base Rate Advance to a LIBOR Advance). (c) Each LIBOR Advance shall bear interest during each Interest Period at a rate per annum equal to the LIBOR Rate for such Interest Period plus the Applicable Margin for such LIBOR Advance, payable in arrears on the last day of such Interest Period and, in the event of the payment of principal of such LIBOR Advance on a day other than such last day, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (d) Each Base Rate Advance shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin for such Base Rate Advance, payable in arrears on each Regular Distribution Date and, in the event of the payment of principal of such Base Rate Advance on a day other than a Regular Distribution Date, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). Each change in the Base Rate shall become effective immediately. (e) [intentionally omitted] (f) Each amount not paid when due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by applicable law, installments of interest on Advances but excluding Advances) shall bear interest at a rate per annum equal to the Base Rate plus 2.00% until paid. (g) The rates of interest specified in this Section 3.7 with respect to any Advance or other amount shall be referred to as the "Applicable Liquidity Rate". Section 3.8 Replacement of Borrower. From time to time and subject to the successor Borrower's meeting the eligibility requirements set forth in Section 6.9 of the Intercreditor Agreement applicable to the Subordination Agent upon the effective date and time specified in a written and completed Notice of Replacement Subordination Agent in substantially the form of Annex VI attached hereto (a "Notice of Replacement Subordination Agent") delivered to the Liquidity Provider by the then Borrower, the successor Borrower designated therein shall be substituted for as the Borrower for all purposes hereunder. Section 3.9 Funding Loss Indemnification. The Borrower shall pay to the Liquidity Provider, upon the request of the Liquidity Provider, such amount or amounts as shall be sufficient (in the reasonable opinion of the Liquidity Provider) to compensate it for any loss, cost, or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired by the Liquidity Provider to fund or maintain any LIBOR Advance (but excluding loss of anticipated profits) incurred as a result of: (a) Any repayment of a LIBOR Advance on a date other than the last day of the Interest Period for such Advance; or (b) Any failure by the Borrower to borrow a LIBOR Advance on the date for borrowing specified in the relevant notice under Section 2.2. 16 Section 3.10 Illegality. Notwithstanding any other provision in this Agreement, if any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Liquidity Provider (or its Principal Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for the Liquidity Provider (or its Principal Office) to maintain or fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity Provider, the outstanding principal amount of the LIBOR Advances shall be converted to Base Rate Advances (a) immediately upon demand of the Liquidity Provider, if such change or compliance with such request, in the judgment of the Liquidity Provider, requires immediate repayment; or (b) at the expiration of the last Interest Period to expire before the effective date of any such change or request. ARTICLE 4 CONDITIONS PRECEDENT Section 4.1 Conditions Precedent to Effectiveness of Section 2.1. Section 2.1 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied or waived: (a) The Liquidity Provider shall have received on or before the Closing Date each of the following, and in the case of each document delivered pursuant to paragraphs (i), (ii) and (iii), each in form and substance satisfactory to the Liquidity Provider: (i) this Agreement duly executed on behalf of the Borrower; (ii) the Intercreditor Agreement and the Delayed Funding Implementation Agreement duly executed on behalf of each of the parties thereto; (iii) fully executed copies of each of the Operative Agreements executed and delivered on or before the Closing Date (other than this Agreement and the Intercreditor Agreement) and each Guaranty (as defined in each Participation Agreement) entered into on or prior to the date hereof; (iv) a copy of the Private Placement Memorandum and a specimen copy of the Class A Certificate; (v) an executed copy of each document, instrument, certificate and opinion delivered on or before the Closing Date pursuant to the Class A Trust Agreement, the Intercreditor Agreement, the Participation Agreements and the other Operative Agreements entered into on or prior to the date hereof (in the case of each such opinion either addressed to the Liquidity Provider or accompanied by a letter from the counsel rendering such opinion to the effect that the Liquidity Provider is entitled to rely on such opinion as of its date as if it were addressed to the Liquidity Provider); 17 (vi) evidence that there shall have been made and shall be in full force and effect, all filings, recordings and/or registrations, and there shall have been given or taken any notice or other similar action as may be reasonably necessary or, to the extent reasonably requested by the Liquidity Provider, reasonably advisable, in order to establish, perfect, protect and preserve the right, title and interest, remedies, powers, privileges, liens and security interests of, or for the benefit of, the Trustees, the Borrower and the Liquidity Provider created by the Operative Agreements executed and delivered on or prior to the Closing Date; (vii) a letter from Amtran agreeing to provide to the Liquidity Provider the periodic financial reports referred to in Section 8.04 of the Trust Agreements and agreeing to cause the Company to deliver to the Liquidity Provider with respect to any Participation Agreement or Financing Agreement executed and delivered after the date hereof, the certificate referred to in Section 2(b) of the Note Purchase Agreement; and (viii) such other documents, instruments, opinions and approvals pertaining to the transactions contemplated hereby or by the other Operative Agreements as the Liquidity Provider shall have reasonably requested. (b) The following statement shall be true on and as of the Effective Date: no event has occurred and is continuing, or would result from the entering into of this Agreement or the making of any Advance, which constitutes a Liquidity Event of Default. (c) The Liquidity Provider shall have received payment in full of all fees and other sums required to be paid to or for the account of the Liquidity Provider on or prior to the Effective Date. (d) All conditions precedent to the issuance of the Certificates under the Trust Agreements shall have been satisfied or waived, and all conditions precedent to the purchase of the Certificates on the Closing Date under the Certificate Purchase Agreements shall have been satisfied (unless any of such conditions precedent shall have been waived by the respective purchasers thereunder). (e) The Borrower shall have received a certificate, dated the date hereof, signed by a duly authorized representative of the Liquidity Provider, certifying that all conditions precedent to the effectiveness of Section 2.1 have been satisfied or waived. Section 4.2 Conditions Precedent to Borrowing. The obligation of the Liquidity Provider to make an Advance on the occasion of each Borrowing shall be subject to the conditions precedent that the Effective Date shall have occurred and, prior to the date of such Borrowing, the Borrower shall have delivered a Notice of Borrowing which conforms to the terms and conditions of this Agreement and has been completed as may be required by the relevant form of the Notice of Borrowing for the type of Advances requested. 18 ARTICLE 5 COVENANTS Section 5.1 Affirmative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Maximum Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity Provider shall otherwise consent in writing: (1) Performance of This and Other Agreements. Punctually pay or cause to be paid all amounts payable by it under this Agreement and the other Operative Agreements and observe and perform in all material respects the conditions, covenants and requirements applicable to it contained in this Agreement and the other Operative Agreements. (2) Reporting Requirements. Furnish to the Liquidity Provider with reasonable promptness, such other information and data with respect to the transactions contemplated by the Operative Agreements as from time to time may be reasonably requested by the Liquidity Provider; and permit the Liquidity Provider, upon reasonable notice, to inspect the Borrower's books and records with respect to such transactions and to meet with officers and employees of the Borrower to discuss such transactions. (3) Certain Operative Agreements. Furnish to the Liquidity Provider with reasonable promptness, such Operative Agreements entered into after the date hereof as from time to time may be reasonably requested by the Liquidity Provider. Section 5.2 Negative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Maximum Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will not without the prior written consent of the Liquidity Provider: (a) Amendments. Modify, amend or supplement, or give any consent to any modification, amendment or supplement or make any waiver with respect to, any provision of any Operative Agreement that could reasonably have a negative impact on the Liquidity Provider, except for any supplemental agreement to the Trust Agreements provided for in Section 9.01 thereof and except as provided in the Delayed Funding Implementation Agreement. (b) Borrower. Appoint or permit or suffer to be appointed any successor Borrower without the prior written approval of the Liquidity Provider (which approval shall not be unreasonably withheld or delayed). 19 ARTICLE 6 LIQUIDITY EVENTS OF DEFAULT Section 6.1 Liquidity Events of Default. If (a) any Liquidity Event of Default has occurred and is continuing and (b) there is a Performing Note Deficiency, the Liquidity Provider may, in its discretion, deliver to the Borrower a Termination Notice, the effect of which shall be to cause (i) the obligation of the Liquidity Provider to make Advances hereunder to expire on the fifth Business Day after the date on which such Termination Notice is received by the Borrower, (ii) the Borrower to promptly request, and the Liquidity Provider to promptly make, a Final Advance in accordance with Section 2.2(d) hereof and Section 3.6(i) of the Intercreditor Agreement, (iii) all other outstanding Advances to be automatically converted into Final Advances for purposes of determining the Applicable Liquidity Rate for interest payable thereon, and (iv) subject to Sections 2.7 and 2.9 hereof, all Advances (including, without limitation, any Provider Advance and Applied Provider Advance), any accrued interest thereon and any other amounts outstanding hereunder to become immediately due and payable to the Liquidity Provider. ARTICLE 7 MISCELLANEOUS Section 7.1 Amendments, Etc. No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Liquidity Provider, and, in the case of an amendment or of a waiver by the Borrower, the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Notwithstanding any provision of this Agreement, upon and simultaneously with the issuance of the Additional Certificates, this Agreement shall be forthwith amended as provided for in the Delayed Funding Implementation Agreement, without any need for further action on the part of any party hereto and without any consent of any of the holders of the Certificates. Section 7.2 Notices, Etc. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telecopier and mailed or delivered or sent by telecopier): Borrower: WILMINGTON TRUST COMPANY Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telephone: (302) 651-1000 Telecopy: (302) 636 - 4140 20 Liquidity Provider: prior to April 7, 2002 AIG Matched Funding Corp. 100 Nyala Farm Westport, CT 06880 Attention: Chief Financial Officer Telecopy: (203) 222-4780 Reference: American Trans Air Pass Through Trust 2002-1A on or after April 7, 2002 AIG Matched Funding Corp. 50 Danbury Road Wilton, CT 06894-4444 Attention: Chief Financial Officer Telecopy: (203) 222-4780 Reference: American Trans Air Pass Through Trust 2002-1A or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to the others. All such notices and communications shall be effective (i) if given by telecopier, when transmitted to the telecopier number specified above, and (ii) if given by other means, when delivered at the address specified above, except that written notices to the Liquidity Provider pursuant to the provisions of Articles II and III hereof shall not be effective until received by the Liquidity Provider. A copy of all notices delivered hereunder to either party shall in addition be delivered to, each of the parties to the Participation Agreements at their respective addresses set forth therein. Section 7.3 No Waiver; Remedies. No failure on the part of the Liquidity Provider to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 7.4 Further Assurances. The Borrower agrees to do such further acts and things and to execute and deliver to the Liquidity Provider such additional assignments, agreements, powers and instruments as the Liquidity Provider may reasonably require or deem advisable to carry into effect the purposes of this Agreement and the other Operative Agreements or to better assure and confirm unto the Liquidity Provider its rights, powers and remedies hereunder and under the other Operative Agreements. Section 7.5 Indemnification; Survival of Certain Provisions. The Liquidity Provider shall be indemnified hereunder to the extent and in the manner described in Section 7 of the Participation Agreements for Owned Aircraft or Section 9 of the Participation Agreements 21 for Leased Aircraft and Section 6 of the Note Purchase Agreement. In addition, the Borrower agrees to indemnify, protect, defend and hold harmless the Liquidity Provider from, against and in respect of, and shall pay on demand, all Expenses of any kind or nature whatsoever (other than any Expenses of the nature described in Sections 3.1, 3.2 or 7.7 hereof or in the Fee Letter (regardless of whether indemnified against pursuant to said Sections or in such Fee Letter)), that may be imposed, incurred by or asserted against any Liquidity Indemnitee, in any way relating to, resulting from, or arising out of or in connection with any action, suit or proceeding by any third party against such Liquidity Indemnitee and relating to this Agreement, the Fee Letter, the Intercreditor Agreement or any Financing Agreement; provided, however, that the Borrower shall not be required to indemnify, protect, defend and hold harmless any Liquidity Indemnitee in respect of any Expense of such Liquidity Indemnitee to the extent such Expense is (i) attributable to the gross negligence or willful misconduct of such Liquidity Indemnitee or any other Liquidity Indemnitee, (ii) ordinary and usual operating overhead expense, or (iii) attributable to the failure by such Liquidity Indemnitee or any other Liquidity Indemnitee to perform or observe any agreement, covenant or condition on its part to be performed or observed in this Agreement, the Intercreditor Agreement, the Fee Letter or any other Operative Agreement to which it is a party. The indemnities contained in Section 7 of the Participation Agreements for Owned Aircraft or Section 9 of the Participation Agreements for Leased Aircraft, and the provisions of Sections 3.1, 3.2, 3.3, 3.9, 7.5 and 7.7 hereof, shall survive the termination of this Agreement. Section 7.6 Limitations on Liability. (1) Neither the Liquidity Provider nor any of its officers, employees, directors or Affiliates shall be liable or responsible for: (i) the use which may be made of the Advances or any acts or omissions of the Borrower or any beneficiary or transferee in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; or (iii) the making of Advances by the Liquidity Provider against delivery of a Notice of Borrowing and other documents which do not comply with the terms hereof; provided, however, that the Borrower shall have a claim against the Liquidity Provider, and the Liquidity Provider shall be liable to the Borrower, to the extent of any damages suffered by the Borrower which were the result of (A) the Liquidity Provider's willful misconduct or negligence in determining whether documents presented hereunder comply with the terms hereof, or (B) any breach by the Liquidity Provider of any of the terms of this Agreement, including, but not limited to, the Liquidity Provider's failure to make lawful payment hereunder after the delivery to it by the Borrower of a Notice of Borrowing strictly complying with the terms and conditions hereof. (2) Neither the Liquidity Provider nor any of its officers, employees, directors or Affiliates shall be liable or responsible in any respect for (i) any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with this Agreement or any Notice of Borrowing delivered hereunder, or (ii) any action, inaction or omission which may be taken by it in good faith, absent willful misconduct or negligence (in which event the extent of the Liquidity Provider's potential liability to the Borrower shall be limited as set forth in the immediately preceding paragraph), in connection with this Agreement or any Notice of Borrowing. 22 (3) Notwithstanding anything contained herein to the contrary, it is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Wilmington Trust Company, not individually or personally but solely as Subordination Agent in the exercise of the powers and authority conferred and vested in it under the Intercreditor Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Subordination Agent is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose for binding only the Subordination Agent as Borrower and (c) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Borrower or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Borrower under this Agreement or the other related documents. Section 7.7 Costs, Expenses and Taxes. The Borrower agrees to pay, or cause to be paid (A) on the Effective Date and on such later date or dates on which the Liquidity Provider shall make demand, all reasonable out-of-pocket costs and expenses (including, without limitation, the reasonable fees and expenses of outside counsel for the Liquidity Provider) of the Liquidity Provider in connection with the preparation, negotiation, execution, delivery, filing and recording of this Agreement, any other Operative Agreement and any other documents which may be delivered in connection with this Agreement and (B) on demand, all reasonable costs and expenses (including reasonable counsel fees and expenses) of the Liquidity Provider in connection with (i) the enforcement of this Agreement or any other Operative Agreement, (ii) the modification or amendment of, or supplement to, this Agreement or any other Operative Agreement or such other documents which may be delivered in connection herewith or therewith (whether or not the same shall become effective) or (iii) any action or proceeding relating to any order, injunction, or other process or decree restraining or seeking to restrain the Liquidity Provider from paying any amount under this Agreement, the Intercreditor Agreement or any other Operative Agreement or otherwise affecting the application of funds in the Class A Cash Collateral Account. In addition, the Borrower shall pay any and all recording, stamp and other similar taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, any other Operative Agreement and such other documents, and agrees to save the Liquidity Provider harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees. Section 7.8 Binding Effect; Participations. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower and the Liquidity Provider and their respective successors and assigns, except that neither the Liquidity Provider (except as otherwise provided in this Section 7.8) nor (except as contemplated by Section 3.8) the Borrower shall have the right to assign its rights or obligations hereunder or any interest herein without the prior written consent of the other party, subject to the requirements of Section 7.8(b). Notwithstanding anything to the contrary contained herein, at any time, the Liquidity Provider may, at its option, arrange for a Replacement Liquidity Facility to replace this Liquidity Facility in accordance with Section 3.6(e) of the Intercreditor Agreement; provided that such replacement will not result in any increased costs payable by the Trust. The Liquidity Provider may grant participations herein or in any of its rights hereunder 23 (including, without limitation, funded participations and participations in rights to receive interest payments hereunder) and under the other Operative Agreements to such Persons (other than ATA or its Affiliates) as the Liquidity Provider may in its sole discretion select, subject to the requirements of Section 7.8(b). No such participation by the Liquidity Provider, however, will relieve the Liquidity Provider of its obligations hereunder. In connection with any participation or any proposed participation, the Liquidity Provider may disclose to the participant or the proposed participant any information that the Borrower is required to deliver or to disclose to the Liquidity Provider pursuant to this Agreement. The Borrower acknowledges and agrees that the Liquidity Provider's source of funds may derive in part from its participants (other than ATA or its Affiliates). Accordingly, references in this Agreement and the other Operative Agreements to determinations, reserve and capital adequacy requirements, increased costs, reduced receipts, additional amounts due pursuant to Section 3.3 and the like as they pertain to the Liquidity Provider shall be deemed also to include those of each of its participants (subject, in each case, to the maximum amount that would have been incurred by or attributable to the Liquidity Provider directly if the Liquidity Provider, rather than the participant, had held the interest participated). (b) If, pursuant to subsection (a) above, the Liquidity Provider sells any participation in this Agreement to any bank or other entity (each, a "Transferee"), then, concurrently with the effectiveness of such participation, the Transferee shall (i) represent to the Liquidity Provider (for the benefit of the Liquidity Provider and the Borrower) either (A) that it is incorporated under the laws of the United States or a state thereof or (B) that under applicable law and treaties, no taxes will be required to be withheld with respect to any payments to be made to such Transferee in respect of this Agreement, (ii) furnish to the Liquidity Provider and the Borrower either (x) a statement that it is incorporated under the laws of the United States or a state thereof or (y) if it is not so incorporated, two copies of a properly completed United States Internal Revenue Service Form W-8ECI or Form W-8BEN, as appropriate, or other applicable form, certificate or document prescribed by the Internal Revenue Service certifying, in each case, such Transferee's entitlement to a complete exemption from United States federal withholding tax with respect to any and all payments to be made hereunder, and (iii) agree (for the benefit of the Liquidity Provider and the Borrower) to provide the Liquidity Provider and the Borrower a new Form W-8ECI or Form W-8BEN, as appropriate, (A) on or before the date that any such form expires or becomes obsolete or (B) after the occurrence of any event requiring a change in the most recent form previously delivered by it and prior to the immediately following due date of any payment by the Borrower hereunder, certifying in the case of a Form W-8BEN or Form W-8ECI that such Transferee is entitled to a complete exemption from United States federal withholding tax on payments under this Agreement. Unless the Borrower has received forms or other documents reasonably satisfactory to it (and required by applicable law) indicating that payments hereunder are not subject to United States federal withholding tax, the Borrower will withhold taxes as required by law from such payments at the applicable statutory rate. (c) Notwithstanding the other provisions of this Section 7.8, the Liquidity Provider may assign and pledge all or any portion of the Advances owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Advances made by the Borrower to the Liquidity Provider in accordance with the terms of this Agreement shall 24 satisfy the Borrower's obligations hereunder in respect of such assigned Advance to the extent of such payment. No such assignment shall release the Liquidity Provider from its obligations hereunder. Section 7.9 Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. Section 7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity. (a) Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement, or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to each party hereto at its address set forth in Section 7.2 hereof, or at such other address of which the Liquidity Provider shall have been notified pursuant thereto; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (b) THE BORROWER AND THE LIQUIDITY PROVIDER EACH HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including, without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. The Borrower and the Liquidity Provider each warrant and represent that it has reviewed this waiver with its legal counsel, and that it 25 knowingly and voluntarily waives its jury trial rights following consultation with such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. Section 7.12 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. Section 7.13 Entirety. This Agreement, the Intercreditor Agreement and the other Operative Agreements to which the Liquidity Provider is a party constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior understandings and agreements of such parties. Section 7.14 Headings. 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. Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. * * * 26 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first set forth above. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class A Trust, as Borrower By: -------------------------------- Name: Title: AIG MATCHED FUNDING CORP., as Liquidity Provider By: -------------------------------- Name: Title: 27 Annex I to Revolving Credit Agreement INTEREST ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to AIG Matched Funding Corp. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (2002-1A) dated as of March 28, 2002, between the Borrower and the Liquidity Provider (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of an Interest Advance by the Liquidity Provider to be used for the payment of the interest on the Class A Certificates which was payable on _______________________________ (the "Distribution Date") in accordance with the terms and provisions of the Class A Trust Agreement and the Class A Certificates, which Advance is requested to be made on ________________. (3) The amount of the Interest Advance requested hereby (i) is $_______ , to be applied in respect of the payment of the interest which was due and payable on the Class A Certificates on the Distribution Date, (ii) does not include any amount with respect to the payment of principal of, or premium on, the Class A Certificates, or principal of, or interest or premium on the Class B Certificates, (iii) was computed in accordance with the provisions of the Class A Certificates, the Class A Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), (iv) does not exceed the Maximum Available Commitment on the date hereof, (v) does not include any amount of interest which was due and payable on the Class A Certificates on such Distribution Date but which remains unpaid due to the failure of the Depositary to pay any amount of accrued interest on the Deposits on such Distribution Date and (vi) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will apply the same in accordance with the terms of Section 3.6(b) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, the making of the Interest Advance as requested by this Notice of Borrowing shall automatically reduce, subject to reinstatement in accordance with the terms of the Liquidity Agreement, the Maximum Available Commitment by an amount equal to the amount of the Interest Advance requested to be made hereby as set forth in clause (i) of paragraph (3) of this Certificate and such reduction shall automatically result in corresponding reductions in the amounts available to be borrowed pursuant to a subsequent Advance. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the ____day of _______________. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: -------------------------------- Name: Title: 2 SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Interest Advance Notice of Borrowing] Annex II Revolving Credit Agreement NON-EXTENSION ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to AIG Matched Funding Corp. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (2002-1A) dated as of March 28, 2002, between the Borrower and the Liquidity Provider (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Non-Extension Advance by the Liquidity Provider to be used for the funding of the Class A Cash Collateral Account in accordance with Section 3.6(d) of the Intercreditor Agreement, which Advance is requested to be made on ____________. (3) The amount of the Non-Extension Advance requested hereby (i) is $____________ , which equals the Maximum Available Commitment on the date hereof and is to be applied in respect of the funding of the Class A Cash Collateral Account in accordance with Section 3.6(d) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class A Certificates, or principal of, or interest or premium on the Class B Certificates, (iii) was computed in accordance with the provisions of the Class A Certificates, the Class A Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class A Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(d) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Non-Extension Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Non-Extension Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the _________ day of _______________, _____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: -------------------------------- Name: Title: 2 SCHEDULE I TO NON-EXTENSION ADVANCE NOTICE OF BORROWING [Insert Copy of computations in accordance with Non-Extension Advance Notice of Borrowing] Annex III to Revolving Credit Agreement DOWNGRADE ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to AIG Matched Funding Corp. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (2002-1A) dated as of March 28, 2002, between the Borrower and the Liquidity Provider (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Downgrade Advance by the Liquidity Provider to be used for the funding of the Class A Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement by reason of (i) the downgrading of the short-term debt rating of the Liquidity Provider issued by Moody's below the applicable Threshold Rating or (ii) the occurrence of a Class A Guarantee Event, which Advance is requested to be made on ___________, _________. (3) The amount of the Downgrade Advance requested hereby (i) is $_______, which equals the Maximum Available Commitment on the date hereof and is to be applied in respect of the funding of the Class A Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class A Certificates, or principal of, or interest or premium on the Class B Certificates, (iii) was computed in accordance with the provisions of the Class A Certificates, the Class A Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class A Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(c) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Downgrade Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Downgrade Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the ___ day of __________________, _______. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: -------------------------------- Name: Title: 2 SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING [Insert Copy of computations in accordance with Downgrade Advance Notice of Borrowing] Annex IV to Revolving Credit Agreement FINAL ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to AIG Matched Funding Corp. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (2002-1A) dated as of March 28, 2002, between the Borrower and the Liquidity Provider (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Final Advance by the Liquidity Provider to be used for the funding of the Class A Cash Collateral Account in accordance with Section 3.6(i) of the Intercreditor Agreement by reason of the receipt by the Borrower of a Termination Notice from the Liquidity Provider with respect to the Liquidity Agreement, which Advance is requested to be made on __________________, _________. (3) The amount of the Final Advance requested hereby (i) is $___________, which equals the Maximum Available Commitment on the date hereof and is to be applied in respect of the funding of the Class A Cash Collateral Account in accordance with Section 3.6(i) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of principal of, or premium on, the Class A Certificates, or principal of, or interest or premium on the Class B Certificates, (iii) was computed in accordance with the provisions of the Class A Certificates, the Class A Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class a Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(i) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance [and that such Base Rate Advance be converted into a LIBOR Advance on the third Business Day following your receipt of this notice].* - --------------------- * Bracketed language is optional. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Final Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Final Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. * * * 2 IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the ___day of ________________, _______. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: -------------------------------- Name: Title: 3 SCHEDULE I TO FINAL ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Final Advance Notice of Borrowing] Annex V to Revolving Credit Agreement NOTICE OF TERMINATION [Date] Wilmington Trust Company, as Subordination Agent, as Borrower Rodney Square North 1100 North Market Square Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: Revolving Credit Agreement dated as of March 28, 2002, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the American Trans Air Pass Through Trust, Series 2002-1A, as Borrower, and AIG Matched Funding Corp. (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Liquidity Agreement") Ladies and Gentlemen: You are hereby notified that pursuant to Section 6.1 of the Liquidity Agreement, by reason of the occurrence of a Liquidity Event of Default and the existence of a Performing Note Deficiency (each as defined therein), we are giving this notice to you in order to cause (i) our obligations to make Advances (as defined therein) under such Liquidity Agreement to terminate on the fifth Business Day after the date on which you receive this notice and (ii) you to request a Final Advance under the Liquidity Agreement pursuant to Section 3.6(i) of the Intercreditor Agreement (as defined in the Liquidity Agreement) as a consequence of your receipt of this notice. THIS NOTICE IS THE "NOTICE OF TERMINATION" PROVIDED FOR UNDER THE LIQUIDITY AGREEMENT. OUR OBLIGATIONS TO MAKE ADVANCES UNDER THE LIQUIDITY AGREEMENT WILL TERMINATE ON THE FIFTH BUSINESS DAY AFTER THE DATE ON WHICH YOU RECEIVE THIS NOTICE. Very truly yours, AIG Matched Funding Corp., as Liquidity Provider By: -------------------------------- Name: Title: cc: Wilmington Trust Company, as Class A Trustee 2 Annex VI to Revolving Credit Agreement NOTICE OF REPLACEMENT SUBORDINATION AGENT [Date] Attention: Revolving Credit Agreement dated as of March 28, 2002, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the American Trans Air Pass Through Trust, 2002-1A, as Borrower, and AIG Matched Funding Corp. (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Liquidity Agreement") Ladies and Gentlemen: For value received, the undersigned beneficiary hereby irrevocably transfers to: ----------------------- (Name of Transferee) ----------------------- (Name of Transferee) all rights and obligations of the undersigned as Borrower under the Liquidity Agreement referred to above. The transferee has succeeded the undersigned as Subordination Agent under the Intercreditor Agreement referred to in the first paragraph of the Liquidity Agreement, pursuant to the terms of Section 8.1 of the Intercreditor Agreement. By this transfer, all rights of the undersigned as Borrower under the Liquidity Agreement are transferred to the transferee and the transferee shall hereafter have the sole rights and obligations as Borrower thereunder. The undersigned shall pay any costs and expenses of such transfer, including, but not limited to, transfer taxes or governmental charges. We ask that this transfer be effective as of _________________, ______. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: -------------------------------- Name: Title: 2 Exhibit A to Revolving Credit Agreement FORM OF CLASS A GUARANTEE AGREEMENT EX-4.8 8 file007.txt REVOLVING CREDIT AGREEMENT EXECUTION COPY - -------------------------------------------------------------------------------- REVOLVING CREDIT AGREEMENT (2002-1B) Dated as of March 28, 2002 between WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the American Trans Air 2002-1B Pass Through Trust as Borrower and AIG MATCHED FUNDING CORP. as Liquidity Provider Relating to American Trans Air 2002-1B Pass Through Trust, Series 2002-1B 10.699% American Trans Air Pass Through Certificates, Series 2002-1B - -------------------------------------------------------------------------------- Table of Contents
Page ---- Article 1 DEFINITIONS..............................................................................1 Section 1.1 Certain Defined Terms..........................................................1 Article 2 AMOUNT AND TERMS OF THE COMMITMENT.......................................................7 Section 2.1 The Advances...................................................................7 Section 2.2 Making the Advances............................................................7 Section 2.3 Fees...........................................................................9 Section 2.4 Adjustments or Termination of the Maximum Commitment...........................9 Section 2.5 Repayments of Interest Advances or the Final Advance..........................10 Section 2.6 Repayments of Provider Advances...............................................10 Section 2.7 Payments to the Liquidity Provider Under the Intercreditor Agreement..........11 Section 2.8 Book Entries..................................................................11 Section 2.9 Payments from Available Funds Only............................................11 Section 2.10 Non-Extension Advance........................................................12 Article 3 OBLIGATIONS OF THE BORROWER.............................................................12 Section 3.1 Increased Costs...............................................................12 Section 3.2 Capital Adequacy..............................................................13 Section 3.3 Payments Free of Deductions...................................................14 Section 3.4 Payments......................................................................14 Section 3.5 Computations..................................................................14 Section 3.6 Payment on Non-Business Days..................................................15 Section 3.7 Interest......................................................................15 Section 3.8 Replacement of Borrower.......................................................16 Section 3.9 Funding Loss Indemnification..................................................16 Section 3.10 Illegality...................................................................17 Article 4 CONDITIONS PRECEDENT....................................................................17 Section 4.1 Conditions Precedent to Effectiveness of Section 2.1..........................17 Section 4.2 Conditions Precedent to Borrowing.............................................18 Article 5 COVENANTS...............................................................................19 Section 5.1 Affirmative Covenants of the Borrower.........................................19 Section 5.2 Negative Covenants of the Borrower............................................19 Article 6 LIQUIDITY EVENTS OF DEFAULT.............................................................20 Section 6.1 Liquidity Events of Default...................................................20 Article 7 MISCELLANEOUS...........................................................................20 Section 7.1 Amendments, Etc...............................................................20 Section 7.2 Notices, Etc..................................................................20 Section 7.3 No Waiver; Remedies...........................................................21
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Section 7.4 Further Assurances............................................................21 Section 7.5 Indemnification; Survival of Certain Provisions...............................21 Section 7.6 Limitations on Liability......................................................22 Section 7.7 Costs, Expenses and Taxes.....................................................23 Section 7.8 Binding Effect; Participations................................................23 Section 7.9 Severability..................................................................25 Section 7.10 GOVERNING LAW................................................................25 Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity.........25 Section 7.12 Execution in Counterparts....................................................26 Section 7.13 Entirety.....................................................................26 Section 7.14 Headings.....................................................................26 Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES.............................26 ANNEX I Interest Advance Notice of Borrowing ANNEX II Non-Extension Advance Notice of Borrowing ANNEX III Downgrade Advance Notice of Borrowing ANNEX IV Final Advance Notice of Borrowing ANNEX V Notice of Termination ANNEX VI Notice of Replacement Subordination Agent EXHIBIT A Form of Class B Guarantee Agreement
ii REVOLVING CREDIT AGREEMENT (2002-1B) This REVOLVING CREDIT AGREEMENT dated as of March 28, 2002, between WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity but solely as Subordination Agent under the Intercreditor Agreement (each as defined below), as agent and trustee for the Class B Trust (as defined below) (the "Borrower"), and AIG MATCHED FUNDING CORP., a Delaware Corporation ("AIG" or the "Liquidity Provider"). W I T N E S S E T H: -------------------- WHEREAS, pursuant to the Class B Trust Agreement (such term and all other capitalized terms used in these recitals having the meanings set forth or referred to in Section 1.1), the Class B Trust is issuing the Class B Certificates; WHEREAS, the Borrower, in order to support the timely payment of a portion of the interest on the Class B Certificates in accordance with their terms, has requested the Liquidity Provider to enter into this Agreement, providing in part for the Borrower to request in specified circumstances that Advances be made hereunder; WHEREAS, the Company, the Subordination Agent, the Escrow Agent, the Liquidity Provider, the Depositary and certain other parties concurrently herewith are entering into a Delayed Funding Implementation Agreement, dated as of the date hereof pursuant to which the parties agree to supplement and modify the Operative Agreements; and WHEREAS, the Liquidity Provider has requested American International Group, Inc. (the "LP Guarantor") to execute a guarantee in the form in Exhibit A hereto providing for the full and unconditional guarantee of the Liquidity Provider's payment obligations under this Agreement (the "Class B Guarantee Agreement"). NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Section 1.1 Certain Defined Terms. (a) Definitions. As used in this Agreement and unless otherwise expressly indicated, or unless the context clearly requires otherwise, the following capitalized terms shall have the following respective meanings for all purposes of this Agreement: "Additional Certificates" has the meaning assigned to such term in the Delayed Funding Implementation Agreement. "Additional Cost" has the meaning assigned to such term in Section 3.1. "Advance" means an Interest Advance, a Final Advance, a Provider Advance or an Applied Provider Advance, as the case may be. "Applicable Liquidity Rate" has the meaning assigned to such term in Section 3.7(g). "Applicable Margin" means (x) with respect to any Unpaid Advance or Applied Provider Advance, 2.25%, or (y) with respect to any Unapplied Provider Advance, 0.65 %. "Applied Downgrade Advance" has the meaning assigned to such term in Section 2.6(a). "Applied Non-Extension Advance" has the meaning assigned to such term in Section 2.6(a). "Applied Provider Advance" has the meaning assigned to such term in Section 2.6(a). "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall on any day be equal to (a) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Liquidity Provider from three Federal funds brokers of recognized standing selected by it, plus (b) one-quarter of one percent (1/4 of 1%). "Base Rate Advance" means an Advance that bears interest at a rate based upon the Base Rate. "Borrower" has the meaning assigned to such term in the recital of parties to this Agreement. "Borrowing" means the making of Advances requested by delivery of a Notice of Borrowing. "Business Day" means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in Indianapolis, Indiana, or New York, New York, or, so long as any Class B Certificate is outstanding, the city and state in which the Class B Trustee, the Borrower or any Loan Trustee maintains its Corporate Trust Office or receives or disburses funds, and, if the applicable Business Day relates to any Advance or other amount bearing interest based on the LIBOR Rate, on which dealings are carried on in the London interbank market. 2 "Certificate Purchase Agreement" means the two Certificate Purchase Agreements, each dated March 26, 2002 among the Company and Amtran and Nyala Funding LLC or PK AirFinance US, Inc., respectively, relating to the purchase of the Class A Certificates and the Class B Certificates, respectively, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class B Guarantee Agreement" has the meaning assigned to such term in the recital of parties to this Agreement. "Class B Guarantee Event" has the meaning assigned to such term in Section 2.02(c). "Deposits" has the meaning assigned to such term in the Deposit Agreement. "Depositary" means IntesaBCI, S.p.A., acting through its New York Branch. "Deposit Agreement" means, prior to the Delayed Funding Date (as defined in the Delayed Funding Implementation Agreement), the Deposit Agreement (Class B) dated March 28, 2002 between Wells Fargo Bank Northwest N.A., as Escrow Agent and IntesaBCI, S.p.A., acting through its New York Branch, as Depositary, pertaining to the Class B Certificates, and on and after the Delayed Funding Date, such Deposit Agreement (to the extent of any payment to be made by the Depositary thereunder on or after the Delayed Funding Date) and the Delayed Deposit Agreement (Class B) dated March 28, 2002 between Wells Fargo Bank Northwest N.A., as Escrow Agent and IntesaBCI, S.p.A., New York Branch, as Depositary, in each case, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Downgrade Advance" means an Advance made pursuant to Section 2.2(c). "Effective Date" has the meaning specified in Section 4.1. The delivery of the certificate of the Liquidity Provider contemplated by Section 4.1 (e) shall be conclusive evidence that the Effective Date has occurred. "Excluded Taxes" means (i) Taxes imposed on the overall net income of the Liquidity Provider or of its Principal Office, and (ii) Excluded Withholding Taxes. "Excluded Withholding Taxes" means (i) withholding Taxes imposed by the United States except to the extent that such United States withholding Taxes are imposed as a result of any change in applicable law after the date hereof (excluding from change in applicable law for this purpose a change in an applicable treaty or other change in law affecting the applicability of a treaty), or in the case of a successor Liquidity Provider (including a transferee of an Advance) or Principal Office, after the date on which such successor Liquidity Provider obtains its interest or on which the Principal Office is changed, and (ii) any withholding Taxes imposed by the United States which are imposed or increased as a result of the Liquidity Provider failing to deliver to the Borrower any certificate or document (which certificate or document in the good faith judgment of the Liquidity Provider it is legally entitled to provide) which is reasonably requested by the Borrower to establish that payments under this Agreement are exempt from (or entitled to a reduced rate of) withholding Tax. 3 "Expenses" means liabilities, obligations, damages, settlements, penalties, claims, actions, suits, costs, expenses and disbursements (including, without limitation, reasonable fees and disbursements of legal counsel and costs of investigation), provided that Expenses shall not include any Taxes. "Expiry Date" means December 5, 2014. "Final Advance" means an Advance made pursuant to Sections 2.2(d) and 6.1. "Intercreditor Agreement" means the Intercreditor Agreement dated the date hereof, among the Trustees, the Liquidity Provider, the liquidity provider under each Liquidity Facility (other than this Agreement) and the Subordination Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Interest Advance" means an Advance made pursuant to Section 2.2(a). "Interest Period" means, with respect to any LIBOR Advance, each of the following periods: (i) the period beginning on the third Business Day following either (x) the Liquidity Provider's receipt of the Notice of Borrowing for such LIBOR Advance or (y) the withdrawal of funds from the Class B Cash Collateral Account for the purpose of paying interest on the Class B Certificates as contemplated by Section 2.6(a) hereof and, in either case, ending on the next Regular Distribution Date; and (ii) each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on but excluding the next Regular Distribution Date. "LIBOR Advance" means an Advance bearing interest at a rate based upon the LIBOR Rate. "LIBOR Rate" means, with respect to any Interest Period, (i) the rate per annum appearing on display page 3750 (British Bankers Association - LIBOR) of the Dow Jones Markets Service (or any successor or substitute therefor) at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period, or (ii) if the rate calculated pursuant to clause (i) above is not available, the average (rounded upwards, if necessary, to the next higher 1/16 of 1%) of the rates per annum at which deposits in dollars are offered for the relevant Interest Period by three banks of recognized standing selected by the Liquidity Provider in the London interbank market at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the LIBOR Advance to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Liquidity Event of Default" means the occurrence of either (a) the Acceleration of all of the Equipment Notes or (b) an ATA Bankruptcy Event. 4 "Liquidity Indemnitee" means (i) the Liquidity Provider, (ii) the LP Guarantor, (iii) each Affiliate of the Liquidity Provider, (iv) the respective directors, officers, employees and agents of the Liquidity Provider, the LP Guarantor and their Affiliates, and (v) the successors and permitted assigns of the persons described in clauses (i) to (iv), inclusive. "Liquidity Provider" shall mean AIG Matched Funding Corp., a Delaware corporation, and its successors and permitted assigns. "LP Guarantor" has the meaning assigned to such term in the recital of parties to this Agreement. "Maximum Available Commitment" shall mean, subject to the proviso contained in the third sentence of Section 2.2(a), at any time of determination, (a) the Maximum Commitment at such time less (b) the aggregate amount of each Interest Advance outstanding at such time; provided that following a Provider Advance or a Final Advance, the Maximum Available Commitment shall be zero. "Maximum Commitment" means, for any day, the lesser of (x) $5,229,541 and (y) the Required Amount on such day, provided that if a Downgrade Advance is made prior to the Delayed Funding Date (as defined in the Delayed Funding Implementation Agreement), for the purpose of determining the amount of such Downgrade Advance only, the Maximum Commitment shall be $9,662,940. "Non-Excluded Taxes" has the meaning specified in Section 3.3. "Non-Extension Advance" `means an Advance made pursuant to Section 2.2(b). "Notice of Borrowing" has the meaning specified in Section 2.2(e). "Notice of Replacement Subordination Agent" has the meaning specified in Section 3.8. "Private Placement Memorandum" means the Private Placement Memorandum dated March 26, 2002 of ATA and Amtran relating to the Certificates, as such Private Placement Memorandum may be amended or supplemented. "Performing Note Deficiency" means any time that less than 65% of the then aggregate outstanding principal amount of all Equipment Notes are Performing Equipment Notes. "Principal Office" means the principal office of the Liquidity Provider presently located in Westport, Connecticut, or such other principal office as the Liquidity Provider from time to time shall notify the Borrower as its principal office hereunder; provided that the Liquidity Provider shall not change its Principal Office to a Principal Office outside the United States of America except in accordance with Section 3.1, 3.2 or 3.3 hereof. "Provider Advance" means a Downgrade Advance or a Non-Extension Advance. 5 "Regulatory Change" has the meaning assigned to such term in Section 3.1. "Replenishment Amount" has the meaning assigned to such term in Section 2.6(b). "Required Amount" means, for any day, the sum of the aggregate amount of interest, calculated at the rate per annum equal to the Stated Interest Rate for the Class B Certificates, that would be payable on the Class B Certificates on each of the six successive quarterly Regular Distribution Dates immediately following such day or, if such day is a Regular Distribution Date, on such day and the succeeding five quarterly Regular Distribution Dates, in each case calculated on the basis of the Pool Balance of the Class B Certificates on such day and without regard to expected future payments of principal on the Class B Certificates. "Termination Date" means the earliest to occur of the following: (i) the Expiry Date; (ii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that all of the Class B Certificates have been paid in full (or provision has been made for such payment in accordance with the Intercreditor Agreement and the Trust Agreements) or are otherwise no longer entitled to the benefits of this Agreement; (iii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that a Replacement Liquidity Facility has been substituted for this Agreement in full pursuant to Section 3.6(e) of the Intercreditor Agreement; (iv) the fifth Business Day following the receipt by the Borrower of a Termination Notice from the Liquidity Provider pursuant to Section 6.1 hereof; and (v) the date on which no Advance is or may (including by reason of reinstatement as herein provided) become available for a Borrowing hereunder. "Termination Notice" means the Notice of Termination substantially in the form of Annex V to this Agreement. "Transferee" has the meaning assigned to such term in Section 7.8(b). "Unapplied Downgrade Advance" means any Downgrade Advance other than an Applied Downgrade Advance. "Unapplied Provider Advance" means any Provider Advance other than an Applied Provider Advance. "Unpaid Advance" has the meaning assigned to such term in Section 2.5. (b) Terms Defined in the Intercreditor Agreement. For all purposes of this Agreement, the following terms shall have the respective meanings assigned to such terms in the Intercreditor Agreement: "Acceleration,", "Affiliate", "Amtran", "ATA", "ATA Bankruptcy Event", "Certificates", "Class A Certificates", "Class B Cash Collateral Account", "Class B Certificates", "Class B Trust", "Class B Trust Agreement", "Class B Trustee", "Closing Date", "Controlling Party", "Corporate Trust Office", "Delayed Funding Implementation Agreement", "Downgraded Facility", "Equipment Notes", "Escrow Agent", "Escrow and 6 Paying Agent Agreement", "Fee Letter", "Final Legal Distribution Date", "Financing Agreement", "Indenture", "Liquidity Facility", "Liquidity Obligations", "Loan Trustee", "Moody's", "Non-Extended Facility", "Note Purchase Agreement", "Operative Agreements", "Participation Agreement", "Performing Equipment Note", "Person", "Pool Balance", "Regular Distribution Date", "Replacement Liquidity Facility", "Responsible Officer", "Standard & Poor's", "Scheduled Payment", "Series B Equipment Notes", "Special Payment", "Stated Interest Rate", "Subordination Agent", "Taxes", "Threshold Rating", "Trust", "Trust Agreements" and "Trustee". (c) Interpretation. Each Scheduled Payment with respect to the Class B Certificates shall be deemed to be comprised of interest and principal components, with the interest component equaling interest accrued at the Stated Interest Rate for the Class B Certificates from (i) the later of (x) the date of the issuance thereof and (y) the most recent but preceding Regular Distribution Date to (ii) the Regular Distribution Date on which such Scheduled Payment is being made, such interest to be considered payable in arrears on such Regular Distribution Date and to be calculated and allocated in the same manner as interest on the Series B Equipment Notes. ARTICLE 2 AMOUNT AND TERMS OF THE COMMITMENT Section 2.1 The Advances. The Liquidity Provider hereby irrevocably agrees, on the terms and conditions hereinafter set forth, to make Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until 12:00 noon (New York City time) on the Expiry Date (unless the obligations of the Liquidity Provider shall be earlier terminated in accordance with the terms of Section 2.4(b)) in an aggregate amount at any time outstanding not to exceed the Maximum Commitment. Section 2.2 Making the Advances. (a) Interest Advances shall be made in one or more Borrowings by delivery to the Liquidity Provider of one or more written and completed Notices of Borrowing in substantially the form of Annex I attached hereto, signed by a Responsible Officer of the Borrower, in an amount not exceeding the Maximum Available Commitment at such time and shall be used solely for the payment when due of the interest on the Class B Certificates at the Stated Interest Rate therefor in accordance with Section 3.6(a) of the Intercreditor Agreement. Each Interest Advance made hereunder shall automatically reduce the Maximum Available Commitment and the amount available to be borrowed hereunder by subsequent Advances by the amount of such Interest Advance (subject to reinstatement as provided in the next sentence). Upon repayment to the Liquidity Provider of all or any part of the amount of any Interest Advance made pursuant to this Section 2.2(a), together with accrued interest thereon (as provided herein), the Maximum Available Commitment shall be reinstated by the amount of such repaid Interest Advance, but not to exceed the Maximum Commitment; provided, however, that the Maximum Available Commitment shall not be so reinstated at any time if (i) a Liquidity 7 Event of Default shall have occurred and be continuing and (ii) there is a Performing Note Deficiency. (b) A Non-Extension Advance shall be made in a single Borrowing if the Liquidity Provider gives notice of termination of this Agreement pursuant to Section 2.10 of this Agreement and Section 3.6(d) of the Intercreditor Agreement (unless a Replacement Liquidity Facility to replace this Agreement shall have been previously delivered to the Borrower in accordance with said Section 3.6(d)) by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex II attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Maximum Available Commitment at such time, and shall be used to fund the Class B Cash Collateral Account in accordance with said Section 3.6(d) and Section 3.6(f) of the Intercreditor Agreement. (c) A Downgrade Advance shall be made in a single Borrowing upon (i) a downgrading of the Liquidity Provider's short-term debt rating issued by Moody's below the applicable Threshold Rating or (ii) upon a downgrading of the LP Guarantor's short term debt rating issued by Standard & Poor's below the applicable Threshold Rating or if the Class B Guarantee Agreement ceases to be in full force and effect, becomes invalid or unenforceable or the LP Guarantor denies its liability thereunder (any such occurrence described in clause (ii), a "Class B Guarantee Event") unless a Replacement Liquidity Facility to replace this Agreement shall have been previously delivered to the Borrower in accordance with Section 3.6(c) of the Intercreditor Agreement, by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex III attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Maximum Available Commitment at such time, and shall be used to fund the Class B Cash Collateral Account in accordance with said Section 3.6(c) and Section 3.6(f) of the Intercreditor Agreement. (d) A Final Advance shall be made in a single Borrowing upon the receipt by the Borrower of a Termination Notice from the Liquidity Provider pursuant to Section 6.1 hereof by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex IV attached hereto, signed by a Responsible Officer of the Borrower, in an amount equal to the Maximum Available Commitment at such time, and shall be used to fund the Class B Cash Collateral Account (in accordance with Sections 3.6(f) and 3.6(i) of the Intercreditor Agreement). (e) Each Borrowing shall be made on notice in writing (a "Notice of Borrowing") in substantially the form required by Section 2.2(a), 2.2(b), 2.2(c) or 2.2(d), as the case may be, given by the Borrower to the Liquidity Provider. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing no later than 1:00 p.m. (New York City time) on a Business Day, upon satisfaction of the conditions precedent set forth in Section 4.2 with respect to a requested Borrowing, the Liquidity Provider shall make available to the Borrower, in accordance with its payment instructions, the amount of such Borrowing in U.S. dollars and immediately available funds, before 4:00 p.m. (New York City time) on such Business Day or on such later Business Day specified in such Notice of Borrowing. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing after 1:00 p.m. (New York City time) on a Business Day, upon satisfaction of the conditions precedent set forth in Section 4.2 with respect to a requested Borrowing, the Liquidity Provider shall make available to 8 the Borrower, in accordance with its payment instructions, the amount of such Borrowing in U.S. dollars and in immediately available funds, before 4:00 p.m. (New York City time) on the first Business Day next following the day of receipt of such Notice of Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing. Payments of proceeds of a Borrowing shall be made by wire transfer of immediately available funds to the Borrower in accordance with such wire transfer instructions as the Borrower shall furnish from time to time to the Liquidity Provider for such purpose. Each Notice of Borrowing shall be irrevocable and binding on the Borrower. The Liquidity Provider acknowledges and confirms that there are no grace periods applicable to its obligations to make Advances in accordance with this Section 2.2. (f) Upon the making of any Advance requested pursuant to a Notice of Borrowing, in accordance with the Borrower's payment instructions, the Liquidity Provider shall be fully discharged of its obligation hereunder with respect to such Notice of Borrowing, and the Liquidity Provider shall not thereafter be obligated to make any further Advances hereunder in respect of such Notice of Borrowing to the Borrower or to any other Person. Following the making of any Advance pursuant to Section 2.2(b), (c) or (d) hereof to fund the Class B Cash Collateral Account, the Liquidity Provider shall have no interest in or rights to the Class B Cash Collateral Account, such Advance or any other amounts from time to time on deposit in the Class B Cash Collateral Account; provided that the foregoing shall not affect or impair the obligations of the Subordination Agent to make the distributions contemplated by Section 3.6(e) or (f) of the Intercreditor Agreement. By paying to the Borrower proceeds of Advances requested by the Borrower in accordance with the provisions of this Agreement, the Liquidity Provider makes no representation as to, and assumes no responsibility for, the correctness or sufficiency for any purpose of the amount of the Advances so made and requested. Section 2.3 Fees. The Borrower agrees to pay to the Liquidity Provider the fees set forth in the Fee Letter. Section 2.4 Adjustments or Termination of the Maximum Commitment. (a) Automatic Adjustments. Promptly following each date on which the Required Amount is (i) reduced as a result of a reduction in the Pool Balance of the Class B Certificates or otherwise, (ii) increased as a result of an increase in the Stated Interest Rate, or (iii) subsequent to an increase described in clause (ii), reduced pursuant to the definition of "Stated Interest Rate", the Maximum Commitment shall automatically be reduced or increased, as the case may be, to an amount equal to the Required Amount (as calculated by the Borrower). The Borrower shall give notice of any such automatic adjustment of the Maximum Commitment to the Liquidity Provider (with a copy to Amtran) within two Business Days thereof. The failure by the Borrower to furnish any such notice shall not affect such automatic reduction or increase of the Maximum Commitment. (b) Termination. Upon the making of any Provider Advance or Final Advance hereunder or the occurrence of the Termination Date, the obligation of the Liquidity Provider to make further Advances hereunder shall automatically and irrevocably terminate, and the Borrower shall not be entitled to request any further Borrowing hereunder. 9 Section 2.5 Repayments of Interest Advances or the Final Advance. Subject to Sections 2.6, 2.7 and 2.9 hereof, the Borrower hereby agrees, without notice of an Advance or demand for repayment from the Liquidity Provider (which notice and demand are hereby waived by the Borrower), to pay, or to cause to be paid, to the Liquidity Provider on each date on which the Liquidity Provider shall make an Interest Advance or the Final Advance, an amount equal to (a) the amount of such Advance (any such Advance, until repaid, is referred to herein as an "Unpaid Advance"), plus (b) interest on the amount of each such Unpaid Advance as provided in Section 3.7 hereof; provided that if (i) the Liquidity Provider shall make a Provider Advance at any time after making one or more Interest Advances which shall not have been repaid in accordance with this Section 2.5 or (ii) this Liquidity Facility shall become a Downgraded Facility or Non-Extended Facility at any time when unreimbursed Interest Advances have reduced the Maximum Available Commitment to zero, then such Interest Advances shall cease to constitute Unpaid Advances and shall be deemed to have been converted into an Applied Downgrade Advance or an Applied Non-Extension Advance, as the case may be, for all purposes of this Agreement (including, without limitation, for the purpose of determining when such Interest Advance is required to be repaid to the Liquidity Provider in accordance with Section 2.6 and for the purposes of Section 2.6(b)). The Borrower and the Liquidity Provider agree that the repayment in full of each Interest Advance and Final Advance on the date such Advance is made is intended to be a contemporaneous exchange for new value given to the Borrower by the Liquidity Provider. Section 2.6 Repayments of Provider Advances. (a) Amounts advanced hereunder in respect of a Provider Advance shall be deposited in the Class B Cash Collateral Account, invested and withdrawn from the Class B Cash Collateral Account as set forth in Sections 3.6(c), (d) and (f) of the Intercreditor Agreement. The Borrower agrees to pay to the Liquidity Provider, on each Regular Distribution Date, commencing on the first Regular Distribution Date after the making of a Provider Advance, interest on the principal amount of any such Provider Advance as provided in Section 3.7; provided, however, that amounts in respect of a Provider Advance withdrawn from the Class B Cash Collateral Account for the purpose of paying interest on the Class B Certificates in accordance with Section 3.6(f) of the Intercreditor Agreement (the amount of any such withdrawal being (y) in the case of a Downgrade Advance, an "Applied Downgrade Advance" and (z) in the case of a Non-Extension Advance, an "Applied Non-Extension Advance" and, together with an Applied Downgrade Advance, an "Applied Provider Advance") shall thereafter (subject to Section 2.6(b)) be treated as an Interest Advance under this Agreement for purposes of determining the Applicable Liquidity Rate for interest payable thereon; provided further, however, that if, following the making of a Provider Advance, the Liquidity Provider delivers a Termination Notice to the Borrower pursuant to Section 6.1 hereof, such Provider Advance shall thereafter be treated as a Final Advance under this Agreement for purposes of determining the Applicable Liquidity Rate for interest payable thereon. Subject to Sections 2.7 and 2.9 hereof, immediately upon the withdrawal of any amounts from the Class B Cash Collateral Account on account of a reduction in the Required Amount, the Borrower shall repay to the Liquidity Provider a portion of the Provider Advances in a principal amount equal to the amount of such reduction, plus interest on the principal amount prepaid as provided in Section 3.7 hereof. 10 (b) At any time when an Applied Provider Advance (or any portion thereof) is outstanding, upon the deposit in the Class B Cash Collateral Account of any amount pursuant to clause "third" of Section 2.4(b) of the Intercreditor Agreement, clause "third" of Section 3.2 of the Intercreditor Agreement or clause "fourth" of Section 3.3 of the Intercreditor Agreement (any such amount being a "Replenishment Amount") for the purpose of replenishing or increasing the balance thereof up to the Required Amount at such time, (i) the aggregate outstanding principal amount of all Applied Provider Advances (and of Provider Advances treated as an Interest Advance for purposes of determining the Applicable Liquidity Rate for interest payable thereon) shall be automatically reduced by the amount of such Replenishment Amount and (ii) the aggregate outstanding principal amount of all Unapplied Provider Advances shall be automatically increased by the amount of such Replenishment Amount. (c) Upon the provision of a Replacement Liquidity Facility in replacement of this Agreement in accordance with Section 3.6(e) of the Intercreditor Agreement, amounts remaining on deposit in the Class B Cash Collateral Account after giving effect to any Applied Provider Advance on the date of such replacement shall be reimbursed to the Liquidity Provider, but only to the extent such amounts are necessary to repay in full to the Liquidity Provider all amounts owing to it hereunder. Section 2.7 Payments to the Liquidity Provider Under the Intercreditor Agreement. In order to provide for payment or repayment to the Liquidity Provider of any amounts hereunder, the Intercreditor Agreement provides that amounts available and referred to in Articles II and III of the Intercreditor Agreement, to the extent payable to the Liquidity Provider pursuant to the terms of the Intercreditor Agreement (including, without limitation, Section 3.6(f) of the Intercreditor Agreement), shall be paid to the Liquidity Provider in accordance with the terms thereof. Amounts so paid to the Liquidity Provider shall be applied by the Liquidity Provider to Liquidity Obligations then due and payable in accordance with the Intercreditor Agreement or, if not provided for in the Intercreditor Agreement, then in such manner as the Liquidity Provider shall deem appropriate. Section 2.8 Book Entries. The Liquidity Provider shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from Advances made from time to time and the amounts of principal and interest payable hereunder and paid from time to time in respect thereof; provided, however, that the failure by the Liquidity Provider to maintain such account or accounts shall not affect the obligations of the Borrower in respect of Advances. Section 2.9 Payments from Available Funds Only. All payments to be made by the Borrower under this Agreement shall be made only from the amounts received by it that constitute Scheduled Payments, Special Payments or payments under Section 7 (Owned Aircraft) or Section 9 (Leased Aircraft) of the Participation Agreements and Section 6 of the Note Purchase Agreement and only to the extent that the Borrower shall have sufficient income or proceeds therefrom to enable the Borrower to make payments in accordance with the terms hereof after giving effect to the priority of payments provisions set forth in the Intercreditor Agreement. The Liquidity Provider agrees that it will look solely to such amounts to the extent available for distribution to it as provided in the Intercreditor Agreement and this Agreement and that the Borrower, in its individual capacity, is not personally liable to it for any amounts payable 11 or liability under this Agreement except as expressly provided in this Agreement, the Intercreditor Agreement or any Participation Agreement. Amounts on deposit in the Class B Cash Collateral Account shall be available to the Borrower to make payments under this Agreement only to the extent and for the purposes expressly contemplated in Section 3.6(f) of the Intercreditor Agreement. Section 2.10 Non-Extension Advance. At any time after the second anniversary of the date of this Agreement, the Liquidity Provider may, at its option notify the Borrower and ATA of the early termination of this Agreement, specifying the date of early termination, which shall be not earlier than the 40th day after the date of such notice (the "Early Termination Date"). If on or prior to the 15th day prior to the Early Termination Date there shall not have been delivered to the Borrower a Replacement Liquidity Facility as provided in Section 3.6(e) of the Intercreditor Agreement, the Borrower shall be entitled on and after such 15th day (but prior to the Early Termination Date) to request a Non-Extension Advance in accordance with Section 2.2(b) hereof and Section 3.6(d) of the Intercreditor Agreement. ARTICLE 3 OBLIGATIONS OF THE BORROWER Section 3.1 Increased Costs. Subject to the Fee Letter, the Borrower shall pay to the Liquidity Provider, upon demand by the Liquidity Provider (such demand to be made not later than 180 days after a Responsible Officer of the Liquidity Provider obtains actual knowledge of any event referred to in clause (1) or (2) below), such amounts as may be necessary to compensate the Liquidity Provider for any increased costs incurred by the Liquidity Provider which are attributable to its making or maintaining any LIBOR Advances hereunder or its obligation to make any such Advances hereunder, or any reduction in any amount receivable by the Liquidity Provider under this Agreement or the Intercreditor Agreement in respect of any such Advances or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any change after the date of this Agreement in U.S. federal, state, municipal, or foreign laws or regulations (including Regulation D), or the adoption or making after the date of this Agreement of any interpretations, directives, or requirements applying to a class of banks including the Liquidity Provider under any U.S. federal, state, municipal, or any foreign laws or regulations (whether or not having the force of law) by any court, central bank or monetary authority charged with the interpretation or administration thereof (a "Regulatory Change"), which: (1) changes the basis of taxation of any amounts payable to the Liquidity Provider under this Agreement in respect of any such Advances (other than Excluded Taxes); or (2) imposes or modifies any reserve, special deposit, compulsory loan or similar requirements relating to any extensions of credit or other assets of, or any deposits with other liabilities of, the Liquidity Provider (including any such Advances or any deposits referred to in the definition of LIBOR Rate or related definitions); provided that if such demand for payment is made after such 180-day period, the Borrower shall be obligated to pay such amounts only with respect to such increased cost actually incurred or effected on or after the 180th day prior to the date of such demand. The Liquidity Provider agrees to use reasonable efforts (consistent with applicable legal and regulatory restrictions) to change the jurisdiction of 12 its Principal Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.1 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider. The Liquidity Provider agrees that if it shall make a demand for payment of additional amounts under this Section 3.1, the Borrower shall have the right to obtain a Replacement Liquidity Facility in replacement of this Agreement in accordance with Section 3.6(e) of the Intercreditor Agreement provided that such replacement would eliminate or reduce the obligation of the Borrower to pay such additional amounts. The Liquidity Provider will notify the Borrower of any event occurring after the date of this Agreement that will entitle the Liquidity Provider to compensation pursuant to this Section 3.1 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, which notice shall describe in reasonable detail the calculation of the amounts owed under this Section. Determinations by the Liquidity Provider for purposes of this Section 3.1 of the effect of any Regulatory Change on its costs of making or maintaining Advances or on amounts receivable by it in respect of Advances, and of the additional amounts required to compensate the Liquidity Provider in respect of any Additional Costs, shall be prima facie evidence of the amount owed under this Section. Section 3.2 Capital Adequacy. Subject to the Fee Letter, if (1) the adoption, after the date hereof, of any applicable governmental law, rule or regulation regarding capital adequacy, (2) any change, after the date hereof, in the interpretation or administration of any such law, rule or regulation by any central bank or other governmental authority charged with the interpretation or administration thereof or (3) compliance by the Liquidity Provider or any corporation controlling the Liquidity Provider with any applicable guideline or request of general applicability, issued after the date hereof, by any central bank or other governmental authority (whether or not having the force of law) that constitutes a change of the nature described in clause (2), has the effect of requiring an increase in the amount of capital required to be maintained by the Liquidity Provider or any corporation controlling the Liquidity Provider, and such increase is based upon the Liquidity Provider's obligations hereunder and other similar obligations and has the effect of reducing the rate of return on the Liquidity Provider's capital as a consequence of issuing or maintaining its commitment hereunder or its funding or maintaining Advances to a level below that which the Liquidity Provider could have achieved but for such adoption, change or compliance (taking into consideration the Liquidity Provider's policies with respect to capital adequacy) by an amount deemed by the Liquidity Provider to be material, then, upon demand by the Liquidity Provider, the Borrower shall pay to the Liquidity Provider from time to time such additional amount or amounts as are necessary to compensate the Liquidity Provider for such portion of such increase as shall be reasonably allocable to the Liquidity Provider's obligations to the Borrower hereunder. The Liquidity Provider agrees to use reasonable efforts (consistent with applicable legal and regulatory restrictions) to change the jurisdiction of its Principal Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise materially disadvantageous to the Liquidity Provider. 13 The Liquidity Provider agrees that if it shall make a demand for payment of additional amounts under this Section 3.2 the Borrower shall have the right to obtain a Replacement Liquidity Facility in replacement of this Agreement in accordance with Section 3.6(c) of the Intercreditor Agreement provided that such replacement would eliminate or reduce the obligation of the Borrower to pay such additional amounts. The Liquidity Provider will notify the Borrower of any event occurring after the date of this Agreement that will entitle the Liquidity Provider to compensation pursuant to this Section 3.2 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, which notice shall describe in reasonable detail the calculation of the amounts owed under this Section. Determinations by the Liquidity Provider for purposes of this Section 3.2 of the effect of any increase in the amount of capital required to be maintained by the Liquidity Provider and of the amount allocable to the Liquidity Provider's obligations to the Borrower hereunder shall be prima facie evidence of the amounts owed under this Section. Section 3.3 Payments Free of Deductions. All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction for or on account of; any present or future stamp or other taxes, levies, imposts, duties, charges, fees, deductions, withholdings, restrictions or conditions of any nature whatsoever now or hereafter imposed, levied, collected, withheld or assessed, excluding Excluded Taxes (such non-excluded taxes being referred to herein, collectively, as "Non-Excluded Tax" and, individually, as a "Non-Excluded Tax"). If any Non-Excluded Taxes are required to be withheld from any amounts payable to the Liquidity Provider under this Agreement, the amounts so payable to the Liquidity Provider shall be increased to the extent necessary to yield to the Liquidity Provider (after payment of all Non-Excluded Taxes and taxes imposed on the receipt of such increase) interest or any other such amounts payable under this Agreement at the rates or in the amounts specified in this Agreement. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Principal Office if making such change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to the Liquidity Provider. The Liquidity Provider is duly organized and validly existing as a corporation under the laws of the State of Delaware. Section 3.4 Payments. The Borrower shall make or cause to be made each payment to the Liquidity Provider under this Agreement so as to cause the same to be received by the Liquidity Provider not later than 1:00 p.m. (New York City time) on the day when due. The Borrower shall make all such payments in lawful money of the United States of America to the Liquidity Provider in immediately available funds, by wire transfer to the account of AIG Matched Funding Corp. at Bank of New York, New York, CHIPS ABA 001, ABA 021000018, SWIFT IRVTUS3N, Ultimate Beneficiary Account # 8900416130/UID 376460, Reference: American Trans Air Pass Through Trust, Series 2002-1B. Section 3.5 Computations. All computations of interest based on the Base Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the LIBOR Rate shall be made on the basis of a year of 360 days, in each 14 case 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. Section 3.6 Payment on Non-Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and no additional interest shall be due as a result (and if so made, shall be deemed to have been made when due). If any payment in respect of interest on an Advance is so deferred to the next succeeding Business Day, such deferral shall not delay the commencement of the next Interest Period for such Advance or reduce the number of days for which interest will be payable on such Advance on the next interest payment date for such Advance. Section 3.7 Interest. (a) Subject to Section 2.9, the Borrower shall pay, or shall cause to be paid, without duplication, interest on (i) the unpaid principal amount of each Advance from and including the date of such Advance (or, in the case of an Applied Provider Advance, from and including the date on which the amount thereof was withdrawn from the Class B Cash Collateral Account to pay interest on the Class B Certificates) to but excluding the date such principal amount shall be paid in full (or, in the case of an Applied Provider Advance, the date on which the Class B Cash Collateral Account is fully replenished in respect of such Advance) and (ii) any other amount due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by law, installments of interest on Advances or any such other amount) which is not paid when due (whether at stated maturity, by acceleration or otherwise) from and including the due date thereof to but excluding the date such amount is paid in full, in each such case, at a fluctuating interest rate per annum for each day equal to the Applicable Liquidity Rate (as defined below) for such Advance or such other amount as in effect for such day, but in no event at a rate per annum greater than the maximum rate permitted by applicable law; provided, however, that, if at any time the otherwise applicable interest rate as set forth in this Section 3.7 shall exceed the maximum rate permitted by applicable law, then any subsequent reduction in such interest rate will not reduce the rate of interest payable pursuant to this Section 3.7 below the maximum rate permitted by applicable law until the total amount of interest accrued equals the amount of interest that would have accrued if such otherwise applicable interest rate as set forth in this Section 3.7 had at all times been in effect. (b) Each Advance (including, without limitation, each outstanding Unapplied Provider Advance) will be either a Base Rate Advance or a LIBOR Advance as provided in this Section. Each such Advance will be a Base Rate Advance for the period from the date of its borrowing to (but excluding) the third Business Day following the Liquidity Provider's receipt of the Notice of Borrowing for such Advance. Thereafter, such Advance shall be a LIBOR Advance; provided that the Borrower (at the direction of the Controlling Party, so long as the Liquidity Provider is not the Controlling Party) may (x) convert the Final Advance into a Base Rate Advance on the last day of an Interest Period for such Advance by giving the Liquidity Provider no less than four Business Days' prior written notice of such election or (y) elect to maintain the Final Advance as a Base Rate Advance by not requesting a conversion of the Final Advance to a LIBOR Advance under Clause (5) of the applicable Notice of Borrowing (or, if such Final Advance is deemed to have been made, without delivery of a Notice of Borrowing 15 pursuant to Section 2.6, by requesting, prior to 11:00 a.m. on the first Business Day immediately following the Borrower's receipt of the applicable Termination Notice, that such Final Advance not be converted from a Base Rate Advance to a LIBOR Advance). (c) Each LIBOR Advance shall bear interest during each Interest Period at a rate per annum equal to the LIBOR Rate for such Interest Period plus the Applicable Margin for such LIBOR Advance, payable in arrears on the last day of such Interest Period and, in the event of the payment of principal of such LIBOR Advance on a day other than such last day, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (d) Each Base Rate Advance shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin for such Base Rate Advance, payable in arrears on each Regular Distribution Date and, in the event of the payment of principal of such Base Rate Advance on a day other than a Regular Distribution Date, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). Each change in the Base Rate shall become effective immediately. (e) [intentionally omitted] (f) Each amount not paid when due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by applicable law, installments of interest on Advances but excluding Advances) shall bear interest at a rate per annum equal to the Base Rate plus 2.00% until paid. (g) The rates of interest specified in this Section 3.7 with respect to any Advance or other amount shall be referred to as the "Applicable Liquidity Rate". Section 3.8 Replacement of Borrower. From time to time and subject to the successor Borrower's meeting the eligibility requirements set forth in Section 6.9 of the Intercreditor Agreement applicable to the Subordination Agent upon the effective date and time specified in a written and completed Notice of Replacement Subordination Agent in substantially the form of Annex VI attached hereto (a "Notice of Replacement Subordination Agent") delivered to the Liquidity Provider by the then Borrower, the successor Borrower designated therein shall be substituted for as the Borrower for all purposes hereunder. Section 3.9 Funding Loss Indemnification. The Borrower shall pay to the Liquidity Provider, upon the request of the Liquidity Provider, such amount or amounts as shall be sufficient (in the reasonable opinion of the Liquidity Provider) to compensate it for any loss, cost, or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired by the Liquidity Provider to fund or maintain any LIBOR Advance (but excluding loss of anticipated profits) incurred as a result of: (a) Any repayment of a LIBOR Advance on a date other than the last day of the Interest Period for such Advance; or (b) Any failure by the Borrower to borrow a LIBOR Advance on the date for borrowing specified in the relevant notice under Section 2.2. 16 Section 3.10 Illegality. Notwithstanding any other provision in this Agreement, if any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Liquidity Provider (or its Principal Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for the Liquidity Provider (or its Principal Office) to maintain or fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity Provider, the outstanding principal amount of the LIBOR Advances shall be converted to Base Rate Advances (a) immediately upon demand of the Liquidity Provider, if such change or compliance with such request, in the judgment of the Liquidity Provider, requires immediate repayment; or (b) at the expiration of the last Interest Period to expire before the effective date of any such change or request. ARTICLE 4 CONDITIONS PRECEDENT Section 4.1 Conditions Precedent to Effectiveness of Section 2.1. Section 2.1 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied or waived: (a) The Liquidity Provider shall have received on or before the Closing Date each of the following, and in the case of each document delivered pursuant to paragraphs (i), (ii) and (iii), each in form and substance satisfactory to the Liquidity Provider: (i) this Agreement duly executed on behalf of the Borrower; (ii) the Intercreditor Agreement and the Delayed Funding Implementation Agreement duly executed on behalf of each of the parties thereto; (iii) fully executed copies of each of the Operative Agreements executed and delivered on or before the Closing Date (other than this Agreement and the Intercreditor Agreement) and each Guaranty (as defined in each Participation Agreement) entered into on or prior to the date hereof; (iv) a copy of the Private Placement Memorandum and a specimen copy of the Class B Certificate; (v) an executed copy of each document, instrument, certificate and opinion delivered on or before the Closing Date pursuant to the Class B Trust Agreement, the Intercreditor Agreement, the Participation Agreements and the other Operative Agreements entered into on or prior to the date hereof (in the case of each such opinion either addressed to the Liquidity Provider or accompanied by a letter from the counsel rendering such opinion to the effect that the Liquidity Provider is entitled to rely on such opinion as of its date as if it were addressed to the Liquidity Provider); 17 (vi) evidence that there shall have been made and shall be in full force and effect, all filings, recordings and/or registrations, and there shall have been given or taken any notice or other similar action as may be reasonably necessary or, to the extent reasonably requested by the Liquidity Provider, reasonably advisable, in order to establish, perfect, protect and preserve the right, title and interest, remedies, powers, privileges, liens and security interests of, or for the benefit of, the Trustees, the Borrower and the Liquidity Provider created by the Operative Agreements executed and delivered on or prior to the Closing Date; (vii) a letter from Amtran agreeing to provide to the Liquidity Provider the periodic financial reports referred to in Section 8.04 of the Trust Agreements and agreeing to cause the Company to deliver to the Liquidity Provider with respect to any Participation Agreement or Financing Agreement executed and delivered after the date hereof, the certificate referred to in Section 2(b) of the Note Purchase Agreement; and (viii) such other documents, instruments, opinions and approvals pertaining to the transactions contemplated hereby or by the other Operative Agreements as the Liquidity Provider shall have reasonably requested. (b) The following statement shall be true on and as of the Effective Date: no event has occurred and is continuing, or would result from the entering into of this Agreement or the making of any Advance, which constitutes a Liquidity Event of Default. (c) The Liquidity Provider shall have received payment in full of all fees and other sums required to be paid to or for the account of the Liquidity Provider on or prior to the Effective Date. (d) All conditions precedent to the issuance of the Certificates under the Trust Agreements shall have been satisfied or waived, and all conditions precedent to the purchase of the Certificates on the Closing Date under the Certificate Purchase Agreements shall have been satisfied (unless any of such conditions precedent shall have been waived by the respective purchasers thereunder). (e) The Borrower shall have received a certificate, dated the date hereof, signed by a duly authorized representative of the Liquidity Provider, certifying that all conditions precedent to the effectiveness of Section 2.1 have been satisfied or waived. Section 4.2 Conditions Precedent to Borrowing. The obligation of the Liquidity Provider to make an Advance on the occasion of each Borrowing shall be subject to the conditions precedent that the Effective Date shall have occurred and, prior to the date of such Borrowing, the Borrower shall have delivered a Notice of Borrowing which conforms to the terms and conditions of this Agreement and has been completed as may be required by the relevant form of the Notice of Borrowing for the type of Advances requested. 18 ARTICLE 5 COVENANTS Section 5.1 Affirmative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Maximum Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity Provider shall otherwise consent in writing: (1) Performance of This and Other Agreements. Punctually pay or cause to be paid all amounts payable by it under this Agreement and the other Operative Agreements and observe and perform in all material respects the conditions, covenants and requirements applicable to it contained in this Agreement and the other Operative Agreements. (2) Reporting Requirements. Furnish to the Liquidity Provider with reasonable promptness, such other information and data with respect to the transactions contemplated by the Operative Agreements as from time to time may be reasonably requested by the Liquidity Provider; and permit the Liquidity Provider, upon reasonable notice, to inspect the Borrower's books and records with respect to such transactions and to meet with officers and employees of the Borrower to discuss such transactions. (3) Certain Operative Agreements. Furnish to the Liquidity Provider with reasonable promptness, such Operative Agreements entered into after the date hereof as from time to time may be reasonably requested by the Liquidity Provider. Section 5.2 Negative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Maximum Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will not without the prior written consent of the Liquidity Provider: (a) Amendments. Modify, amend or supplement, or give any consent to any modification, amendment or supplement or make any waiver with respect to, any provision of any Operative Agreement that could reasonably have a negative impact on the Liquidity Provider, except for any supplemental agreement to the Trust Agreements provided for in Section 9.01 thereof and except as provided in the Delayed Funding Implementation Agreement. (b) Borrower. Appoint or permit or suffer to be appointed any successor Borrower without the prior written approval of the Liquidity Provider (which approval shall not be unreasonably withheld or delayed). 19 ARTICLE 6 LIQUIDITY EVENTS OF DEFAULT Section 6.1 Liquidity Events of Default. If (a) any Liquidity Event of Default has occurred and is continuing and (b) there is a Performing Note Deficiency, the Liquidity Provider may, in its discretion, deliver to the Borrower a Termination Notice, the effect of which shall be to cause (i) the obligation of the Liquidity Provider to make Advances hereunder to expire on the fifth Business Day after the date on which such Termination Notice is received by the Borrower, (ii) the Borrower to promptly request, and the Liquidity Provider to promptly make, a Final Advance in accordance with Section 2.2(d) hereof and Section 3.6(i) of the Intercreditor Agreement, (iii) all other outstanding Advances to be automatically converted into Final Advances for purposes of determining the Applicable Liquidity Rate for interest payable thereon, and (iv) subject to Sections 2.7 and 2.9 hereof, all Advances (including, without limitation, any Provider Advance and Applied Provider Advance), any accrued interest thereon and any other amounts outstanding hereunder to become immediately due and payable to the Liquidity Provider. ARTICLE 7 MISCELLANEOUS Section 7.1 Amendments, Etc. No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Liquidity Provider, and, in the case of an amendment or of a waiver by the Borrower, the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Notwithstanding any provision of this Agreement, upon and simultaneously with the issuance of the Additional Certificates, this Agreement shall be forthwith amended as provided for in the Delayed Funding Implementation Agreement, without any need for further action on the part of any party hereto and without any consent of any of the holders of the Certificates. Section 7.2 Notices, Etc. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telecopier and mailed or delivered or sent by telecopier): Borrower: WILMINGTON TRUST COMPANY Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Telephone: (302) 651-1000 Telecopy: (302) 636 - 4140 20 Liquidity Provider: prior to April 7, 2002 AIG Matched Funding Corp. 100 Nyala Farm Westport, CT 06880 Attention: Chief Financial Officer Telecopy: (203) 222-4780 Reference: American Trans Air Pass Through Trust 2002-1B on or after April 7, 2002 AIG Matched Funding Corp. 50 Danbury Road Wilton, CT 06894-4444 Attention: Chief Financial Officer Telecopy: (203) 222-4780 Reference: American Trans Air Pass Through Trust 2002-1B or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to the others. All such notices and communications shall be effective (i) if given by telecopier, when transmitted to the telecopier number specified above, and (ii) if given by other means, when delivered at the address specified above, except that written notices to the Liquidity Provider pursuant to the provisions of Articles II and III hereof shall not be effective until received by the Liquidity Provider. A copy of all notices delivered hereunder to either party shall in addition be delivered to, each of the parties to the Participation Agreements at their respective addresses set forth therein. Section 7.3 No Waiver; Remedies. No failure on the part of the Liquidity Provider to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 7.4 Further Assurances. The Borrower agrees to do such further acts and things and to execute and deliver to the Liquidity Provider such additional assignments, agreements, powers and instruments as the Liquidity Provider may reasonably require or deem advisable to carry into effect the purposes of this Agreement and the other Operative Agreements or to better assure and confirm unto the Liquidity Provider its rights, powers and remedies hereunder and under the other Operative Agreements. Section 7.5 Indemnification; Survival of Certain Provisions. The Liquidity Provider shall be indemnified hereunder to the extent and in the manner described in Section 7 of the Participation Agreements for Owned Aircraft or Section 9 of the Participation Agreements 21 for Leased Aircraft and Section 6 of the Note Purchase Agreement. In addition, the Borrower agrees to indemnify, protect, defend and hold harmless the Liquidity Provider from, against and in respect of, and shall pay on demand, all Expenses of any kind or nature whatsoever (other than any Expenses of the nature described in Sections 3.1, 3.2 or 7.7 hereof or in the Fee Letter (regardless of whether indemnified against pursuant to said Sections or in such Fee Letter)), that may be imposed, incurred by or asserted against any Liquidity Indemnitee, in any way relating to, resulting from, or arising out of or in connection with any action, suit or proceeding by any third party against such Liquidity Indemnitee and relating to this Agreement, the Fee Letter, the Intercreditor Agreement or any Financing Agreement; provided, however, that the Borrower shall not be required to indemnify, protect, defend and hold harmless any Liquidity Indemnitee in respect of any Expense of such Liquidity Indemnitee to the extent such Expense is (i) attributable to the gross negligence or willful misconduct of such Liquidity Indemnitee or any other Liquidity Indemnitee, (ii) ordinary and usual operating overhead expense, or (iii) attributable to the failure by such Liquidity Indemnitee or any other Liquidity Indemnitee to perform or observe any agreement, covenant or condition on its part to be performed or observed in this Agreement, the Intercreditor Agreement, the Fee Letter or any other Operative Agreement to which it is a party. The indemnities contained in Section 7 of the Participation Agreements for Owned Aircraft or Section 9 of the Participation Agreements for Leased Aircraft, and the provisions of Sections 3.1, 3.2, 3.3, 3.9, 7.5 and 7.7 hereof, shall survive the termination of this Agreement. Section 7.6 Limitations on Liability. (1) Neither the Liquidity Provider nor any of its officers, employees, directors or Affiliates shall be liable or responsible for: (i) the use which may be made of the Advances or any acts or omissions of the Borrower or any beneficiary or transferee in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; or (iii) the making of Advances by the Liquidity Provider against delivery of a Notice of Borrowing and other documents which do not comply with the terms hereof; provided, however, that the Borrower shall have a claim against the Liquidity Provider, and the Liquidity Provider shall be liable to the Borrower, to the extent of any damages suffered by the Borrower which were the result of (A) the Liquidity Provider's willful misconduct or negligence in determining whether documents presented hereunder comply with the terms hereof, or (B) any breach by the Liquidity Provider of any of the terms of this Agreement, including, but not limited to, the Liquidity Provider's failure to make lawful payment hereunder after the delivery to it by the Borrower of a Notice of Borrowing strictly complying with the terms and conditions hereof. (2) Neither the Liquidity Provider nor any of its officers, employees, directors or Affiliates shall be liable or responsible in any respect for (i) any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with this Agreement or any Notice of Borrowing delivered hereunder, or (ii) any action, inaction or omission which may be taken by it in good faith, absent willful misconduct or negligence (in which event the extent of the Liquidity Provider's potential liability to the Borrower shall be limited as set forth in the immediately preceding paragraph), in connection with this Agreement or any Notice of Borrowing. 22 (3) Notwithstanding anything contained herein to the contrary, it is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Wilmington Trust Company, not individually or personally but solely as Subordination Agent in the exercise of the powers and authority conferred and vested in it under the Intercreditor Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Subordination Agent is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose for binding only the Subordination Agent as Borrower and (c) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Borrower or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Borrower under this Agreement or the other related documents. Section 7.7 Costs, Expenses and Taxes. The Borrower agrees to pay, or cause to be paid (A) on the Effective Date and on such later date or dates on which the Liquidity Provider shall make demand, all reasonable out-of-pocket costs and expenses (including, without limitation, the reasonable fees and expenses of outside counsel for the Liquidity Provider) of the Liquidity Provider in connection with the preparation, negotiation, execution, delivery, filing and recording of this Agreement, any other Operative Agreement and any other documents which may be delivered in connection with this Agreement and (B) on demand, all reasonable costs and expenses (including reasonable counsel fees and expenses) of the Liquidity Provider in connection with (i) the enforcement of this Agreement or any other Operative Agreement, (ii) the modification or amendment of, or supplement to, this Agreement or any other Operative Agreement or such other documents which may be delivered in connection herewith or therewith (whether or not the same shall become effective) or (iii) any action or proceeding relating to any order, injunction, or other process or decree restraining or seeking to restrain the Liquidity Provider from paying any amount under this Agreement, the Intercreditor Agreement or any other Operative Agreement or otherwise affecting the application of funds in the Class B Cash Collateral Account. In addition, the Borrower shall pay any and all recording, stamp and other similar taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, any other Operative Agreement and such other documents, and agrees to save the Liquidity Provider harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees. Section 7.8 Binding Effect; Participations. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower and the Liquidity Provider and their respective successors and assigns, except that neither the Liquidity Provider (except as otherwise provided in this Section 7.8) nor (except as contemplated by Section 3.8) the Borrower shall have the right to assign its rights or obligations hereunder or any interest herein without the prior written consent of the other party, subject to the requirements of Section 7.8(b). Notwithstanding anything to the contrary contained herein, at any time, the Liquidity Provider may, at its option, arrange for a Replacement Liquidity Facility to replace this Liquidity Facility in accordance with Section 3.6(e) of the Intercreditor Agreement; provided that such replacement will not result in any increased costs payable by the Trust. The Liquidity Provider may grant participations herein or in any of its rights hereunder 23 (including, without limitation, funded participations and participations in rights to receive interest payments hereunder) and under the other Operative Agreements to such Persons (other than ATA or its Affiliates) as the Liquidity Provider may in its sole discretion select, subject to the requirements of Section 7.8(b). No such participation by the Liquidity Provider, however, will relieve the Liquidity Provider of its obligations hereunder. In connection with any participation or any proposed participation, the Liquidity Provider may disclose to the participant or the proposed participant any information that the Borrower is required to deliver or to disclose to the Liquidity Provider pursuant to this Agreement. The Borrower acknowledges and agrees that the Liquidity Provider's source of funds may derive in part from its participants (other than ATA or its Affiliates). Accordingly, references in this Agreement and the other Operative Agreements to determinations, reserve and capital adequacy requirements, increased costs, reduced receipts, additional amounts due pursuant to Section 3.3 and the like as they pertain to the Liquidity Provider shall be deemed also to include those of each of its participants (subject, in each case, to the maximum amount that would have been incurred by or attributable to the Liquidity Provider directly if the Liquidity Provider, rather than the participant, had held the interest participated). (b) If, pursuant to subsection (a) above, the Liquidity Provider sells any participation in this Agreement to any bank or other entity (each, a "Transferee"), then, concurrently with the effectiveness of such participation, the Transferee shall (i) represent to the Liquidity Provider (for the benefit of the Liquidity Provider and the Borrower) either (A) that it is incorporated under the laws of the United States or a state thereof or (B) that under applicable law and treaties, no taxes will be required to be withheld with respect to any payments to be made to such Transferee in respect of this Agreement, (ii) furnish to the Liquidity Provider and the Borrower either (x) a statement that it is incorporated under the laws of the United States or a state thereof or (y) if it is not so incorporated, two copies of a properly completed United States Internal Revenue Service Form W-8ECI or Form W-8BEN, as appropriate, or other applicable form, certificate or document prescribed by the Internal Revenue Service certifying, in each case, such Transferee's entitlement to a complete exemption from United States federal withholding tax with respect to any and all payments to be made hereunder, and (iii) agree (for the benefit of the Liquidity Provider and the Borrower) to provide the Liquidity Provider and the Borrower a new Form W-8ECI or Form W-8BEN, as appropriate, (A) on or before the date that any such form expires or becomes obsolete or (B) after the occurrence of any event requiring a change in the most recent form previously delivered by it and prior to the immediately following due date of any payment by the Borrower hereunder, certifying in the case of a Form W-8BEN or Form W-8ECI that such Transferee is entitled to a complete exemption from United States federal withholding tax on payments under this Agreement. Unless the Borrower has received forms or other documents reasonably satisfactory to it (and required by applicable law) indicating that payments hereunder are not subject to United States federal withholding tax, the Borrower will withhold taxes as required by law from such payments at the applicable statutory rate. (c) Notwithstanding the other provisions of this Section 7.8, the Liquidity Provider may assign and pledge all or any portion of the Advances owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Advances made by the Borrower to the Liquidity Provider in accordance with the terms of this Agreement shall 24 satisfy the Borrower's obligations hereunder in respect of such assigned Advance to the extent of such payment. No such assignment shall release the Liquidity Provider from its obligations hereunder. Section 7.9 Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. Section 7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Immunity. (a) Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement, or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to each party hereto at its address set forth in Section 7.2 hereof, or at such other address of which the Liquidity Provider shall have been notified pursuant thereto; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (b) THE BORROWER AND THE LIQUIDITY PROVIDER EACH HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including, without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. The Borrower and the Liquidity Provider each warrant and represent that it has reviewed this waiver with its legal counsel, and that it 25 knowingly and voluntarily waives its jury trial rights following consultation with such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. Section 7.12 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. Section 7.13 Entirety. This Agreement, the Intercreditor Agreement and the other Operative Agreements to which the Liquidity Provider is a party constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior understandings and agreements of such parties. Section 7.14 Headings. 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. Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. * * * 26 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first set forth above. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class B Trust, as Borrower By: ---------------------------------- Name: Title: AIG MATCHED FUNDING CORP. as Liquidity Provider By: ---------------------------------- Name: Title: 27 Annex I to Revolving Credit Agreement INTEREST ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to AIG Matched Funding Corp. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (2002-1B) dated as of March 28, 2002, between the Borrower and the Liquidity Provider (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of an Interest Advance by the Liquidity Provider to be used for the payment of the interest on the Class B Certificates which was payable on _______________________________ (the "Distribution Date") in accordance with the terms and provisions of the Class B Trust Agreement and the Class B Certificates, which Advance is requested to be made on ________________. (3) The amount of the Interest Advance requested hereby (i) is $_______ , to be applied in respect of the payment of the interest which was due and payable on the Class B Certificates on the Distribution Date, (ii) does not include any amount with respect to the payment of principal of, or premium on, the Class B Certificates, or principal of, or interest or premium on the Class A Certificates, (iii) was computed in accordance with the provisions of the Class B Certificates, the Class B Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), (iv) does not exceed the Maximum Available Commitment on the date hereof, (v) does not include any amount of interest which was due and payable on the Class B Certificates on such Distribution Date but which remains unpaid due to the failure of the Depositary to pay any amount of accrued interest on the Deposits on such Distribution Date and (vi) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will apply the same in accordance with the terms of Section 3.6(b) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, the making of the Interest Advance as requested by this Notice of Borrowing shall automatically reduce, subject to reinstatement in accordance with the terms of the Liquidity Agreement, the Maximum Available Commitment by an amount equal to the amount of the Interest Advance requested to be made hereby as set forth in clause (i) of paragraph (3) of this Certificate and such reduction shall automatically result in corresponding reductions in the amounts available to be borrowed pursuant to a subsequent Advance. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the ____day of _______________. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: --------------------------------- Name: Title: 2 SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Interest Advance Notice of Borrowing] Annex II Revolving Credit Agreement NON-EXTENSION ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to AIG Matched Funding Corp. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (2002-1B) dated as of March 28, 2002, between the Borrower and the Liquidity Provider (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Non-Extension Advance by the Liquidity Provider to be used for the funding of the Class B Cash Collateral Account in accordance with Section 3.6(d) of the Intercreditor Agreement, which Advance is requested to be made on ____________. (3) The amount of the Non-Extension Advance requested hereby (i) is $_____________________ , which equals the Maximum Available Commitment on the date hereof and is to be applied in respect of the funding of the Class B Cash Collateral Account in accordance with Section 3.6(d) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class B Certificates, or principal of, or interest or premium on the Class A Certificates, (iii) was computed in accordance with the provisions of the Class B Certificates, the Class B Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class B Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(d) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Non-Extension Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Non-Extension Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the _________ day of _______________, _____. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By:__________________________________ Name: Title: 2 SCHEDULE I TO NON-EXTENSION ADVANCE NOTICE OF BORROWING [Insert Copy of computations in accordance with Non-Extension Advance Notice of Borrowing] Annex III to Revolving Credit Agreement DOWNGRADE ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to AIG Matched Funding Corp. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (2002-1B) dated as of March 28, 2002, between the Borrower and the Liquidity Provider (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Downgrade Advance by the Liquidity Provider to be used for the funding of the Class B Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement by reason of (i) the downgrading of the short-term debt rating of the Liquidity Provider issued by Moody's below the applicable Threshold Rating or (ii) the occurrence of a Class B Guarantee Event, which Advance is requested to be made on ___________, _________. (3) The amount of the Downgrade Advance requested hereby (i) is $_______, which equals the Maximum Available Commitment on the date hereof and is to be applied in respect of the funding of the Class B Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class B Certificates, or principal of, or interest or premium on the Class A Certificates, (iii) was computed in accordance with the provisions of the Class B Certificates, the Class B Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class B Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(c) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Downgrade Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Downgrade Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the ___ day of __________________, _______. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By:__________________________________ Name: Title: 2 SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING [Insert Copy of computations in accordance with Downgrade Advance Notice of Borrowing] Annex IV to Revolving Credit Agreement FINAL ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to AIG Matched Funding Corp. (the "Liquidity Provider"), with reference to the Revolving Credit Agreement (2002-1B) dated as of March 28, 2002, between the Borrower and the Liquidity Provider (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Final Advance by the Liquidity Provider to be used for the funding of the Class B Cash Collateral Account in accordance with Section 3.6(i) of the Intercreditor Agreement by reason of the receipt by the Borrower of a Termination Notice from the Liquidity Provider with respect to the Liquidity Agreement, which Advance is requested to be made on __________________, _________. (3) The amount of the Final Advance requested hereby (i) is $___________, which equals the Maximum Available Commitment on the date hereof and is to be applied in respect of the funding of the Class B Cash Collateral Account in accordance with Section 3.6(i) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of principal of, or premium on, the Class B Certificates, or principal of, or interest or premium on the Class A Certificates, (iii) was computed in accordance with the provisions of the Class B Certificates, the Class B Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class B Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(i) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance [and that such Base Rate Advance be converted into a LIBOR Advance on the third Business Day following your receipt of this notice].* - ------------------ * Bracketed language is optional. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Final Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Final Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. * * * 2 IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the ___day of ________________, _______. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By: -------------------------------- Name: Title: 3 SCHEDULE I TO FINAL ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Final Advance Notice of Borrowing] Annex V to Revolving Credit Agreement NOTICE OF TERMINATION [Date] Wilmington Trust Company, as Subordination Agent, as Borrower Rodney Square North 1100 North Market Square Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: Revolving Credit Agreement dated as of March 28, 2002, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the American Trans Air Pass Through Trust, Series 2002-1B, as Borrower, and AIG Matched Funding Corp. (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Liquidity Agreement") Ladies and Gentlemen: You are hereby notified that pursuant to Section 6.1 of the Liquidity Agreement, by reason of the occurrence of a Liquidity Event of Default and the existence of a Performing Note Deficiency (each as defined therein), we are giving this notice to you in order to cause (i) our obligations to make Advances (as defined therein) under such Liquidity Agreement to terminate on the fifth Business Day after the date on which you receive this notice and (ii) you to request a Final Advance under the Liquidity Agreement pursuant to Section 3.6(i) of the Intercreditor Agreement (as defined in the Liquidity Agreement) as a consequence of your receipt of this notice. THIS NOTICE IS THE "NOTICE OF TERMINATION" PROVIDED FOR UNDER THE LIQUIDITY AGREEMENT. OUR OBLIGATIONS TO MAKE ADVANCES UNDER THE LIQUIDITY AGREEMENT WILL TERMINATE ON THE FIFTH BUSINESS DAY AFTER THE DATE ON WHICH YOU RECEIVE THIS NOTICE. Very truly yours, AIG Matched Funding Corp., as Liquidity Provider By: --------------------------- Name: Title: cc: Wilmington Trust Company, as Class B Trustee 2 Annex VI to Revolving Credit Agreement NOTICE OF REPLACEMENT SUBORDINATION AGENT [Date] Attention: Revolving Credit Agreement dated as of March 28, 2002, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the American Trans Air Pass Through Trust, 2002-1B, as Borrower, and AIG Matched Funding Corp. (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Liquidity Agreement") Ladies and Gentlemen: For value received, the undersigned beneficiary hereby irrevocably transfers to: ----------------------- (Name of Transferee) ----------------------- (Name of Transferee) all rights and obligations of the undersigned as Borrower under the Liquidity Agreement referred to above. The transferee has succeeded the undersigned as Subordination Agent under the Intercreditor Agreement referred to in the first paragraph of the Liquidity Agreement, pursuant to the terms of Section 8.1 of the Intercreditor Agreement. By this transfer, all rights of the undersigned as Borrower under the Liquidity Agreement are transferred to the transferee and the transferee shall hereafter have the sole rights and obligations as Borrower thereunder. The undersigned shall pay any costs and expenses of such transfer, including, but not limited to, transfer taxes or governmental charges. We ask that this transfer be effective as of _________________, ______. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Subordination Agent, as Borrower By:__________________________________ Name: Title: 2 Exhibit A to Revolving Credit Agreement FORM OF CLASS B GUARANTEE AGREEMENT EX-4.9 9 file008.txt INTERCREDITOR AGREEMENT EXECUTION COPY INTERCREDITOR AGREEMENT Dated as of March 28, 2002 AMONG WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee under the American Trans Air 2002-1A Pass Through Trust and American Trans Air 2002-1B Pass Through Trust, AIG MATCHED FUNDING CORP. as Class A Liquidity Provider and Class B Liquidity Provider, AND WILMINGTON TRUST COMPANY, not in its individual capacity except as expressly set forth herein but solely as Subordination Agent and Trustee TABLE OF CONTENTS -----------------
Page ---- ARTICLE I DEFINITIONS............................................................................................2 ARTICLE II TRUST ACCOUNTS; CONTROLLING PARTY....................................................................20 SECTION 2.1 Agreement to Terms of Subordination; Payments from Monies Received Only....................20 SECTION 2.2 Trust Accounts.............................................................................21 SECTION 2.3 Deposits to the Collection Account and Special Payments Account............................22 SECTION 2.4 Distributions of Special Payments..........................................................22 SECTION 2.5 Designated Representatives.................................................................25 SECTION 2.6 Controlling Party..........................................................................26 ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF............................................................27 SECTION 3.1. Written Notice of Distribution............................................................27 SECTION 3.2. Distribution of Amounts on Deposit in the Collection Account..............................29 SECTION 3.3. Distribution of Amounts on Deposit Following a Triggering Event...........................31 SECTION 3.4 Other Payments.............................................................................33 SECTION 3.5. Payments to the Trustees and the Liquidity Providers......................................33 SECTION 3.6. Liquidity Facilities......................................................................33 ARTICLE IV EXERCISE OF REMEDIES.................................................................................39 SECTION 4.1. Directions from the Controlling Party.....................................................39 SECTION 4.2. Remedies Cumulative.......................................................................40 SECTION 4.3. Discontinuance of Proceedings.............................................................40 SECTION 4.4. Right of Certificateholders to Receive Payments Not to Be Impaired........................41 SECTION 4.5. Undertaking for Costs.....................................................................41 ARTICLE V DUTIES OF THE SUBORDINATION AGENT; AGREEMENTS OF TRUSTEES, ETC........................................41 SECTION 5.1. Notice of Indenture Default or Triggering Event...........................................41 SECTION 5.2. Indemnification...........................................................................42 SECTION 5.3. No Duties Except as Specified in Intercreditor Agreement..................................42 SECTION 5.4. Notice from the Liquidity Providers and Trustees..........................................42 ARTICLE VI THE SUBORDINATION AGENT..............................................................................43 SECTION 6.1. Authorization; Acceptance of Trusts and Duties............................................43 SECTION 6.2. Absence of Duties.........................................................................43 SECTION 6.3. No Representations or Warranties as to Documents..........................................43 SECTION 6.4. No Segregation of Monies; No Interest.....................................................43 SECTION 6.5. Reliance; Agents; Advice of Counsel.......................................................44
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Page ---- SECTION 6.6. Capacity in Which Acting..................................................................44 SECTION 6.7. Compensation..............................................................................44 SECTION 6.8. May Become Certificateholder..............................................................45 SECTION 6.9. Subordination Agent Required; Eligibility.................................................45 SECTION 6.10. Money to Be Held in Trust................................................................45 ARTICLE VII INDEMNIFICATION OF SUBORDINATION AGENT..............................................................45 SECTION 7.1. Indemnification...........................................................................45 ARTICLE VIII SUCCESSOR SUBORDINATION AGENT......................................................................46 SECTION 8.1. Replacement of Subordination Agent; Appointment of Successor..............................46 ARTICLE IX SUPPLEMENTS AND AMENDMENTS...........................................................................47 SECTION 9.1. Amendments, Waivers, Etc..................................................................47 SECTION 9.2. Subordination Agent Protected.............................................................49 SECTION 9.3. Effect of Supplemental Agreements.........................................................49 SECTION 9.4. Notice to Rating Agency...................................................................50 ARTICLE X MISCELLANEOUS.........................................................................................50 SECTION 10.1. Termination of Intercreditor Agreement...................................................50 SECTION 10.2. Intercreditor Agreement for Benefit of Trustees, Liquidity Providers and Subordination Agent................................................................50 SECTION 10.3. Notices..................................................................................50 SECTION 10.4. Severability.............................................................................51 SECTION 10.5. No Oral Modifications or Continuing Waivers..............................................52 SECTION 10.6. Successors and Assigns...................................................................52 SECTION 10.7. Headings.................................................................................52 SECTION 10.8. Counterpart Form.........................................................................52 SECTION 10.9. Subordination............................................................................52 SECTION 10.10. GOVERNING LAW...........................................................................54 SECTION 10.11. Submission to Jurisdiction; Waiver of Jury Trial........................................54 SECTION 10.12. Transfer................................................................................54 SECTION 10.13. Subordination Agent's Liability.........................................................55
ii INTERCREDITOR AGREEMENT ----------------------- INTERCREDITOR AGREEMENT dated as of March 28, 2002, among WILMINGTON TRUST COMPANY, a Delaware banking corporation ("WTC"), not in its individual capacity but solely as Trustee of each Trust (each as defined below), AIG Matched Funding Corp., a Delaware corporation, as Class A Liquidity Provider and Class B Liquidity Provider, and WTC, not in its individual capacity except as expressly set forth herein, but solely as Subordination Agent and trustee hereunder (in such capacity, together with any successor appointed pursuant to Article VIII hereof, the "Subordination Agent"). WHEREAS, all capitalized terms used herein shall have the respective meanings referred to in Article I hereof; WHEREAS, pursuant to each Indenture (i) in the case of each Aircraft that is owned by ATA at the time such Indenture is entered into (the "Owned Aircraft"), ATA will issue on a recourse basis two series of Equipment Notes to finance the purchase of such Aircraft and (ii) in the case of each Aircraft that is leased to ATA pursuant to a related Lease at the time such Indenture is entered into (the "Leased Aircraft"), the related Owner Trustee will issue on a nonrecourse basis two series of Equipment Notes to finance the purchase of such Aircraft; WHEREAS, pursuant to the Financing Agreements, each Trust will acquire Equipment Notes having an interest rate equal to the interest rate applicable to the Certificates to be issued by such Trust; WHEREAS, pursuant to each Trust Agreement, the Trust created thereby proposes to issue a single class of Certificates (a "Class") bearing the interest rate and having the final distribution date described in such Trust Agreement on the terms and subject to the conditions set forth therein; WHEREAS, the Company and Amtran have entered into two Certificate Purchase Agreements (together, as amended, supplemented or otherwise modified in accordance with their terms, the "Certificate Purchase Agreements"), each dated as of March 26, 2002 with Nyala Funding LLC (the "Class A Purchaser") and PK AirFinance US, Inc. (the "Class B Purchaser"), respectively, providing for the purchase of the Class A Certificates and the Class B Certificates, respectively; WHEREAS, the Company, Amtran, the Trustee, the Subordination Agent, the Escrow Agent, the Liquidity Provider, the Paying Agent, the Class A Purchaser and the Class B Purchaser concurrently herewith are entering into a Delayed Funding Implementation Agreement, dated as of the date hereof (the "Delayed Funding Implementation Agreement"), pursuant to which the parties thereto agree to supplement and modify the Operative Agreements, as defined therein; WHEREAS, the initial Liquidity Provider proposes to enter into the Class A Liquidity Facility and the Class B Liquidity Facility with the Subordination Agent, as agent for the respective Trustee of each of the two Trusts, for the benefit of the Certificateholders of such Trust; 2 WHEREAS, American International Group, Inc. will guarantee, pursuant to two separate guarantee agreements dated as of the date hereof (each, a "Guarantee Agreement") the payment obligations of AIG-MF under the Class A Liquidity Facility and the Class B Liquidity Facility, respectively; WHEREAS, it is a condition precedent to the purchase of the Class A Certificates by the Class A Purchaser and of the Class B Certificates by the Class B Purchaser that the Subordination Agent, the Trustees, and the Liquidity Providers agree to the terms of subordination set forth in this Agreement in respect of each Class of Certificates, and the Subordination Agent, the Trustees and the Liquidity Providers, by entering into this Agreement, hereby acknowledge and agree to such terms of subordination and the other provisions of this Agreement. NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms used herein that are defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) all references in this Agreement to designated "Articles", "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement; (3) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; and (4) the term "including" shall mean "including without limitation". "Acceleration" means, with respect to the amounts payable in respect of the Equipment Notes issued under any Indenture, such amounts becoming immediately due and payable by declaration or otherwise. "Accelerate", "Accelerating" and "Accelerated" have meanings correlative to the foregoing. 3 "Adjusted Expected Distributions" means with respect to the Certificates of any Trust on any Current Distribution Date the sum of (x) the amount of accrued and unpaid interest on such Certificates (excluding interest, if any, payable with respect to the Deposits related to such Trust) and (y) the greater of: (A) the difference between (a) the Pool Balance of such Certificates as of the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the original aggregate face amount of the Certificates of such Trust) and (b) the Pool Balance of such Certificates as of the Current Distribution Date calculated on the basis that (i) the principal of the Non-Performing Equipment Notes held in such Trust has been paid in full and such payments have been distributed to the holders of such Certificates, (ii) the principal of the Performing Equipment Notes held in such Trust has been paid when due (but without giving effect to any Acceleration of Performing Equipment Notes) and such payments have been distributed to the holders of such Certificates and (iii) the principal of any Equipment Notes formerly held in such Trust that have been sold pursuant to the terms hereof has been paid in full and such payments have been distributed to the holders of such Certificates, but without giving effect to any reduction in the Pool Balance as a result of any distribution attributable to Deposits occurring after the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, occurring after the initial issuance of the Certificates of such Trust); and (B) the amount of the excess, if any, of (i) the Pool Balance of such Class of Certificates as of the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the original aggregate face amount of the Certificates of such Trust), less the amount of the Deposits for such Class of Certificates as of such preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the original aggregate amount of the Deposits for such Class of Certificates) other than any portion of such Deposits thereafter used to acquire Equipment Notes pursuant to the Note Purchase Agreement, over (ii) the Aggregate LTV Collateral Amount for such Class of Certificates for the Current Distribution Date; provided that, until the date of the initial LTV Appraisals for all of the Aircraft, clause (B) above shall not apply. For purposes of calculating Adjusted Expected Distributions with respect to the Certificates of any Trust, any premium paid on the Equipment Notes held in such Trust which has not been distributed to the Certificateholders of such Trust (other than such premium or a portion thereof applied to the payment of interest on the Certificates of such Trust or the reduction of the Pool Balance of such Trust) shall be added to the amount of Adjusted Expected Distributions. "Advance", with respect to any Liquidity Facility, means any Advances as defined in such Liquidity Facility. 4 "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person. For the purposes of this definition, "control" means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities or by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Aggregate LTV Collateral Amount" means, for any Class of Certificates for any Distribution Date, the sum of the applicable LTV Collateral Amounts for each Leased Aircraft and Owned Aircraft minus the Pool Balance for each Class of Certificates, if any, senior to such Class, after giving effect to any distribution of principal on such Distribution Date with respect to such senior Class or Classes, but in no event an amount less than zero. "AIG" means American International Group, Inc., a Delaware corporation, and its successors and permitted assigns. "AIG-MF" means AIG Matched Funding Corp., a Delaware corporation, and its successors and permitted assigns. "Aircraft" means, with respect to each Indenture, the "Aircraft" referred to therein. "Amtran" means Amtran, Inc., an Indiana corporation, and its successors and permitted assigns. "Appraised Current Market Value" of any Leased Aircraft or Owned Aircraft means the lower of the average and the median of the three most recent LTV Appraisals of such Aircraft. "Appraisers" means Aircraft Information Services, Inc., Morten Beyer and Agnew, Inc. and Simat, Helliesen and Eichner, Inc. "ATA" means American Trans Air, Inc., an Indiana corporation, and its successors and permitted assigns. "ATA Bankruptcy Event" means the occurrence and continuation of any of the following: (a) the commencement of an involuntary case or other proceeding in respect of ATA in an involuntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law in the United States or seeking the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of ATA or for all or substantially all of its property, or seeking the winding-up or liquidation of its affairs and the continuation of any such case or other proceeding undismissed and unstayed for a period of ninety (90) consecutive days or an order, judgment or decree shall be entered in 5 any proceeding by any court of competent jurisdiction appointing, without the consent of ATA, a receiver, trustee or liquidator of ATA, or of any substantial part of its property, or sequestering any substantial part of the property of ATA and any such order, judgment or decree or appointment or sequestration shall be final or shall remain in force undismissed, unstayed or unvacated for a period of ninety (90) days after the date of entry thereof; or (b) the commencement by ATA of a voluntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar law in the United States, or the consent by ATA to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of ATA or for all or substantially all of its property, or ATA shall admit in writing its inability to pay its debts generally as they come due, or the making by ATA of any assignment for the benefit of creditors or the taking by ATA of any corporate action to authorize any of the foregoing. "Business Day" means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in Indianapolis, Indiana, New York, New York, or, so long as any Certificate is outstanding, the city and state in which any Trustee, the Subordination Agent or any Loan Trustee maintains its Corporate Trust Office or receives and disburses funds and, solely with respect to draws under any Liquidity Facility, that is also a "Business Day" as defined in such Liquidity Facility. "Cash Collateral Account" means the Class A Cash Collateral Account or the Class B Cash Collateral Account, as applicable. "Certificate" means a Class A Certificate or a Class B Certificate, as applicable. "Certificateholder" means any holder of one or more Certificates. "Certificate Purchase Agreements" has the meaning assigned to such term in the preliminary statements to this Agreement. "Class" has the meaning assigned to such term in the preliminary statements to this Agreement. "Class A Cash Collateral Account" means an Eligible Deposit Account in the name of the Subordination Agent maintained at an Eligible Institution, which shall be the Subordination Agent if it shall so qualify, into which all amounts drawn under the Class A Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i) shall be deposited. "Class A Certificateholder" means, at any time, any holder of one or more Class A Certificates. "Class A Certificates" means the certificates issued by the Class A Trust, substantially in the form of Exhibit A to the Class A Trust Agreement, and authenticated by the 6 Class A Trustee, representing fractional undivided interests in the Class A Trust, and any certificates issued in exchange therefor or in replacement thereof pursuant to the terms of the Class A Trust Agreement and/or the Registration Rights Agreement (including without limitation, any Exchange Certificates (as defined in the Class A Trust Agreement)). "Class A Deposits" means the Deposits with respect to the Class A Certificates. "Class A Liquidity Facility" means, initially, the Revolving Credit Agreement dated as of the date hereof, between the Subordination Agent, as agent and trustee for the Class A Trustee, and the initial Class A Liquidity Provider, and, from and after the replacement of such Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class A Liquidity Provider" means AIG Matched Funding Corp., together with any Replacement Liquidity Provider which has issued a Replacement Liquidity Facility to replace any Class A Liquidity Facility pursuant to Section 3.6(e). "Class A Purchaser" has the meaning assigned to such term in the preliminary statements to this Agreement. "Class A Trust" means American Trans Air 2002-1A Pass Through Trust created and administered pursuant to the Class A Trust Agreement. "Class A Trust Agreement" means the Pass Through Trust Agreement dated as of March 28, 2002, among ATA, Amtran and the Class A Trustee governing the creation and administration of American Trans Air 2002-1A Pass Through Trust and the issuance of the Class A Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class A Trustee" means WTC, not in its individual capacity except as expressly set forth in the Class A Trust Agreement, but solely as trustee under the Class A Trust Agreement, together with any successor trustee appointed pursuant thereto. "Class B Cash Collateral Account" means an Eligible Deposit Account in the name of the Subordination Agent maintained at an Eligible Institution, which shall be the Subordination Agent if it shall so qualify, into which all amounts drawn under the Class B Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i) shall be deposited. "Class B Certificateholder" means, at any time, any holder of one or more Class B Certificates. "Class B Certificates" means the certificates issued by the Class B Trust, substantially in the form of Exhibit A to the Class B Trust Agreement, and authenticated by the Class B Trustee, representing fractional undivided interests in the Class B Trust, and any certificates issued in exchange therefor or in replacement thereof pursuant to the terms of the 7 Class B Trust Agreement and/or the Registration Rights Agreement (including, without limitation, any Exchange Certificates (as defined in the Class B Trust Agreement)). "Class B Liquidity Facility" means, initially, the Revolving Credit Agreement dated as of the date hereof, between the Subordination Agent, as agent and trustee for the Class B Trustee, and the initial Class B Liquidity Provider and, from and after the replacement of such Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class B Liquidity Provider" means AIG Matched Funding Corp., together with any Replacement Liquidity Provider which has issued a Replacement Liquidity Facility to replace any Class B Liquidity Facility pursuant to Section 3.6(e). "Class B Purchaser" has the meaning assigned to such term in the preliminary statements to this Agreement "Class B Trust" means American Trans Air 2002-1B Pass Through Trust created and administered pursuant to the Class B Trust Agreement. "Class B Trust Agreement" means the Pass Through Trust Agreement dated as of March 28, 2002 among ATA, Amtran and the Class B Trustee governing the creation and administration of the American Trans Air 2002-1B Pass Through Trust and the issuance of the Class B Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class B Trustee" means WTC, not in its individual capacity except as expressly set forth in the Class B Trust Agreement, but solely as trustee under the Class B Trust Agreement, together with any successor trustee appointed pursuant thereto. "Class C Certificates" means pass through certificates, if any, issued by the Class C Trust representing fractional undivided interests in the Class C Trust. "Class C Trust" means the American Trans Air 2002-1C Pass Through Trust, if and when established. "Closing Date" means March 28, 2002. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and Treasury Regulations promulgated thereunder. "Collateral" has the meaning assigned to such term in the Indentures. "Collection Account" means the Eligible Deposit Account established by the Subordination Agent pursuant to Section 2.2 which the Subordination Agent shall make deposits in and withdrawals from in accordance with this Agreement. 8 "Controlling Party" means the Person entitled to act as such pursuant to the terms of Section 2.6. "Corporate Trust Office" means, with respect to any Trustee, the Subordination Agent or any Loan Trustee, the office of such Person in the city at which, at any particular time, its corporate trust business shall be principally administered. "Current Distribution Date" means a Distribution Date specified as a reference date for calculating the Adjusted Expected Distributions or Expected Distributions with respect to the Certificates of any Trust as of such Distribution Date. "Delayed Funding Implementation Agreement" has the meaning assigned to such term in the preliminary statements to this Agreement. "Delivery Period Expiry Date" means the earlier of (a) September 29, 2002, and (b) the date on which Equipment Notes with respect to all Aircraft (or Substitute Aircraft in lieu thereof) have been purchased by the Trusts in accordance with the Note Purchase Agreement. "Deposit Agreement" shall mean, with respect to each Class, prior to the Delayed Funding Date (as defined in the Delayed Funding Implementation Agreement), the Deposit Agreement pertaining to such Class dated the date hereof between the Escrow Agent and the Depositary, and on and after the Delayed Funding Date, such Deposit Agreement (to the extent of any payment to be made by the Depositary thereunder on or after the Delayed Funding Date) and the Delayed Deposit Agreement pertaining to such Class dated the date hereof between the Escrow Agent and the Depositary, in each case, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof and shall include any Replacement Deposit Agreement (as defined in the Note Purchase Agreement). "Depositary" means IntesaBCI S.p.A, acting through its New York Branch, as depositary under each Deposit Agreement, or its successors and assigns. "Deposits" with respect to any Class, shall have the meaning set forth in the Deposit Agreement pertaining to such Class. "Designated Representatives" means the Subordination Agent Representatives, the Trustee Representatives and the Provider Representatives identified under Section 2.5. "Distribution Date" means a Regular Distribution Date or a Special Distribution Date. "Dollars" or "$"means United States dollars. "Downgrade Drawing" has the meaning assigned to such term in Section 3.6(c). "Downgraded Facility" has the meaning assigned to such term in Section 3.6(c). 9 "Drawing" means an Interest Drawing, a Final Drawing, a Non-Extension Drawing or a Downgrade Drawing, as the case may be. "Eligible Deposit Account" means either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of such depository institution has a long-term unsecured debt rating from the Rating Agency and Standard and Poor's of at least A-3 or its equivalent. An Eligible Deposit Account may be maintained with a Liquidity Provider so long as such Liquidity Provider is an Eligible Institution; provided that such Liquidity Provider shall have waived all rights of set-off and counterclaim with respect to such account. "Eligible Institution" means (a) the corporate trust department of the Subordination Agent or any Trustee, as applicable, or (b) a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), which has a long-term unsecured debt rating from the Rating Agency and Standard & Poor's of at least A-3 or its equivalent. "Eligible Investments" means (a) investments in obligations of, or guaranteed by, the United States Government having maturities no later than 90 days following the date of such investment, (b) investments in open market commercial paper of any corporation incorporated under the laws of the United States of America or any state thereof with a short-term unsecured debt rating issued by Moody's and Standard & Poor's of at least P-1 and A-1, respectively, having maturities no later than 90 days following the date of such investment, (c) investments in negotiable certificates of deposit, time deposits, banker's acceptances, commercial paper or other direct obligations of, or obligations guaranteed by, commercial banks organized under the laws of the United States or of any political subdivision thereof (or any U.S. branch of a foreign bank) with issuer ratings of at least P-1 by Moody's and A-1 by Standard & Poor's, having maturities no later than 90 days following the date of such investment, or (d) investments in any U.S. money market fund registered under the Investment Company Act of 1940, as amended, which has been issued the highest rating in its category by Moody's and Standard & Poor's that invests solely in obligations described in clause (a) above; provided, however, that (x) all Eligible Investments that are bank obligations shall be denominated in U.S. dollars; and (y) the aggregate amount of Eligible Investments at any one time that are bank obligations issued by any one bank shall not be in excess of 5% of such bank's capital surplus; provided further that (1) any investment of the types described in clause (a), (b) or (c) above may be made through a repurchase agreement in commercially reasonable form with a bank or other financial institution qualifying as an Eligible Institution so long as such investment is held by a third party custodian also qualifying as an Eligible Institution, and (2) all such investments set forth in clauses (a), (b) and (c) above mature no later than the Business Day immediately preceding the next Regular Distribution Date; provided further, however, that in the case of any Eligible Investment issued by a domestic branch of a foreign bank, the income from such investment shall be from sources within the 10 United States for purposes of the Code. Notwithstanding the foregoing, no investment of the types described in clause (b) or (c) above which is issued or guaranteed by ATA or Amtran or any of their respective Affiliates shall be an Eligible Investment. "Equipment Notes" means, at any time, the Series A Equipment Notes and the Series B Equipment Notes, collectively, and in each case, any Equipment Notes issued in exchange therefor or replacement thereof pursuant to the terms of the Indentures. "Escrow Agent" means Wells Fargo Bank Northwest, National Association, as escrow agent under each Escrow and Paying Agent Agreement, together with its successors in such capacity. "Escrow and Paying Agent Agreement" shall mean, with respect to any Class, the Escrow and Paying Agent Agreement pertaining to such Class dated the date hereof among the Escrow Agent, the Trustee for such Class, the Paying Agent and the Class A Purchaser or the Class B Purchaser, as the case may be, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Expected Distributions" means, with respect to the Certificates of any Trust on any Current Distribution Date, the sum of (x) accrued and unpaid interest on such Certificates (excluding interest, if any, payable with respect to the Deposits related to such Trust) and (y) the difference between (A) the Pool Balance of such Certificates as of the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the original aggregate face amount of the Certificates of such Trust) and (B) the Pool Balance of such Certificates as of the Current Distribution Date, calculated on the basis that (i) the principal of the Equipment Notes held in such Trust has been paid when due (whether at stated maturity or upon redemption, prepayment, purchase, acceleration or otherwise) and such payments have been distributed to the holders of such Certificates and (ii) the principal of any Equipment Notes formerly held in such Trust that have been sold pursuant to the terms hereof has been paid in full and such payments have been distributed to the holders of such Certificates, but without giving effect to any reduction in the Pool Balance as a result of any distribution attributable to the Deposits occurring after the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, occurring after the initial issuance of the Certificates of such Trust). For purposes of calculating Expected Distributions with respect to the Certificates of any Trust, any premium paid on the Equipment Notes held in such Trust which has not been distributed to the Certificateholders of such Trust (other than such premium or a portion thereof applied to the payment of interest on the Certificates of such Trust or the reduction of the Pool Balance of such Trust) shall be added to the amount of such Expected Distributions. "Expiry Date" with respect to any Liquidity Facility, shall have the meaning set forth in such Liquidity Facility. 11 "Fee Letter" means the Fee Letter dated as of the date hereof among AIG Matched Funding Corp., ATA and the Subordination Agent with respect to the initial Liquidity Facilities and any fee letter entered into among the Subordination Agent, ATA and any Replacement Liquidity Provider, in each case as it may be amended, supplemented or otherwise modified from time to time. "Final Distributions" means, with respect to the Certificates of any Trust on any Distribution Date, the sum of (a) the aggregate amount of all accrued and unpaid interest on such Certificates (excluding interest, if any, payable with respect to the Deposits relating to such Trust) and (b) the Pool Balance of such Certificates as of the immediately preceding Distribution Date (less the amount of the Deposits for such Class of Certificates as of such preceding Distribution Date other than any portion of such Deposits thereafter used to acquire Equipment Notes pursuant to the Note Purchase Agreement). For purposes of calculating Final Distributions with respect to the Certificates of any Trust, any premium paid on the Equipment Notes held in such Trust which has not been distributed to the Certificateholders of such Trust (other than such premium or a portion thereof applied to the payment of interest on the Certificates of such Trust or the reduction of the Pool Balance of such Trust) shall be added to the amount of such Final Distributions. "Final Drawing" has the meaning assigned to such term in Section 3.6(i). "Final Legal Distribution Date" means, for the Class A Certificates, November 20, 2014 and for the Class B Certificates, August 20, 2009. "Financing Agreement" means each of the Participation Agreements and the Note Purchase Agreement. "Guarantee Agreement" has the meaning assigned to such term in the preliminary statements of this Agreement. "Guarantee Event" has the meaning assigned to such term in Section 3.6(c), "Indenture" means each of the Trust Indenture and Mortgages entered into by the Loan Trustee, and the Owner Trustee or ATA, pursuant to the Note Purchase Agreement, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Indenture Default" means, with respect to any Indenture, a Mortgage Event of Default under (and as defined in) any Indenture relating to a Leased Aircraft or an Event of Default under (and as defined in) an Indenture relating to an Owned Aircraft. "Interest Drawing" has the meaning assigned to such term in Section 3.6(a). 12 "Interest Payment Date" means, with respect to any Liquidity Facility, each date on which interest is due and payable under Section 3.7(c) or 3.7(d) of such Liquidity Facility on a Downgrade Drawing, Non-Extension Drawing or Final Drawing. "Investment Earnings" means investment earnings on funds on deposit in the Trust Accounts net of losses and investment expenses of the Subordination Agent in making such investments. "Lease" means, with respect to each Indenture pertaining to a Leased Aircraft, the "Lease" referred to therein. "Leased Aircraft" has the meaning assigned to such term in the preliminary statements of this Agreement. "Leased Aircraft Indenture" means, with respect to each Leased Aircraft, the Indenture pertaining thereto. "Lien" means any mortgage, pledge, lien, charge, claim, disposition of title, encumbrance, lease, sublease, sub-sublease or security interest of any kind, including, without limitation, any thereof arising under any conditional sales or other title retention agreement. "Liquidity Event of Default", with respect to any Liquidity Facility, has the meaning assigned to such term in such Liquidity Facility. "Liquidity Expenses" means all Liquidity Obligations other than (i) the principal amount of any Drawings under the Liquidity Facilities and (ii) any interest accrued on any Liquidity Obligations. "Liquidity Facility" means, at any time, the Class A Liquidity Facility or the Class B Liquidity Facility, as applicable. "Liquidity Obligations" means all principal, interest, fees and other amounts owing to the Liquidity Providers under the Liquidity Facilities, the Fee Letter, Section 7 of the Participation Agreements for Owned Aircraft or Section 9 of the Participation Agreements for Leased Aircraft. "Liquidity Provider" means, at any time, the Class A Liquidity Provider or the Class B Liquidity Provider, as applicable. "Loan Trustee" means, with respect to any Indenture, the "Mortgagee" thereunder. "LTV Appraisal" means a current fair market appraisal (which may be a "desktop" appraisal) performed by any Appraiser or any other nationally recognized appraiser on the basis of an arm's-length transaction between an informed and willing purchaser under no compulsion 13 to buy and an informed and willing seller under no compulsion to sell and both having knowledge of all relevant facts. "LTV Collateral Amount" of any Leased Aircraft or Owned Aircraft for any Class of Certificates means, on any Distribution Date, the lesser of (i) the LTV Ratio for such Class of Certificates multiplied by the Appraised Current Market Value of such Aircraft (or with respect to any such Aircraft which has suffered an Event of Loss under and as defined in the relevant Lease (in the case of a Leased Aircraft) or Indenture (in the case of an Owned Aircraft), the amount of the insurance proceeds paid to the related Loan Trustee in respect thereof to the extent then held by such Loan Trustee (and/or on deposit in the Special Payments Account) or payable to such Loan Trustee in respect thereof) and (ii) the outstanding principal amount of the Equipment Notes secured by such Aircraft after giving effect to any principal payments of such Equipment Notes on or before such Distribution Date. "LTV Ratio" means for the Class A Certificates, 51% and for the Class B Certificates, 66%. "Maximum Available Commitment" with respect to any Liquidity Facility, has the meaning assigned to such term in such Liquidity Facility. "Minimum Sale Price" means, with respect to any Aircraft or the Equipment Notes issued in respect of such Aircraft, at any time, the lesser of (a) 75% of the Appraised Current Market Value of such Aircraft and (b) the aggregate outstanding principal amount of such Equipment Notes, plus accrued and unpaid interest thereon. "Moody's" means Moody's Investors Service, Inc. "Non-Controlling Party" means, at any time, any Trustee or Liquidity Provider which is not the Controlling Party at such time. "Non-Extended Facility" has the meaning assigned to such term in Section 3.6(d). "Non-Extension Drawing" has the meaning assigned to such term in Section 3.6(d). "Non-Performing Equipment Note" means an Equipment Note issued pursuant to an Indenture that is not a Performing Equipment Note. "Note Purchase Agreement" means the Note Purchase Agreement dated as of the date hereof, among ATA, Amtran, each Trustee, the Escrow Agent, the Subordination Agent and the Paying Agent, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Officer's Certificate" of any Person means a certification signed by a Responsible Officer of such Person. 14 "Operative Agreements" means this Agreement, the Liquidity Facilities, the Escrow and Paying Agent Agreements, the Deposit Agreements, the Indentures, the Trust Agreements, the Certificate Purchase Agreements, the Delayed Funding Implementation Agreement, the Financing Agreements, the Leases, the Participation Agreements, the Fee Letter, the Equipment Notes and the Certificates, together with all exhibits and schedules included with any of the foregoing and each of the other documents and instruments referred to in the definitions of "Operative Agreements" contained in the Leases or the Indenture(s) with respect to Owned Aircraft. "Outstanding" means, when used with respect to each Class of Certificates, as of the date of determination, all Certificates of such Class theretofore authenticated and delivered under the related Trust Agreement, except: (i) Certificates of such Class theretofore cancelled by the Registrar (as defined in such Trust Agreement) or delivered to the Trustee thereunder or such Registrar for cancellation; (ii) Certificates of such Class for which money in the full amount required to make the final distribution with respect to such Certificates pursuant to Section 11.01 of such Trust Agreement has been theretofore deposited with the related Trustee in trust for the holders of such Certificates as provided in Section 4.01 of such Trust Agreement pending distribution of such money to such Certificateholders pursuant to such final distribution payment; and (iii) Certificates of such Class in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to such Trust Agreement; provided, however, that in determining whether the holders of the requisite Outstanding amount of such Certificates have given any request, demand, authorization, direction, notice, consent or waiver hereunder, any Certificates owned by Amtran, ATA or any of their Affiliates shall be disregarded and deemed not to be Outstanding, except that, in determining whether such Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Certificates that such Trustee knows to be so owned shall be so disregarded. Certificates so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the applicable Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not Amtran, ATA or any of their Affiliates. "Overdue Scheduled Payment" means any Scheduled Payment which is not in fact received by the Subordination Agent within five days after the Scheduled Payment Date relating thereto. "Owned Aircraft" has the meaning assigned to such term in the preliminary statements to this Agreement. 15 "Owned Aircraft Indenture" means, with respect to each Owned Aircraft, the Indenture pertaining to such Aircraft. "Owner Participant" with respect to each Leased Aircraft, has the meaning provided in the Lease relating thereto. "Owner Trustee" means, with respect to any Indenture pertaining to a Leased Aircraft, the Owner Trustee (as defined therein) not in its individual capacity but solely as trustee under the related owner trust agreement, together with any successor trustee appointed pursuant to such owner trust agreement. "Participation Agreement" means, with respect to each Indenture, the "Participation Agreement" referred to therein. "Payee" has the meaning assigned to such term in Section 2.4(e). "Paying Agent" means Wilmington Trust Company, as paying agent under each Escrow and Paying Agent Agreement, together with its successors in such capacity. "Performing Equipment Note" means an Equipment Note issued pursuant to an Indenture with respect to which no payment default has occurred and is continuing (without giving effect to any Acceleration); provided that in the event of a bankruptcy proceeding involving ATA under Title 11 of the United States Code (the "Bankruptcy Code"), (i) any payment default occurring before the date of the order for relief for such proceedings shall not be taken into consideration during the 60-day period under Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of the Bankruptcy Code) (the "Section 1110 Period"), (ii) any payment default occurring after the date of the order of relief in such proceeding shall not be taken into consideration if such payment default is cured under Section 1110(a)(2)(B) of the Bankruptcy Code before the later of (A) 30 days after the date of such default or (B) the expiration of the Section 1110 Period and (iii) any payment default occurring after the Section 1110 period will not be taken into consideration if such payment default is cured before the end of the grace period, if any, set forth in the related Indenture. "Performing Note Deficiency" means any time that less than 65% of the then aggregate outstanding principal amount of all Equipment Notes are Performing Equipment Notes. "Person" means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, trustee, unincorporated organization or government or any agency or political subdivision thereof. "Pool Balance" means, with respect to each Trust or the Certificates issued by any Trust, as of any date, (i) the original aggregate face amount of the Certificates of such Trust less (ii) the aggregate amount of all payments made in respect of the Certificates of such Trust or in respect of Deposits relating to such Trust, other than payments made in respect of interest or 16 premium thereon or reimbursement of any costs and expenses in connection therewith. The Pool Balance for each Trust or for the Certificates issued by any Trust as of any Distribution Date shall be computed after giving effect to any special distribution with respect to unused Deposits, any payment of principal of the Equipment Notes or payment with respect to other Trust Property held in such Trust and the distribution thereof to be made on that date. "Proceeding" means any suit in equity, action at law or other judicial or administrative proceeding. "Provider Incumbency Certificate" has the meaning assigned to such term in Section 2.5(c). "Provider Representatives" has the meaning assigned to such term in Section 2.5(c). "PTC Event of Default" means, with respect to each Trust Agreement, the failure to pay within 10 Business Days of the due date thereof: (i) the outstanding Pool Balance of the applicable Class of Certificates on the Final Legal Distribution Date for such Class or (ii) interest due on such Certificates on any Distribution Date (unless the Subordination Agent shall have made an Interest Drawing, or a withdrawal from the Cash Collateral Account with respect thereto in an aggregate amount sufficient to pay such interest and shall have distributed such amount to the Trustee entitled thereto). "Rating Agency" means, at any time, a nationally recognized rating agency which shall have been requested to rate the Certificates and which shall then be rating the Certificates. Initially, the Rating Agency shall be Moody's. "Rating Confirmation" means, with respect to any action proposed to be taken, a written confirmation from the Rating Agency that such action would not result in (i) a reduction of the rating for any Class of Certificates below the then current rating for such Class of Certificates or (ii) a withdrawal or suspension of the rating of any Class of Certificates. "Registration Rights Agreement" means the Registration Rights Agreement dated as of March 26, 2002, among the Investors (as defined therein), the Trustees, Amtran and ATA, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Regular Distribution Dates" means each February 20, May 20, August 20 and November 20, commencing on May 20, 2002; provided`, however, that, if any such day shall not be a Business Day, the related distribution shall be made on the next succeeding Business Day without additional interest. "Replacement Liquidity Facility" means, for any Trust, a revolving credit agreement issued by a Replacement Liquidity Provider in substantially the form of the replaced Liquidity Facility for such Trust, including reinstatement provisions or in such other form (which may include a letter of credit) as shall permit the Rating Agency to confirm in writing its rating 17 then in effect for each Class of Certificates (before the downgrading of such rating, if any, as a result of the downgrading of the replaced Liquidity Provider) in a face amount equal to the Required Amount for such Liquidity Facility and issued by a Replacement Liquidity Provider, provided that, if a form of Liquidity Facility that is not substantially in the form of the replaced Liquidity Facility is to be used, ATA shall have received a satisfactory opinion of tax counsel satisfactory to ATA with respect to such form of Replacement Liquidity Facility (and a copy of such opinion shall be furnished to the Subordination Agent). "Replacement Liquidity Provider" means a Person having a short-term unsecured debt rating (or, as applicable, a short-term corporate credit rating) issued by the Rating Agency or Standard & Poor's which is equal to or higher than the Threshold Rating who issues a Replacement Liquidity Facility. "Required Amount" means, with respect to each Liquidity Facility, or the Cash Collateral Account related thereto, for any Class, for any day, the sum of the aggregate amount of interest, calculated at the rate per annum equal to the Stated Interest Rate for the related Class of Certificates, that would be payable on such Class of Certificates on each of the six successive Regular Distribution Dates immediately following such day or, if such day is a Regular Distribution Date, on such day and the succeeding five Regular Distribution Dates, in each case calculated on the basis of the Pool Balance of such Class of Certificates on such date and without regard to expected future payments of principal on such Class of Certificates. "Responsible Officer" means (i) with respect to the Subordination Agent and each of the Trustees, any officer in the corporate trust administration department of the Subordination Agent or such Trustee or any other officer customarily performing functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject, (ii) with respect to the Liquidity Provider, any authorized officer of such Liquidity Provider. "Scheduled Payment" means, with respect to any Equipment Note, (i) any payment of principal or interest on such Equipment Note (other than an Overdue Scheduled Payment) due from the obligor thereon or (ii) any payment of interest on the corresponding Class of Certificates with funds drawn under any Liquidity Facility, which payment represents the installment of principal at the stated maturity of such installment of principal on such Equipment Note, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Note, or both; provided that any payment of principal of, premium, if any, or interest resulting from the redemption or purchase of any Equipment Note shall not constitute a Scheduled Payment. "Scheduled Payment Date" means, with respect to any Scheduled Payment, the date on which such Scheduled Payment is scheduled to be made. "Section 2.4(b) Fraction" has the meaning assigned to such term in Section 2.4(b). 18 "Series A Equipment Notes" means the 8.328% Series A Equipment Notes issued pursuant to each Indenture by the related Owner Trustee or ATA, as the case may be, and authenticated by the Loan Trustee thereunder, and any such secured certificate issued in exchange therefor or replacement thereof pursuant to the terms of such Indenture. "Series B Equipment Notes" means the 10.699% Series B Equipment Notes issued pursuant to each Indenture by the related Owner Trustee or ATA, as the case may be, and authenticated by the Loan Trustee thereunder, and any such secured certificate issued in exchange therefor or replacement thereof pursuant to the terms of such Indenture. "Series C Equipment Notes" means equipment notes, if any, issued pursuant to any Indenture by the related Owner Trustee or ATA, as the case may be, and authenticated by the Loan Trustee thereunder, and designated as "Series C" thereunder, and any such equipment notes issued in exchange therefor or replacement thereof pursuant to the terms of such Indenture. "Special Distribution Date" means with respect to any Special Payment, the date chosen by the Subordination Agent pursuant to Section 2.4(a) for the distribution of such Special Payment in accordance with this Agreement, whether distributed pursuant to Section 2.4 or Section 3.3 hereof; provided, however, that, if any such day shall not be a Business Day, the related distribution shall be made on the next succeeding Business Day without additional interest, whether pursuant to Section 2.4 or Section 3.3. "Special Payment" means any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note, Trust Indenture Estate or Collateral (as defined in each Indenture), including Overdue Scheduled Payments, payments in respect of the redemption or repurchase of any Equipment Note, and payments in respect of the sale of any Equipment Note to the related Owner Trustee or Owner Participant (in the case of a Leased Aircraft) or any other Person. "Special Payments Account" means the Eligible Deposit Account created pursuant to Section 2.2 as a sub-account to the Collection Account. "Standard & Poor's" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "Stated Amount" means with respect to any Liquidity Facility, the Maximum Commitment (as defined in such Liquidity Facility) of the applicable Liquidity Provider thereunder. "Stated Expiration Date" has the meaning assigned to it in Section 3.6(d). "Stated Interest Rate" means (i) with respect to the Class A Certificates, 8.328% per annum and, (ii) with respect to the Class B Certificates, 10.699% per annum, plus, in each case, an additional margin of 0.50% per annum for any period required by the Registration Rights Agreement. 19 "Subordination Agent" has the meaning assigned to it in the preamble to this Agreement. "Subordination Agent Incumbency Certificate" has the meaning assigned to such term in Section 2.5(a). "Subordination Agent Representatives" has the meaning assigned to such term in Section 2.5(a). "Substitute Aircraft" shall have the meaning set forth in the Note Purchase Agreement. "Tax" and "Taxes" mean any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, loss, damage, liability, expense, additions to tax and additional amounts or costs incurred or imposed with respect thereto) imposed or otherwise assessed by the United States of America or by any state, local or foreign government (or any subdivision or agency thereof) or other taxing authority, including, without limitation, taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation, or net worth and similar charges; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, taxes on goods and services, gains taxes, license, registration and documentation fees, customs duties, tariffs, and similar charges. "Threshold Rating" means the short-term unsecured debt rating of P-1 by Moody's or the short-term corporate credit rating of A-1 by Standard & Poor's, as the case may be. "Treasury Regulations" means regulations, including proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations. "Triggering Event" means (x) the occurrence of an Indenture Default under all of the Indentures resulting in a PTC Event of Default with respect to the most senior Class of Certificates then Outstanding, (y) the Acceleration of, or a failure to pay at final maturity, all of the outstanding Equipment Notes or (z) the occurrence of an ATA Bankruptcy Event. "Trust" means either of the Class A Trust or the Class B Trust. "Trust Accounts" has the meaning assigned to such term in Section 2.2(a). "Trust Agreement" means either of the Class A Trust Agreement or the Class B Trust Agreement. 20 "Trust Property" with respect to any Trust, has the meaning set forth in the Trust Agreement for such Trust. "Trustee" means either of the Class A Trustee or the Class B Trustee. "Trustee Incumbency Certificate" has the meaning assigned to such term in Section 2.5(b). "Trustee Representatives" has the meaning assigned to such term in Section 2.5(b). "Written Notice" means, from the Subordination Agent, any Trustee or any Liquidity Provider a written instrument executed by the Designated Representative of such Person. An invoice delivered by a Liquidity Provider pursuant to Section 3.1 in accordance with its normal invoicing procedures shall constitute Written Notice under such Section. "WTC" has the meaning assigned to such term in the preamble to this Agreement. ARTICLE II TRUST ACCOUNTS; CONTROLLING PARTY SECTION 2.1 Agreement to Terms of Subordination; Payments from Monies Received Only. (a) Each Trustee hereby acknowledges and agrees to the terms of subordination and distribution set forth in this Agreement in respect of each Class of Certificates and agrees to enforce such provisions and cause all payments in respect of the Equipment Notes and the Liquidity Facilities to be applied in accordance with the terms of this Agreement. In addition, each Trustee hereby agrees to cause the Equipment Notes purchased by the related Trust to be registered in the name of the Subordination Agent or its nominee, as agent and trustee for such Trustee, to be held in trust by the Subordination Agent solely for the purpose of facilitating the enforcement of the subordination and other provisions of this Agreement. (b) Except as otherwise expressly provided in the next succeeding sentence of this Section 2.1 or as provided in Section 2.4(b), all payments to be made by the Subordination Agent hereunder shall be made only from amounts received by it that constitute Scheduled Payments, Special Payments or payments under Section 7 of the Participation Agreements for Owned Aircraft and Section 9 of the Participation Agreements for Leased Aircraft or payments under Section 6 of the Note Purchase Agreement, and only to the extent that the Subordination Agent shall have received sufficient income or proceeds therefrom to enable it to make such payments in accordance with the terms hereof. Each of the Trustees and the Subordination Agent hereby agrees and, as provided in each Trust Agreement, each Certificateholder, by its acceptance of a Certificate, each Liquidity Provider, by entering into the Liquidity Facility to 21 which it is a party, has agreed to look solely to such amounts to the extent available for distribution to it as provided in this Agreement and to the relevant Deposits and that none of the Trustees, Owner Trustees, Loan Trustees, Owner Participants nor the Subordination Agent or WTC is personally liable to any of them for any amounts payable or any liability under this Agreement, any Trust Agreement, any Liquidity Facility or such Certificate, except (in the case of the Subordination Agent) as expressly provided herein or (in the case of the Trustees) as expressly provided in each Trust Agreement or (in the case of the Owner Trustees and the Loan Trustees) as expressly provided in any Operative Agreement. SECTION 2.2 Trust Accounts. (a) Upon the execution of this Agreement, the Subordination Agent shall establish and maintain in its name (i) the Collection Account as an Eligible Deposit Account, bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Trustees, the Certificateholders and the Liquidity Providers, and (ii) as a sub-account in the Collection Account, the Special Payments Account as an Eligible Deposit Account bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Trustees, the Certificateholders and the Liquidity Providers. The Subordination Agent shall establish and maintain the Cash Collateral Accounts pursuant to and under the circumstances set forth in Section 3.6(f) hereof. Upon such establishment and maintenance under Section 3.6(f) hereof, the Cash Collateral Accounts shall, together with the Collection Account, constitute the "Trust Accounts" hereunder. (b) Funds on deposit in the Trust Accounts shall be invested and reinvested by the Subordination Agent in Eligible Investments selected by the Liquidity Provider if such investments are reasonably available and have maturities no later than the earlier of (i) 90 days following the date of such investment and (ii) the Business Day immediately preceding the Regular Distribution Date or the date of any then specified Special Distribution Date, as the case may be, next following the date of such investment; provided, however, that following the making of a Downgrade Drawing or Non-Extension Drawing, the Subordination Agent shall invest and reinvest such amounts in Eligible Investments at the direction of ATA (or, if and to the extent so specified to the Subordination Agent by ATA with respect to any Liquidity Facility, the Liquidity Provider with respect to such Liquidity Facility); provided, further, however, that upon the occurrence and during the continuation of a Triggering Event, the Subordination Agent shall invest and reinvest such amounts in Eligible Investments in accordance with the written instructions of the Controlling Party. Unless otherwise expressly provided in this Agreement (including, without limitation, with respect to Investment Earnings on amounts on deposit in the Cash Collateral Accounts, the provisions of Section 3.6(f) hereof), any Investment Earnings shall be deposited in the Collection Account when received by the Subordination Agent and shall be applied by the Subordination Agent in the same manner as the other amounts on deposit in the Collection Account are to be applied and any losses shall be charged against the principal amount invested, in each case net of the Subordination Agent's reasonable fees and expenses in making such investments. The Subordination Agent shall not be liable for any loss resulting from any investment, reinvestment or liquidation required to be made under this Agreement other than by 22 reason of its willful misconduct or gross negligence. Eligible Investments and any other investment required to be made hereunder shall be held to their maturities except that any such investment may be sold (without regard to its maturity) by the Subordination Agent without instructions whenever such sale is necessary to make a distribution required under this Agreement. Uninvested funds held hereunder shall not earn or accrue interest. (c) The Subordination Agent shall possess all right, title and interest in all funds on deposit from time to time in the Trust Accounts and in all proceeds thereof (including all income thereon). The Trust Accounts shall be held in trust by the Subordination Agent under the sole dominion and control of the Subordination Agent for the benefit of the Trustees, the Certificateholders and the Liquidity Providers, as the case may be. If, at any time, any of the Trust Accounts ceases to be an Eligible Deposit Account, the Subordination Agent shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, to which the Rating Agency may consent) establish a new Collection Account, Special Payments Account or Cash Collateral Account, as the case may be, as an Eligible Deposit Account and shall transfer any cash and/or any investments to such new Collection Account, Special Payments Account or Cash Collateral Account, as the case may be. So long as WTC is an Eligible Institution, the Trust Accounts shall be maintained with it as Eligible Deposit Accounts. SECTION 2.3 Deposits to the Collection Account and Special Payments Account. (a) The Subordination Agent shall, upon receipt thereof, deposit in the Collection Account all Scheduled Payments received by it (other than any Scheduled Payment which by the express terms hereof is to be deposited in the Cash Collateral Account). (b) The Subordination Agent shall, on each date when one or more Special Payments are made to the Subordination Agent as holder of the Equipment Notes, deposit in the Special Payments Account the aggregate amount of such Special Payments. SECTION 2.4 Distributions of Special Payments. (a) Notice of Special Payment. Except as provided in Section 2.4(e) below, upon receipt by the Subordination Agent, as registered holder of the Equipment Notes, of any notice of a Special Payment (or, in the absence of any such notice, upon receipt by the Subordination Agent of a Special Payment), the Subordination Agent shall promptly give notice thereof to each Trustee and the Liquidity Providers. The Subordination Agent shall promptly calculate the amount of the redemption or purchase of Equipment Notes or the amount of any Overdue Scheduled Payment or the proceeds of Equipment Notes or Collateral, as the case may be, comprising such Special Payment under the applicable Indenture or Indentures and shall promptly send to each Trustee a Written Notice of such amount and the amount allocable to each Trust. Such Written Notice shall also set the distribution date for such Special Payment (a "Special Distribution Date"), which shall be the first Business Day which follows the later to occur of (x) the 15th day after the date of such Written Notice or (y) the date the Subordination Agent receives or expects to receive such Special Payment. Amounts on deposit in the Special Payments Account shall be distributed in accordance with Sections 2.4(b) and 2.4(c) hereof, as applicable. 23 (b) Redemptions and Purchases of Equipment Notes. (i) So long as no Triggering Event shall have occurred (whether or not continuing), the Subordination Agent shall make distributions pursuant to this Section 2.4(b) of amounts on deposit in the Special Payments Account on account of the redemption, purchase (including, without limitation, a purchase resulting from a sale of the Equipment Notes permitted by Article IV hereof) or prepayment of all of the Equipment Notes issued pursuant to an Indenture on the Special Distribution Date for such Special Payment in the following order of priority: first, such amount as shall be required to pay (A) the aggregate amount of all accrued, due and unpaid Liquidity Expenses then in arrears ("past due amounts") plus (B) the product of (x) the aggregate amount of all accrued, but not due and unpaid Liquidity Expenses not in arrears to such Special Distribution Date multiplied by (y) a fraction (the "Section 2.4(b) Fraction"), the numerator of which is the aggregate outstanding principal amount of Equipment Notes being redeemed, purchased or prepaid on such Special Distribution Date and the denominator of which is the aggregate outstanding principal amount of all Equipment Notes ("accrued amounts"), shall be distributed to the Liquidity Providers first in satisfaction of any past due amounts and then in satisfaction of the accrued amounts, in each case, pro rata on the basis of the amount of Liquidity Expenses owed to each Liquidity Provider; second, such amount as shall be required to pay (A) all accrued and unpaid interest (including interest accrued and unpaid on any Interest Drawing or any Applied Provider Advance (as defined in any Liquidity Facility)) then in arrears on all Liquidity Obligations plus (B) the product of (x) the aggregate amount of all accrued and unpaid interest on all Liquidity Obligations not in arrears to such Special Distribution Date (at the rate provided in the applicable Liquidity Facility) multiplied by (y) the Section 2.4(b) Fraction shall be distributed to the Liquidity Providers pro rata on the basis of the amount of such Liquidity Obligations owed to each Liquidity Provider; third, such amount as shall be required (A) if any Cash Collateral Account had been previously funded as provided in Section 3.6(f), to fund such Cash Collateral Account up to its Required Amount shall be deposited in such Cash Collateral Account, (B) if any Liquidity Facility shall become a Downgraded Facility or a Non-Extended Facility at a time when unreimbursed Interest Drawings under such Liquidity Facility have reduced the Maximum Available Commitment thereunder to zero, to deposit into the related Cash Collateral Account an amount equal to such Cash Collateral Account's Required Amount shall be deposited in such Cash Collateral Account, and (C) if, with respect to any particular Liquidity Facility, neither subclause (A) nor subclause (B) of this clause "third" are applicable, to pay or reimburse the Liquidity Provider in respect of such Liquidity Facility in an amount equal to the amount of any unreimbursed Interest Drawings under such Liquidity Facility shall be distributed to the Liquidity Providers pro rata on the basis of the amount of such Liquidity Obligations owed to each Liquidity Provider; 24 fourth, if, with respect to any particular Liquidity Facility, any amounts are to be distributed pursuant to either subclause (A) or (B) of clause "third" above, then the Liquidity Provider with respect to such Liquidity Facility shall be paid the excess of (x) the aggregate outstanding amount of unreimbursed Advances (whether or not then due) under such Liquidity Facility over (y) the Required Amount for the relevant Class, pro rata on the basis of such amounts in respect of each Liquidity Provider; fifth, such amount as shall be required to pay in full Expected Distributions to the holders of Class A Certificates on such Special Distribution Date shall be distributed to the Class A Trustee; sixth, such amount as shall be required to pay in full Expected Distributions to the holders of Class B Certificates on such Special Distribution Date shall be distributed to the Class B Trustee; seventh, if Class C Certificates are issued, such amount as shall be required to pay in full "Expected Distributions" (to be defined in a manner equivalent to the definition for other Classes of Certificates) to the holders of Class C Certificates on such Special Distribution Date shall be distributed to the Class C Trustee; and eighth, the balance, if any, of such Special Payment shall be transferred to the Collection Account for distribution in accordance with Section 3.2 hereof. For the purposes of this Section 2.4(b)(i), clause (x) of the definition of "Expected Distributions" shall be deemed to read as follows: "(x) accrued, due and unpaid interest on such Certificates together with (without duplication) accrued and unpaid interest on a portion of such Certificates equal to the outstanding principal amount of the Equipment Notes held in such Trust and being redeemed, purchased or prepaid (immediately prior to such redemption, purchase or prepayment) (in each case excluding interest, if any, payable with respect to the Deposits related to such Trust)". (ii) At any time following the occurrence of a Triggering Event (whether or not continuing), the Subordination Agent shall make distributions of amounts on deposit in the Special Payments Account on account of the redemption, prepayment or purchase of all of the Equipment Notes issued pursuant to an Indenture on the Special Distribution Date for such Special Payment in accordance with Section 3.3 hereof. (c) Other Special Payments. Except as provided in clause (e) below, any amounts on deposit in the Special Payments Account other than in respect of amounts to be distributed pursuant to Section 2.4(b) shall be distributed on the Special Distribution Date therefor in accordance with Article III hereof. 25 (d) Investment of Amounts in Special Payments Account. Any amounts on deposit in the Special Payments Account prior to the distribution thereof pursuant to Section 2.4(b) or (c) shall be invested in accordance with Section 2.2(b). Investment Earnings on such investments shall be distributed in accordance with Section 2.4(b) or (c), as the case may be. (e) Certain Payments. The Subordination Agent will distribute promptly upon receipt thereof (i) any indemnity payment or expense reimbursement received by it from the Owner Participant, the Owner Trustee, Amtran or ATA in respect of any Trustee, any Liquidity Provider, any Paying Agent, any Depositary or any Escrow Agent (collectively, the "Payees") and (ii) any compensation (including, without limitation, any fees payable to any Liquidity Provider under Section 2.03 of any Liquidity Facility) received by it from the Owner Participant, the Owner Trustee, Amtran or ATA under any Operative Agreement in respect of any Payee, directly to the Payee entitled thereto. SECTION 2.5 Designated Representatives. (a) With the delivery of this Agreement, the Subordination Agent shall furnish to each Liquidity Provider and each Trustee, and from time to time thereafter may furnish to each Liquidity Provider and each Trustee, at the Subordination Agent's discretion, or upon any Liquidity Provider's or any Trustee's request (which request shall not be made more than one time in any 12-month period), a certificate (a "Subordination Agent Incumbency Certificate") of a Responsible Officer of the Subordination Agent certifying as to the incumbency and specimen signatures of the officers of the Subordination Agent and the attorney-in-fact and agents of the Subordination Agent (the "Subordination Agent Representatives") authorized to give Written Notices on behalf of the Subordination Agent hereunder. Until each Liquidity Provider and each Trustee receives a subsequent Subordination Agent Incumbency Certificate, it shall be entitled to rely on the last Subordination Agent Incumbency Certificate delivered to it hereunder. (b) With the delivery of this Agreement, each Trustee shall furnish to the Subordination Agent, and from time to time thereafter may furnish to the Subordination Agent, at such Trustee's discretion, or upon the Subordination Agent's request (which request shall not be made more than one time in any 12-month period), a certificate (a "Trustee Incumbency Certificate") of a Responsible Officer of such Trustee certifying as to the incumbency and specimen signatures of the officers of such Trustee and the attorney-in-fact and agents of such Trustee (the "Trustee Representatives") authorized to give Written Notices on behalf of such Trustee hereunder. Until the Subordination Agent receives a subsequent Trustee Incumbency Certificate, it shall be entitled to rely on the last Trustee Incumbency Certificate delivered to it hereunder. (c) With the delivery of this Agreement, each Liquidity Provider shall furnish to the Subordination Agent, and from time to time thereafter may furnish to the Subordination Agent, at such Liquidity Provider's discretion, or upon the Subordination Agent's request (which request shall not be made more than one time in any 12-month period), a certificate (each a "Provider Incumbency Certificate") of any Responsible Officer of such Liquidity Provider certifying as to the incumbency and specimen signatures of any officer, attorney-in-fact, agent or 26 other designated representative of such Liquidity Provider respectively (in each case the "Provider Representatives" and, together with the Subordination Agent Representatives and the Trustee Representatives, the "Designated Representatives") authorized to give Written Notices on behalf of such Liquidity Provider hereunder. Until the Subordination Agent receives a subsequent Provider Incumbency Certificate, it shall be entitled to rely on the last Provider Incumbency Certificate delivered to it hereunder by the relevant Liquidity Provider. SECTION 2.6 Controlling Party. (a) The Trustees and the Liquidity Providers hereby agree that, with respect to any Indenture at any given time, the Loan Trustee thereunder will be directed (i) in taking, or refraining from taking, any action under such Indenture or with respect to the Equipment Notes issued thereunder, so long as no Indenture Event of Default has occurred and is continuing thereunder, by the holders of at least a majority of the outstanding principal amount of such Equipment Notes (provided that, for so long as the Subordination Agent is the registered holder of such Equipment Notes, the Subordination Agent shall act with respect to this clause (i) in accordance with the directions of the Trustees of Trusts for which the related Trust Properties include, in the aggregate, a majority of outstanding principal amount of such Equipment Notes), and (ii) after the occurrence and during the continuance of an Indenture Default thereunder, in taking, or refraining from taking, any action under such Indenture or with respect to such Equipment Notes, including exercising remedies thereunder (including Accelerating the Equipment Notes issued thereunder or foreclosing the Lien created thereunder on the Aircraft securing such Equipment Notes), by the Subordination Agent as directed by the Controlling Party. (b) The Person who shall be the "Controlling Party" with respect to any Indenture shall be: (x) the Class A Trustee so long as the Final Distribution on the Class A Certificates has not been made; and (y) upon payment of the Final Distributions to the Class A Certificateholders, the Class B Trustee. For purposes of giving effect to the foregoing provisions of Section 2.6(a) and this Section 2.6(b), the Trustees (other than the Controlling Party) irrevocably agree (and the Certificateholders (other than the Certificateholders represented by the Controlling Party) shall be deemed to agree by virtue of their purchase of Certificates) that the Subordination Agent, as record holder of the Equipment Notes, shall exercise its voting rights in respect of the Equipment Notes as directed by the Controlling Party and any vote so exercised shall be binding upon the Trustees and all Certificateholders. The Subordination Agent shall give written notice to all of the other parties to this Agreement promptly upon a change in the identity of the Controlling Party. Each of the parties hereto agrees that it shall not exercise any of the rights of the Controlling Party if it is not the Controlling Party hereunder; provided, however, that nothing herein contained shall prevent or prohibit any Non-Controlling Party from exercising such rights as shall be specifically granted to such Non-Controlling Party hereunder and under the other Operative Agreements. (c) Notwithstanding the foregoing, at any time after 18 months from the earliest to occur of (i) the date on which the entire Maximum Available Commitment under any 27 Liquidity Facility shall have been drawn (for any reason other than a Downgrade Drawing or a Non-Extension Drawing) and remain unreimbursed, (ii) the date on which the entire amount of any Downgrade Drawing or Non-Extension Drawing under any Liquidity Facility shall have become and remain "Applied Downgrade Advances" or "Applied Non-Extension Advances", as the case may be, under and as defined in such Liquidity Facility and (iii) the date on which all Equipment Notes shall have been Accelerated, the Liquidity Provider, if any, with the highest outstanding amount of Liquidity Obligations then owed to it and not then in default in its obligations to make any Drawing under any Liquidity Facility shall have the right to elect, by Written Notice to the Subordination Agent and each of the Trustees, to become the Controlling Party hereunder with respect to any Indenture at any time from and including the last day of such 18-month period. (d) The exercise of remedies by the Controlling Party under this Agreement shall be expressly limited by Section 4.1(a)(ii) hereof. (e) The Controlling Party shall not be entitled to require or obligate any Non-Controlling Party to provide funds necessary to exercise any right or remedy hereunder. ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF AMOUNTS RECEIVED SECTION 3.1. Written Notice of Distribution. (a) No later than 3:00 P.M. (New York City time) on the Business Day immediately preceding each Regular Distribution Date (or Special Distribution Date for purposes of Section 2.4(b) hereof, as the case may be), each of the following Persons shall deliver to the Subordination Agent a Written Notice setting forth the following information as at the close of business on such Business Day: (i) With respect to the Class A Certificates, the Class A Trustee shall set forth the amounts to be paid in accordance with clause "fifth" of Section 3.2 or Section 2.4(b), as the case may be, hereof; (ii) With respect to the Class B Certificates, the Class B Trustee shall separately set forth the amounts to be paid in accordance with clause "sixth" of Section 3.2 or Section 2.4(b), as the case may be, hereof; (iii) With respect to each Liquidity Facility, the Liquidity Provider thereunder shall separately set forth the amounts to be paid to it in accordance with clauses "first", "second", "third" and "fourth" of Section 3.2 or Section 2.4(b), as the case may be, hereof; and 28 (iv) Each Trustee shall set forth the amounts to be paid in accordance with clause "eighth" of Section 3.2 hereof. The notices required under this Section 3.1(a) may be in the form of a schedule or similar document provided to the Subordination Agent by the parties referenced therein or by any one of them, which schedule or similar document may state that, unless there has been a prepayment of the Certificates, such schedule or similar document is to remain in effect until any substitute notice or amendment shall be given to the Subordination Agent by the party providing such notice. (b) Following the occurrence of a Triggering Event, the Subordination Agent shall request the following information from the following Persons, and each of the following Persons shall, upon the request of the Subordination Agent, deliver a Written Notice to the Subordination Agent setting forth for such Person the following information: (i) With respect to the Class A Certificates, the Class A Trustee shall set forth the amounts to be paid in accordance with clauses "first" and "sixth" (to reimburse payments made by the Class A Certificateholders pursuant to subclause (iii) of clause "first" and subclause (iii) of clause "sixth" of Section 3.3 hereof) and "seventh" of Section 3.3 hereof; (ii) With respect to the Class B Certificates, the Class B Trustee shall separately set forth the amounts to be paid in accordance with clauses "first" and "sixth" (to reimburse payments made by the Class B Certificateholders pursuant to subclause (iii) of clause "first" and subclause (iii) of "sixth" of Section 3.3 hereof) and "eighth" of Section 3.3 hereof; (iii) With respect to each Liquidity Facility, the Liquidity Provider thereunder shall separately set forth the amounts to be paid to it in accordance with subclause (iii) of clause "first" and clauses "second", "third", "fourth" and "fifth" of Section 3.3 hereof; and (iv) Each Trustee shall set forth the amounts to be paid in accordance with clause "sixth" of Section 3.3 hereof. (c) At such time as a Trustee or a Liquidity Provider shall have received all amounts owing to it (and, in the case of a Trustee, the Certificateholders for which it is acting) pursuant to Sections 2.4, 3.2, 3.3 or 3.7 hereof, as applicable, and, in the case of a Liquidity Provider, its commitment under the related Liquidity Facility, shall have terminated or expired, such Person shall, by a Written Notice, so inform the Subordination Agent and each other party to this Agreement. (d) As provided in Section 6.5 hereof, the Subordination Agent shall be fully protected in relying on any of the information set forth in a Written Notice provided by any Trustee or any Liquidity Provider pursuant to paragraphs (a) through (c) above and shall have no 29 independent obligation to verify, calculate or recalculate any amount set forth in any Written Notice delivered in accordance with such paragraphs. (e) Any Written Notice delivered by a Trustee or a Liquidity Provider, as applicable, pursuant to Sections 3.1(a), 3.1(b) or 3.1(c) hereof, if made prior to 10:00 A.M. (New York City time) on any Business Day, shall be effective on the date delivered (or if delivered later on a Business Day or if delivered on a day which is not a Business Day shall be effective as of the next Business Day). Subject to the terms of this Agreement, the Subordination Agent shall as promptly as practicable comply with any such instructions; provided, however, that any transfer of funds pursuant to any instruction received after 10:00 A.M. (New York City time) on any Business Day may be made on the next succeeding Business Day. (f) In the event the Subordination Agent shall not receive from any Person any information set forth in paragraph (a) or (b) above which is required to enable the Subordination Agent to make a distribution to such Person pursuant to Section 2.4(b), 3.2 or 3.3 hereof, the Subordination Agent shall request such information and, failing to receive any such information, the Subordination Agent shall not make such distribution(s) to such Person. In such event, the Subordination Agent shall make distributions pursuant to clauses "first" through "eighth" of Section 2.4(b) or clauses "first" through "ninth" of Section 3.2 and clauses "first" through "ninth" of Section 3.3, as the case may be, to the extent it shall have sufficient information to enable it to make such distributions, and shall continue to hold any funds remaining, after making such distributions, until the Subordination Agent shall receive all necessary information to enable it to distribute any funds so withheld. (g) On such dates (but not more frequently than monthly) as any Liquidity Provider or any Trustee shall request, the Subordination Agent shall send to such party a written statement reflecting all amounts on deposit with the Subordination Agent pursuant to Section 3.1(f) hereof. SECTION 3.2. Distribution of Amounts on Deposit in the Collection Account. Except as otherwise provided in Sections 2.4, 3.1(f), 3.3, 3.4 and 3.6(b), amounts on deposit in the Collection Account (or, in the case of any amount described in Section 2.4(c), on deposit in the Special Payments Account) shall be promptly distributed on each Regular Distribution Date (or, in the case of any amount described in Section 2.4(c), on the Special Distribution Date thereof) in the following order of priority and in accordance with the information provided to the Subordination Agent pursuant to Section 3.1(a) hereof (provided that for the avoidance of doubt, any amounts received by the Trustee by noon on a Regular Distribution Date shall be distributed on such Regular Distribution Date and in no event later than the immediately succeeding Business Day): first, such amount as shall be required to pay all accrued and unpaid Liquidity Expenses owed to each Liquidity Provider shall be distributed to the Liquidity Providers pro rata on the basis of the amount of Liquidity Expenses owed to each Liquidity Provider; 30 second, such amount as shall be required to pay the aggregate amount of interest accrued and unpaid on all Liquidity Obligations (at the rate, or in the amount, provided in the applicable Liquidity Facility) shall be distributed to the Liquidity Providers pro rata on the basis of the amount of such Liquidity Obligations owed to each Liquidity Provider; third, such amount as shall be required (A) if any Cash Collateral Account had been previously funded as provided in Section 3.6(f), to fund such Cash Collateral Account up to its Required Amount shall be deposited in such Cash Collateral Account, (B) if any Liquidity Facility shall become a Downgraded Facility or a Non-Extended Facility at a time when unreimbursed Interest Drawings under such Liquidity Facility have reduced the Maximum Available Commitment thereunder to zero, to deposit into the related Cash Collateral Account an amount equal to such Cash Collateral Account's Required Amount shall be deposited in such Cash Collateral Account, and (C) if, with respect to any particular Liquidity Facility, neither subclause (A) nor subclause (B) of this clause "third" is applicable, to pay or reimburse the Liquidity Provider in respect of such Liquidity Facility in an amount equal to the amount of all Liquidity Obligations then due under such Liquidity Facility (other than amounts payable pursuant to clause "first" or "second" of this Section 3.2); fourth, if, with respect to any particular Liquidity Facility, any amounts are to be distributed pursuant to either subclause (A) or (B) of clause "third" above, then the Liquidity Provider with respect to such Liquidity Facility shall be paid the excess of (x) the aggregate outstanding amount of unreimbursed Advances (whether or not then due) under such Liquidity Facility over (y) the Required Amount for the relevant Class, pro rata on the basis of such amounts in respect of each Liquidity Provider; fifth, such amount as shall be required to pay in full Expected Distributions to the holders of the Class A Certificates on such Distribution Date shall be distributed to the Class A Trustee; sixth, such amount as shall be required to pay in full Expected Distributions to the holders of the Class B Certificates on such Distribution Date shall be distributed to the Class B Trustee; seventh, if Class C Certificates are issued, such amount as shall be required to pay in full "Expected Distributions" (to be defined in a manner equivalent to the definition for other Classes of Certificates) to the holders of Class C Certificates on such Distribution Date shall be distributed to the Class C Trustee; and eighth, such amount as shall be required to pay in full the aggregate unpaid amount of fees and expenses payable as of such Distribution Date to the Subordination Agent and each Trustee pursuant to the terms of this Agreement and the Trust 31 Agreements, as the case may be, shall be distributed to the Subordination Agent and such Trustee; and ninth, the balance, if any, of any such payment remaining thereafter shall be held in the Collection Account for later distribution in accordance with this Article III. SECTION 3.3. Distribution of Amounts on Deposit Following a Triggering Event. Except as otherwise provided in Sections 3.1(f), 3.6(b) and 3.6(k) hereof, upon the occurrence of a Triggering Event and at all times thereafter, all funds in the Collection Account or the Special Payments Account shall be promptly distributed by the Subordination Agent in the following order of priority: first, such amount as shall be required to reimburse (i) the Subordination Agent for any out-of-pocket costs and expenses actually incurred by it (to the extent not previously reimbursed) in the protection of, or the realization of the value of, the Equipment Notes or any Collateral securing such Equipment Notes, shall be applied by the Subordination Agent in reimbursement of such costs and expenses, (ii) each Trustee for any amounts of the nature described in clause (i) above actually incurred by it under the applicable Trust Agreement (to the extent not previously reimbursed), shall be distributed to such Trustee, and (iii) any Liquidity Provider or any Certificateholder for payments, if any, made by it to the Subordination Agent or any Trustee in respect of amounts described in clause (i) above, shall be distributed to such Liquidity Provider or to the applicable Trustee for the account of such Certificateholder, in each such case, pro rata on the basis of all amounts described in clauses (i) through (iii) above; second, such amount remaining as shall be required to pay all accrued and unpaid Liquidity Expenses owed to each Liquidity Provider shall be distributed to each Liquidity Provider pro rata on the basis of the amount of Liquidity Expenses owed to each Liquidity Provider; third, such amount remaining as shall be required to pay the aggregate amount of interest accrued and unpaid on all Liquidity Obligations (at the rate, or in the amount, provided in the applicable Liquidity Facility) shall be distributed to the Liquidity Providers pro rata on the basis of the amount of such Liquidity Obligations owed to each Liquidity Provider; fourth, such amount remaining as shall be required (A) if any Cash Collateral Account had been previously funded as provided in Section 3.6(f), unless (i) a Performing Note Deficiency exists and a Liquidity Event of Default shall have occurred and be continuing with respect to the relevant Liquidity Facility or (ii) a Final Drawing shall have occurred with respect to such Liquidity Facility, to fund such Cash Collateral Account up to its Required Amount (less the amount of any repayments of Interest Drawings under such Liquidity Facility while subclause (A)(i) above is applicable) shall 32 be deposited in such Cash Collateral Account, (B) if any Liquidity Facility shall become a Downgraded Facility or a Non-Extended Facility at a time when unreimbursed Interest Drawings under such Liquidity Facility have reduced the Maximum Available Commitment thereunder to zero, unless (i) a Performing Note Deficiency exists and a Liquidity Event of Default shall have occurred and be continuing with respect to the relevant Liquidity Facility or (ii) a Final Drawing shall have occurred with respect to such Liquidity Facility, to deposit into the related Cash Collateral Account an amount equal to such Cash Collateral Account's Required Amount (less the amount of any repayments of Interest Drawings under such Liquidity Facility while subclause (B)(i) above is applicable) shall be deposited in such Cash Collateral Account, and (C) if, with respect to any particular Liquidity Facility, neither subclause (A) nor subclause (B) of this clause "fourth" are applicable, to pay in full the outstanding amount of all Liquidity Obligations then due under such Liquidity Facility (other than amounts payable pursuant to clause "second" or "third" of this Section 3.3), shall be distributed to such Liquidity Provider, pro rata on the basis of the amounts of all such deficiencies and/or unreimbursed Liquidity Obligations in respect of each Liquidity Provider; fifth, if, with respect to any particular Liquidity Facility, any amounts are to be distributed pursuant to either subclause (A) or (B) of clause "fourth" above, then the Liquidity Provider with respect to such Liquidity Facility shall be paid the excess of (x) the aggregate outstanding amount of unreimbursed Advances (whether or not then due) under such Liquidity Facility over (y) the Required Amount for the relevant Class (less the amount of any repayments of Interest Drawings under such Liquidity Facility while subclause (I)(A)(i) or (I)(B)(i), as the case may be, of clause "fourth" above is applicable), pro rata on the basis of such amounts in respect of each Liquidity Provider; sixth, such amount as shall be required to reimburse or pay (i) the Subordination Agent for any Tax (other than Taxes imposed on compensation paid hereunder), expense, fee, charge or other loss incurred by or any other amount payable to the Subordination Agent in connection with the transactions contemplated hereby (to the extent not previously reimbursed), shall be applied by the Subordination Agent in reimbursement of such amount, (ii) each Trustee for any Tax (other than Taxes imposed on compensation paid under the applicable Trust Agreement), expense, fee, charge, loss or any other amount payable to such Trustee under the applicable Trust Agreements (to the extent not previously reimbursed), shall be distributed to such Trustee, and (iii) each Certificateholder for payments, if any, made by it pursuant to Section 5.2 hereof in respect of amounts described in clause (i) above, shall be distributed to the applicable Trustee for the account of such Certificateholder, in each such case, pro rata on the basis of all amounts described in clauses (i) through (iii) above; seventh, such amount remaining as shall be required to pay in full Adjusted Expected Distributions on the Class A Certificates shall be distributed to the Class A Trustee; 33 eighth, such amount remaining as shall be required to pay in full Adjusted Expected Distributions on the Class B Certificates shall be distributed to the Class B Trustee; ninth, if Class C Certificates are issued, such amount as is required to pay in full "Adjusted Expected Distributions" (to be defined in a manner equivalent to the definition for other Classes of Certificates) on the Class C Certificates shall be distributed to the Class C Trustee; tenth, such amount remaining shall be retained in the Collection Account until the immediately succeeding Distribution Date; and eleventh, if all Classes of Certificates shall have been paid in full, such amount remaining shall be distributed to the Certificateholders of the related Trust. SECTION 3.4 Other Payments. (a) Any payments received by the Subordination Agent for which no provision as to the application thereof is made in this Agreement shall be distributed by the Subordination Agent (i) in the order of priority specified in Section 3.3 hereof and (ii) to the extent received or realized at any time after the Final Distributions for each Class of Certificates have been made, in the manner provided in clause "first" of Section 3.3 hereof. (b) Except as otherwise provided in Section 3.3 hereof, if the Subordination Agent receives any Scheduled Payment after the Scheduled Payment Date relating thereto, but prior to such payment becoming an Overdue Scheduled Payment, then the Subordination Agent shall deposit such Scheduled Payment in the Collection Account and promptly distribute such Scheduled Payment in accordance with the priority of distributions set forth in Section 3.2 hereof; provided that, for the purposes of this Section 3.4(c) only, each reference in clause "eighth" of Section 3.2 to "Distribution Date" shall be deemed to mean the actual date of payment of such Scheduled Payment and each reference in clause "fifth" or "sixth" of Section 3.2 to "Distribution Date" shall be deemed to refer to such Scheduled Payment Date. SECTION 3.5. Payments to the Trustees and the Liquidity Providers. Any amounts distributed hereunder to any Liquidity Provider shall be paid to such Liquidity Provider by wire transfer of funds to the address such Liquidity Provider shall provide to the Subordination Agent. The Subordination Agent shall provide a Written Notice of any such transfer to the applicable Liquidity Provider, as the case may be, at the time of such transfer. Any amounts distributed hereunder by the Subordination Agent to any Trustee which shall not be the same institution as the Subordination Agent shall be paid to such Trustee by wire transfer funds at the address such Trustee shall provide to the Subordination Agent. SECTION 3.6. Liquidity Facilities.(a) Interest Drawings. If on any Distribution Date, after giving effect to the subordination provisions of this Agreement, the 34 Subordination Agent shall not have sufficient funds for the payment of any amounts due and owing in respect of accrued interest on the Class A Certificates or the Class B Certificates (at the Stated Interest Rate for such Class of Certificates), then, prior to 1:00 p.m.(New York City time) on such Distribution Date, the Subordination Agent shall request a drawing (each such drawing, an "Interest Drawing") under the Liquidity Facility with respect to such Class of Certificates in an amount equal to the lesser of (i) an amount sufficient to pay the amount of such accrued interest (at the Stated Interest Rate for such Class of Certificates) and (ii) the Maximum Available Commitment under such Liquidity Facility, and shall pay such amount to the Trustee with respect to such Class of Certificates in payment of such accrued interest. (b) Application of Interest Drawings. Notwithstanding anything to the contrary contained in this Agreement, (i) all payments received by the Subordination Agent in respect of an Interest Drawing under the Class A Liquidity Facility and all amounts withdrawn by the Subordination Agent from the Class A Cash Collateral Account, and payable in each case to the Class A Trustee on behalf of the Class A Certificateholders, shall be promptly distributed to the Class A Trustee and (ii) all payments received by the Subordination Agent in respect of an Interest Drawing under the Class B Liquidity Facility and all amounts withdrawn by the Subordination Agent from the Class B Cash Collateral Account, and payable in each case to the Class B Trustee on behalf of the Class B Certificateholders, shall be promptly distributed to the Class B Trustee. (c) Downgrade Drawings. If at any time (i) the short-term unsecured debt rating of any Liquidity Provider other than AIG-MF issued by the Rating Agency or Standard & Poor's is lower than the applicable Threshold Rating or in the case of AIG-MF, the short-term unsecured debt rating of AIG-MF issued by the Rating Agency is lower than the applicable Threshold Rating or (ii) so long as AIG-MF is the Liquidity Provider, the short-term unsecured debt rating of AIG issued by Standard & Poor's is lower than the applicable Threshold Rating or the related Guarantee Agreement ceases to be in full force and effect, becomes invalid or unenforceable or AIG denies its liability thereunder (any such occurrence described in clause (ii), a "Guarantee Event"), within 10 days after such downgrading or Guarantee Event (but no later than the expiration date of the Liquidity Facility issued by the relevant Liquidity Provider (the "Downgraded Facility")), such Liquidity Provider may arrange, or the Subordination Agent (in consultation with ATA), may arrange for a Replacement Liquidity Provider to issue and deliver a Replacement Liquidity Facility to the Subordination Agent. If a Downgraded Facility has not been replaced in accordance with the terms of this paragraph, the Subordination Agent shall, on such 10th day (or if such 10th day is not a Business Day, on the next succeeding Business Day) (or, if earlier, the expiration date of such Downgraded Facility), request a drawing in accordance with and to the extent permitted by such Downgraded Facility (such drawing, a "Downgrade Drawing") of all available and undrawn amounts thereunder. Amounts drawn pursuant to a Downgrade Drawing shall be maintained and invested as provided in Section 3.6(f) hereof. The applicable Liquidity Provider may also arrange for a Replacement Liquidity Provider to issue and deliver a Replacement Liquidity Facility at any time after such Downgrade Drawing so long as such Downgrade Drawing has not been reimbursed in full to such Liquidity Provider. 35 (d) Non-Extension Drawings. At any time after the second anniversary of the date of this Agreement, the Liquidity Provider of a Liquidity Facility with respect to any Class of Certificates may, at its option, notify the Subordination Agent and ATA of the early termination of such Liquidity Facility pursuant to Section 2.10 of such Liquidity Facility, (a "Non-Extended Facility"), specifying the date of early termination, which shall be not earlier than the 40th day after the date of such notice (the "Early Termination Date"). If on or prior to the 15th day prior to the Early Termination Date there shall not have been delivered to the Borrower a Replacement Liquidity Facility as provided in Section 3.6(e) hereof, the Subordination Agent shall, on such 15th day (or as soon as possible thereafter), in accordance with and to the extent permitted by the terms of the Non-Extended Facility, request a drawing under such Non-Extended Facility (such drawing, a "Non-Extension Drawing") of all available and undrawn amounts thereunder. Amounts drawn pursuant to a Non-Extension Drawing shall be maintained and invested in accordance with Section 3.6(f) hereof. (e) Issuance of Replacement Liquidity Facility. At any time, the Subordination Agent may, at its option, in consultation with ATA, arrange for a Replacement Liquidity Facility to replace the Liquidity Facility for any Class of Certificates; provided that the initial Liquidity Provider may only be replaced in whole and not in part with respect to all Liquidity Facilities and may not be replaced (except as provided in any other section of this Agreement) unless there shall have become due to the initial Liquidity Provider amounts pursuant to Section 3.1, 3.2 or 3.3 of the Liquidity Facilities and the replacement of the initial Liquidity Provider would reduce or eliminate the obligation to pay such amounts. In any such consultation, the Subordination Agent shall accept the recommendations of ATA, in the absence of a good faith reason not to do so. Notwithstanding anything to the contrary contained herein, at any time, the initial Liquidity Provider may, at its option, arrange for a Replacement Liquidity Facility to replace its Liquidity Facility, provided that such replacement will not result in any increased costs payable by the related Trust. If such Replacement Liquidity Facility is provided at any time after a Downgrade Drawing or a Non-Extension Drawing has been made, all funds on deposit in the relevant Cash Collateral Account will be returned to the Liquidity Provider being replaced. No such Replacement Liquidity Facility executed in connection therewith shall become effective and no such Replacement Liquidity Facility shall be deemed a "Liquidity Facility" under the Operative Agreements, unless and until (i) the conditions referred to in the immediately following paragraph shall have been satisfied and (ii) if such Replacement Liquidity Facility shall materially adversely affect the rights, remedies, interests or obligations of the Class A Certificateholders or the Class B Certificateholders under any of the Operative Agreements, the applicable Trustee shall have consented, in writing, to the execution and issuance of such Replacement Liquidity Facility. In connection with the issuance of each Replacement Liquidity Facility, the Subordination Agent shall (x) prior to the issuance of such Replacement Liquidity Facility, obtain written confirmation from the Rating Agency that such Replacement Liquidity Facility will not cause a reduction of the rating then in effect for any Class of Certificates by such Rating Agency (without regard to the rating of any Liquidity Provider being replaced pursuant to Section 3.6(c) or 3.6(d) hereof, (y) pay all Liquidity Obligations then owing to the replaced Liquidity 36 Provider (which payment shall be made first from available funds in the applicable Cash Collateral Account as described in clause (vii) of Section 3.6(f) hereof and thereafter from any other available source, including, without limitation, a drawing under the Replacement Liquidity Facility, it being understood that no Replacement Liquidity Facility shall become effective (other than insofar as necessary to permit the repayment of amounts owed to the replaced Liquidity Provider) until all amounts owed to the replaced Liquidity Provider have been paid) and (z) cause the issuer of the Replacement Liquidity Facility to deliver the Replacement Liquidity Facility to the Subordination Agent, together with a legal opinion opining that such Replacement Liquidity Facility is an enforceable obligation of such Replacement Liquidity Provider. Upon satisfaction of the conditions set forth in this Section 3.6(e), (i) the replaced Liquidity Facility shall terminate and (ii) such Replacement Liquidity Provider shall be deemed to be a Liquidity Provider with the rights and obligations of a Liquidity Provider hereunder and under the other Operative Agreements and such Replacement Liquidity Facility shall be deemed to be a Liquidity Facility hereunder and under the other Operative Agreements. (f) Cash Collateral Accounts; Withdrawals; Investments. In the event the Subordination Agent shall draw all available amounts under the Class A Liquidity Facility or the Class B Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or a Final Drawing shall be made as provided in the Liquidity Facility, amounts so drawn shall be deposited by the Subordination Agent in the Class A Cash Collateral Account or the Class B Cash Collateral Account, respectively. Amounts so deposited shall be invested in Eligible Investments in accordance with Section 2.2(b) hereof. Investment Earnings on amounts on deposit in the Cash Collateral Accounts shall be deposited in the Collection Account prior to giving effect to the distributions below on each Distribution Date after any such amounts are deposited in any Cash Collateral Account. The Subordination Agent shall deliver a written statement to ATA and the respective Liquidity Provider to be paid one day prior to each Distribution Date setting forth the aggregate amount of Investment Earnings held in the Cash Collateral Accounts as of such date. In addition, from and after the date funds are so deposited, the Subordination Agent shall make withdrawals from such account as follows: (i) on each Distribution Date, the Subordination Agent shall, to the extent it shall not have received funds to pay accrued and unpaid interest on the Class A Certificates (at the Stated Interest Rate for the Class A Certificates) from any other source, withdraw from the Class A Cash Collateral Account, and pay to the Class A Trustee an amount equal to the lesser of (x) an amount which, when added to the amount of interest payable by the Depositary on the Deposits with respect to the Class A Certificates on such Distribution Date, equals the amount necessary to pay accrued and unpaid interest (at the Stated Interest Rate for the Class A Certificates) on such Class A Certificates and (y) the amount on deposit in the Class A Cash Collateral Account; (ii) on each Distribution Date, the Subordination Agent shall, to the extent it shall not have received funds to pay accrued and unpaid interest on the Class B Certificates (at the Stated Interest Rate for the Class B Certificates) from any other source, withdraw from the Class B Cash Collateral Account, and pay to the Class B Trustee an amount equal 37 to the lesser of (x) an amount which, when added to the amount of interest payable by the Depositary on the Deposits with respect to the Class B Certificates on such Distribution Date, equals the amount necessary to pay accrued and unpaid interest (at the Stated Interest Rate for the Class B Certificates) on such Class B Certificates and (y) the amount on deposit in the Class B Cash Collateral Account; (iii) on each date on which the Pool Balance of the Class A Trust shall have been reduced by payments made to the Class A Certificateholders pursuant to Section 2.4, 3.2 or 3.3 hereof or pursuant to Section 2.03 of the Escrow and Paying Agent Agreement for such Class, the Subordination Agent shall withdraw from the Class A Cash Collateral Account such amount as is necessary so that, after giving effect to the reduction of the Pool Balance on such date (including any such reduction resulting from a prior withdrawal of amounts on deposit in the Class A Cash Collateral Account on such date), the Required Amount (with respect to the Class A Liquidity Facility) will be on deposit in the Class A Cash Collateral Account and shall first, pay such amount to the Class A Liquidity Provider until the Liquidity Obligations (with respect to the Class A Certificates) shall have been paid in full, and second, deposit any remaining amount in the Collection Account; (iv) on each date on which the Pool Balance of the Class B Trust shall have been reduced by payments made of the Class B Certificateholders pursuant to Section 2.4, 3.2 or 3.3 hereof or pursuant to Section 2.03 of the Escrow and Paying Agent Agreement for such Class, the Subordination Agent shall withdraw from the Class B Cash Collateral Account such amount as is necessary so that, after giving effect to the reduction of the Pool Balance on such date (including any such reduction resulting from a prior withdrawal of amounts on deposit in the Class B Cash Collateral Account on such date), the Required Amount (with respect to the Class B Liquidity Facility) will be on deposit in the Class B Cash Collateral Account and shall first, pay such amount to the Class B Liquidity Provider until the Liquidity Obligations (with respect to the Class B Certificates) shall have been paid in full, and second, deposit any remaining amount in the Collection Account; (v) if a Replacement Liquidity Facility for any Class of Certificates shall be delivered to the Subordination Agent following the date on which funds have been deposited into the Cash Collateral Account for such Class of Certificates, the Subordination Agent shall withdraw all amounts on deposit in such Cash Collateral Account and shall pay such amounts to the replaced Liquidity Provider until all Liquidity Obligations owed to such Person shall have been paid in full, and shall deposit any remaining amount in the Collection Account; and (vi) following the payment of Final Distributions with respect to any Class of Certificates, on the date on which the Subordination Agent shall have been notified by the Liquidity Provider for such Class of Certificates that the Liquidity Obligations owed to such Liquidity Provider have been paid in full, the Subordination Agent shall withdraw 38 all amounts on deposit in the Cash Collateral Account in respect of such Class of Certificates and shall deposit such amount in the Collection Account. (g) Reinstatement. With respect to any Interest Drawing under the Liquidity Facility for any Trust, upon the reimbursement of the applicable Liquidity Provider for all or any part of the amount of such Interest Drawing, together with any accrued interest thereon, the Maximum Available Commitment of such Liquidity Facility shall be reinstated by an amount equal to the amount of such Interest Drawing so reimbursed to the applicable Liquidity Provider, but not to exceed the Stated Amount for such Liquidity Facility; provided, however, that (i) such Liquidity Facility shall not be so reinstated in part or in full at any time if (x) both a Performing Note Deficiency exists and a Liquidity Event of Default shall have occurred and be continuing under such Liquidity Facility or (y) a Final Drawing shall have occurred under such Liquidity Facility. In the event that under any particular Liquidity Facility funds (i) are withdrawn from any Cash Collateral Account pursuant to clause (i), (ii) or (iii) of Section 3.6(f) hereof or (ii) such Liquidity Facility shall become a Downgraded Facility or a Non-Extended Facility at any time when unreimbursed Interest Drawings have reduced the Maximum Available Commitment to zero, then funds received by the Subordination Agent at any time other than (x) any time when a Liquidity Event of Default shall have occurred and be continuing with respect to such Liquidity Facility and a Performing Note Deficiency exists or (y) any time after a Final Drawing shall have occurred under such Liquidity Facility shall be deposited in such Cash Collateral Account as provided in clause "third" of Section 2.4(b)(i), clause "third" of Section 3.2 or clause "fourth" of Section 3.3, as applicable, and applied in accordance with Section 3.6(f) hereof. (h) Reimbursement. The amount of each drawing under the Liquidity Facilities shall be due and payable, together with interest thereon, on the dates and at the rates, respectively, provided in the Liquidity Facilities. (i) Final Drawing. Upon receipt from a Liquidity Provider of a Termination Notice with respect to any Liquidity Facility, the Subordination Agent shall, not later than the date specified in such Termination Notice, in accordance with and to the extent permitted by the terms of such Liquidity Facility, request a drawing under such Liquidity Facility of all available and undrawn amounts thereunder (a "Final Drawing"). Amounts drawn pursuant to a Final Drawing shall be maintained and invested in accordance with Section 3.6(f) hereof. (j) Adjustment of Stated Amount. Promptly following each date on which the Required Amount of the Liquidity Facility for a Class of Certificates is adjusted in accordance with the terms of such Liquidity Facility, the Subordination Agent shall, if any such Liquidity Facility provides for adjustments of the Stated Amount of such Liquidity Facility and if such adjustments are not automatic, request such Liquidity Provider for such Class of Certificates to adjust such Stated Amount to an amount equal to the Required Amount with respect to such Liquidity Facility (as calculated by the Subordination Agent after giving effect to the event leading to such adjustment). Each such request shall be made in accordance with the provisions of the applicable Liquidity Facility. 39 (k) Relation to Subordination Provisions. Interest Drawings under the Liquidity Facilities and withdrawals from the Cash Collateral Accounts, in each case, in respect of interest on the Certificates of any Class, will be distributed to the Trustee for such Class of Certificates notwithstanding Sections 2.4, 3.2, 3.3 and 3.6(h) hereof. ARTICLE IV EXERCISE OF REMEDIES SECTION 4.1. Directions from the Controlling Party. (a) (i) Following the occurrence and during the continuation of an Indenture Default under any Indenture, the Controlling Party shall direct the Subordination Agent which shall in turn direct the Loan Trustee under such Indenture in the exercise of remedies available to the holders of the Equipment Notes issued pursuant to such Indenture, including, without limitation, the ability to vote all such Equipment Notes in favor of Accelerating such Equipment Notes in accordance with, the provisions of such Indenture. Subject to the Owner Trustees' and the Owner Participants' rights, if any, set forth in the Indentures with respect to Leased Aircraft to purchase the Equipment Notes and the provisions of the next paragraph, if the Equipment Notes issued pursuant to any Indenture have been Accelerated following an Indenture Default with respect thereto, the Controlling Party may sell, assign, contract to sell or otherwise dispose of and deliver all (but not less than all) of such Equipment Notes to any Person at public or private sale, at any location at the option of the Controlling Party, all upon such terms and conditions as it may reasonably deem advisable in accordance with applicable law. (ii) Subject to the Owner Trustees' and the Owner Participants' rights, if any, set forth in the Indentures with respect to the Leased Aircraft to purchase the Equipment Notes, and notwithstanding the foregoing, so long as any Certificates remain Outstanding, during the period ending on the date which is nine months after the earlier of (x) the Acceleration of the Equipment Notes issued pursuant to any Indenture or (y) the occurrence of an ATA Bankruptcy Event, without the consent of each Trustee, (A) no Aircraft subject to the Lien of such Indenture or such Equipment Notes may be sold if the net proceeds from such sale would be less than the Minimum Sale Price for such Aircraft or such Equipment Notes, and (B) with respect to any Leased Aircraft, the amount and payment dates of rentals payable by ATA under the Lease for such Aircraft may not be adjusted, if, as a result of such adjustment, the discounted present value of all such rentals would be less than 75% of the discounted present value of the rentals payable by ATA under such Lease before giving effect to such adjustment, in each case, using the weighted average interest rate of the Equipment Notes then outstanding pursuant to such Indenture as the discount rate. (iii) At the request of the Controlling Party, the Subordination Agent may from time to time during the continuance of an Indenture Default (and before the occurrence of 40 a Triggering Event) commission LTV Appraisals with respect to the Aircraft subject to such Indenture. (iv) After a Triggering Event occurs and any Equipment Note becomes a Non-Performing Equipment Note, the Subordination Agent shall obtain LTV Appraisals for the Aircraft as soon as practicable and additional LTV Appraisals on or prior to each anniversary of the date of such initial LTV Appraisals; provided that, if the Controlling Party reasonably objects to the appraised value of the Aircraft shown in any such LTV Appraisals, the Controlling Party shall have the right to obtain or cause to be obtained substitute LTV Appraisals (including any LTV Appraisals based upon physical inspection of the Aircraft). (b) The Controlling Party shall take such actions as it may reasonably deem most effectual to complete the sale or other disposition of such Aircraft or Equipment Notes. In addition, in lieu of any sale, assignment, contract to sell or other disposition, the Controlling Party may maintain or cause the Subordination Agent to maintain possession of such Equipment Notes and continue to apply monies received in respect of such Equipment Notes in accordance with Article III hereof. In addition, in lieu of such sale, assignment, contract to sell or other disposition, or in lieu of such maintenance of possession, the Controlling Party may, subject to the terms and conditions of the related Indenture, instruct the Loan Trustee under such Indenture to foreclose on the Lien on the related Aircraft or to take any other remedial action permitted under such Indenture or under any applicable law. SECTION 4.2. Remedies Cumulative. Each and every right, power and remedy given to the Trustees, the Liquidity Providers, the Controlling Party or the Subordination Agent specifically or otherwise in this Agreement shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may, subject always to the terms and conditions hereof, be exercised from time to time and as often and in such order as may be deemed expedient by any Trustee, any Liquidity Provider, the Controlling Party or the Subordination Agent, as appropriate, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by any Trustee, any Liquidity Provider, the Controlling Party or the Subordination Agent in the exercise of any right, remedy or power or in the pursuit of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default or to be an acquiescence therein. SECTION 4.3. Discontinuance of Proceedings. In case any party to this Agreement (including the Controlling Party in such capacity) shall have instituted any Proceeding to enforce any right, power or remedy under this Agreement by foreclosure, entry or otherwise, and such Proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Person instituting such Proceeding, then and in every such case each such party shall, subject to any determination in such Proceeding, be restored to 41 its former position and rights hereunder, and all rights, remedies and powers of such party shall continue as if no such Proceeding had been instituted. SECTION 4.4. Right of Certificateholders to Receive Payments Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding but subject to each Trust Agreement, the right of any Certificateholder or any Liquidity Provider to receive payments hereunder (including without limitation pursuant to Section 2.4, 3.2 or 3.3 hereof) when due, or to institute suit for the enforcement of any such payment on or after the applicable Distribution Date, shall not be impaired or affected without the consent of such Certificateholder or Liquidity Provider. SECTION 4.5. Undertaking for Costs. In any Proceeding for the enforcement of any right or remedy under this Agreement or in any Proceeding against any Controlling Party or the Subordination Agent for any action taken or omitted by it as Controlling Party or Subordination Agent, as the case may be, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. The provisions of this Section do not apply to a suit instituted by the Subordination Agent, a Liquidity Provider or a Trustee or a suit by Certificateholders holding more than 10% of the original principal amount of any Class of Certificates. ARTICLE V DUTIES OF THE SUBORDINATION AGENT; AGREEMENTS OF TRUSTEES, ETC. SECTION 5.1. Notice of Indenture Default or Triggering Event. (a) In the event the Subordination Agent shall have actual knowledge of the occurrence of an Indenture Default or a Triggering Event, as promptly as practicable, and in any event within 10 days after obtaining knowledge thereof, the Subordination Agent shall transmit by mail or courier to the Rating Agency, the Liquidity Providers and the Trustees notice of such Indenture Default or Triggering Event, unless such Indenture Default or Triggering Event shall have been cured or waived by the Controlling Party. For all purposes of this Agreement, in the absence of actual knowledge on the part of a Responsible Officer, the Subordination Agent shall not be deemed to have knowledge of any Indenture Default, Performing Note Deficiency, Liquidity Event of Default or Triggering Event unless notified in writing by one or more Trustees, one or more Liquidity Providers or one or more Certificateholders. (b) Other Notices. The Subordination Agent will furnish to each Liquidity Provider and Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, 42 requests, demands, certificates, financial statements and other instruments furnished to the Subordination Agent as registered holder of the Equipment Notes or otherwise in its capacity as Subordination Agent to the extent the same shall not have been otherwise directly distributed to such Liquidity Provider or Trustee, as applicable, pursuant to the express provision of any other Operative Agreement. (c) Determinations and Notifications. The Subordination Agent agrees to provide to ATA, upon its request, information in its possession concerning amounts contained in, and returns earned on, any Cash Collateral Account and any other information needed for ATA to determine amounts owing to any Liquidity Provider. SECTION 5.2. Indemnification. The Subordination Agent shall not be required to take any action or refrain from taking any action under Section 5.1 (other than the first sentence thereof) or Article IV hereof unless the Subordination Agent shall have been indemnified (to the extent and in the manner reasonably satisfactory to the Subordination Agent) against any liability, cost or expense (including counsel fees and expenses) which may be incurred in connection therewith. The Subordination Agent shall not be under any obligation to take any action, or refrain from taking any action, under this Agreement and nothing contained in this Agreement shall require the Subordination Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. The Subordination Agent shall not be required to take any action under Section 5.1 (other than the first sentence of Section 5.1(a)) or Article IV hereof, nor shall any other provision of this Agreement be deemed to impose a duty on the Subordination Agent to take any action, if the Subordination Agent shall have been advised by counsel that such action is contrary to the terms hereof or is otherwise contrary to law. SECTION 5.3. No Duties Except as Specified in Intercreditor Agreement. The Subordination Agent shall not have any duty or obligation to take or refrain from taking any action under, or in connection with, this Agreement, except as expressly provided by the terms of this Agreement; and no implied duties or obligations shall be read into this Agreement against the Subordination Agent. The Subordination Agent agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Section 5.2 or 7.1 hereof) promptly take such action as may be necessary to duly discharge all Liens on any of the Trust Accounts or any monies deposited therein which result from claims against it in its individual capacity not related to its activities hereunder or any other Operative Agreement. SECTION 5.4. Notice from the Liquidity Providers and Trustees. If a Responsible Officer of any Liquidity Provider or any Trustee has notice of an Indenture Default or a Triggering Event, such Liquidity Provider or Trustee, as the case may be, shall promptly give notice thereof to all other Liquidity Providers and Trustees and to the Subordination Agent; 43 provided, however, that no such Person shall have any liability hereunder as a result of its failure to deliver any such notice. ARTICLE VI THE SUBORDINATION AGENT SECTION 6.1. Authorization; Acceptance of Trusts and Duties. Each of the Class A Trustee and the Class B Trustee hereby designates and appoints the Subordination Agent as the agent and trustee of such Trustee under the applicable Liquidity Facility and authorizes the Subordination Agent to enter into the Delayed Funding Implementation Agreement, the applicable Liquidity Facility and Fee Letter as agent and trustee for such Trustee. Each of the Liquidity Providers and the Trustees hereby designates and appoints the Subordination Agent as the Subordination Agent under this Agreement. WTC hereby accepts the duties hereby created and applicable to it as the Subordination Agent and agrees to perform the same but only upon the terms of this Agreement and agrees to receive and disburse all monies received by it in accordance with the terms hereof. The Subordination Agent shall not be answerable or accountable under any circumstances, except (a) for its own willful misconduct or gross negligence (or ordinary negligence in the handling of funds), (b) as provided in Sections 2.2 and 5.3 hereof and (c) for liabilities that may result from the material inaccuracy of any representation or warranty of the Subordination Agent made in its individual capacity in any Operative Agreement. The Subordination Agent shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Subordination Agent, unless it is proved that the Subordination Agent was negligent in ascertaining the pertinent facts. SECTION 6.2. Absence of Duties. The Subordination Agent shall have no duty to see to any recording or filing of this Agreement or any other document, or to see to the maintenance of any such recording or filing. SECTION 6.3. No Representations or Warranties as to Documents. The Subordination Agent in its individual capacity does not make nor shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement or as to the correctness of any statement contained in any thereof, except for the representations and warranties of the Subordination Agent, made in its individual capacity, under any Operative Agreement to which it is a party. The Certificateholders, the Trustees and the Liquidity Providers make no representation or warranty hereunder whatsoever. SECTION 6.4. No Segregation of Monies; No Interest. Any monies paid to or retained by the Subordination Agent pursuant to any provision hereof and not then required to be distributed to any Trustee or any Liquidity Provider as provided in Articles II and III hereof or 44 deposited into one or more Trust Accounts need not be segregated in any manner except to the extent required by such Articles II and III and by law, and the Subordination Agent shall not (except as otherwise provided in Section 2.2 hereof) be liable for any interest thereon; provided, however, that any payments received or applied hereunder by the Subordination Agent shall be accounted for by the Subordination Agent so that any portion thereof paid or applied pursuant hereto shall be identifiable as to the source thereof. SECTION 6.5. Reliance; Agents; Advice of Counsel. The Subordination Agent shall not incur liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. As to the Pool Balance of any Trust as of any date, the Subordination Agent may for all purposes hereof rely on a certificate signed by any Responsible Officer of the applicable Trustee, and such certificate shall constitute full protection to the Subordination Agent for any action taken or omitted to be taken by it in good faith in reliance thereon. As to any fact or matter relating to the Liquidity Providers or the Trustees the manner of ascertainment of which is not specifically described herein, the Subordination Agent may for all purposes hereof rely on a certificate, signed by any Responsible Officer of the applicable Liquidity Provider or Trustee, as the case may be, as to such fact or matter, and such certificate shall constitute full protection to the Subordination Agent for any action taken or omitted to be taken by it in good faith in reliance thereon. The Subordination Agent shall assume, and shall be fully protected in assuming, that each of the Liquidity Providers and each of the Trustees are authorized to enter into this Agreement and to take all action to be taken by them pursuant to the provisions hereof, and shall not inquire into the authorization of each of the Liquidity Providers and each of the Trustees with respect thereto. In the administration of the trusts hereunder, the Subordination Agent may execute any of the trusts or powers hereof and perform its powers and duties hereunder directly or through agents or attorneys and may consult with counsel, accountants and other skilled persons to be selected and retained by it at the cost of ATA, and the Subordination Agent shall not be liable for the acts or omissions of any agent appointed with due care or for anything done, suffered or omitted in good faith by it in accordance with the advice or written opinion of any such counsel, accountants or other skilled persons. SECTION 6.6. Capacity in Which Acting. The Subordination Agent acts hereunder solely as agent and trustee herein and not in its individual capacity, except as otherwise expressly provided in the Operative Agreements. SECTION 6.7. Compensation. The Subordination Agent shall be entitled to compensation, including expenses and disbursements, for all services rendered hereunder (such compensation shall be set forth in a separate fee agreement between ATA and WTC) and shall have a priority claim to the extent set forth in Article III hereof on all monies collected hereunder for the payment of such compensation, to the extent that such compensation shall not be paid by others. The Subordination Agent agrees that it shall have no right against any Trustee or 45 Liquidity Provider for any fee as compensation for its services as agent under this Agreement. The provisions of this Section 6.7 shall survive the termination of this Agreement. SECTION 6.8. May Become Certificateholder. The institution acting as Subordination Agent hereunder may become a Certificateholder and have all rights and benefits of a Certificateholder to the same extent as if it were not the institution acting as the Subordination Agent. SECTION 6.9. Subordination Agent Required; Eligibility. There shall at all times be a Subordination Agent hereunder which shall be a corporation organized and doing business under the laws of the United States of America or of any State or the District of Columbia having a combined capital and surplus of at least $100,000,000 (or the obligations of which, whether now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws of the United States of America, any State thereof or of the District of Columbia and having a combined capital and surplus of at least $100,000,000), if there is such an institution willing and able to perform the duties of the Subordination Agent hereunder upon reasonable or customary terms. Such corporation shall be a citizen of the United States of America and shall be authorized under the laws of the United States of America or any State thereof or of the District of Columbia to exercise corporate trust powers and shall be subject to supervision or examination by federal, state or District of Columbia authorities. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of any of the aforesaid supervising or examining authorities, then, for the purposes of this Section 6.9, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Subordination Agent shall cease to be eligible in accordance with the provisions of this Section, the Subordination Agent shall resign immediately in the manner and with the effect specified in Section 8.1. SECTION 6.10. Money to Be Held in Trust. All Equipment Notes, monies and other property deposited with or held by the Subordination Agent pursuant to this Agreement shall be held in trust for the benefit of the parties entitled to such Equipment Notes, monies and other property. All such Equipment Notes, monies or other property shall be held in the Trust Department of the institution acting as Subordination Agent hereunder. ARTICLE VII INDEMNIFICATION OF SUBORDINATION AGENT SECTION 7.1. Indemnification. The Subordination Agent shall be indemnified hereunder to the extent and in the manner described in Section 7 of the Participation Agreements 46 for Owned Aircraft, Section 9 of the Participation Agreements for Leased Aircraft and Section 6 of the Note Purchase Agreement. The indemnities contained in such Sections of such agreements shall survive the termination of this Agreement. ARTICLE VIII SUCCESSOR SUBORDINATION AGENT SECTION 8.1. Replacement of Subordination Agent; Appointment of Successor. The Subordination Agent may resign at any time by so notifying each Trustee and each Liquidity Provider. The Controlling Party may remove the Subordination Agent for cause by so notifying the Subordination Agent and may appoint a successor Subordination Agent. The Controlling Party shall remove the Subordination Agent if: (1) the Subordination Agent fails to comply with Section 6.9 hereof; (2) the Subordination Agent is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Subordination Agent or its property; or (4) the Subordination Agent otherwise becomes incapable of acting. If the Subordination Agent resigns or is removed or if a vacancy exists in the office of Subordination Agent for any reason (the Subordination Agent in such event being referred to herein as the retiring Subordination Agent), the Controlling Party shall promptly appoint a successor Subordination Agent. A successor Subordination Agent shall deliver (x) a written acceptance of its appointment as Subordination Agent hereunder to the retiring Subordination Agent and (y) a written assumption of its obligations hereunder and under each Liquidity Facility to each party hereto, upon which the resignation or removal of the retiring Subordination Agent shall become effective, and the successor Subordination Agent shall have all the rights, powers and duties of the Subordination Agent under this Agreement. The successor Subordination Agent shall mail a notice of its succession to the Liquidity Providers and the Trustees. The retiring Subordination Agent shall promptly transfer its rights under each of the Liquidity Facilities and all of the property held by it as Subordination Agent to the successor Subordination Agent. If a successor Subordination Agent does not take office within 60 days after the retiring Subordination Agent resigns or is removed, the retiring Subordination Agent or one or more of the Trustees may petition any court of competent jurisdiction for the appointment of a successor Subordination Agent. 47 If the Subordination Agent fails to comply with Section 6.9 hereof (to the extent applicable), one or more of the Trustees, one or more of the Liquidity Providers may petition any court of competent jurisdiction for the removal of the Subordination Agent and the appointment of a successor Subordination Agent. Notwithstanding the foregoing, no resignation or removal of the Subordination Agent shall be effective unless and until a successor has been appointed. No appointment of a successor Subordination Agent shall be effective unless and until the Rating Agency shall have delivered a Rating Confirmation. ARTICLE IX SUPPLEMENTS AND AMENDMENTS SECTION 9.1. Amendments, Waivers, Etc. (a) Except as provided in Section 9.1(b), this Agreement may not be supplemented, amended or modified without the consent of each Trustee (acting with the consent of holders of Certificates of the related Class evidencing interests in the related Trust aggregating not less than a majority in interest in such Trust or as otherwise authorized pursuant to the relevant Trust Agreement), the Subordination Agent and each Liquidity Provider; provided, however, that this Agreement may be supplemented, amended or modified without the consent of any Trustee if such supplement, amendment or modification (i) is in accordance with Section 9.1(d) hereof and does not materially adversely affect such Trustee or the holders of the related Class of Certificates or (ii) cures an ambiguity or inconsistency or does not materially adversely affect such Trustee or the holders of the related Class of Certificates. Notwithstanding the foregoing, without the consent of each Certificateholder and each Liquidity Provider, no supplement, amendment or modification of this Agreement may (i) reduce the percentage of the interest in any Trust evidenced by the Certificates issued by such Trust necessary to consent to modify or amend any provision of this Agreement or to waive compliance therewith or (ii) except as provided in Section 9.1(c), modify Section 2.4, 3.2 or 3.3 hereof, relating to the distribution of monies received by the Subordination Agent hereunder from the Equipment Notes or pursuant to the Liquidity Facilities. Nothing contained in this Section shall require the consent of a Trustee at any time following the payment of Final Distributions with respect to the related Class of Certificates. (b) Notwithstanding any provision of this Agreement, upon and simultaneously with the issuance of the Additional Certificates (as defined in the Delayed Funding Implementation Agreement), this Agreement shall be forthwith amended as provided in the Delayed Funding Implementation Agreement, without any need for further action on the part of any party hereto and without any consent of any of the Certificateholders. (c) In the event that the Subordination Agent, as the registered holder of any Equipment Notes, receives a request for its consent to any amendment, modification, consent or 48 waiver under such Equipment Notes, the Indenture pursuant to which such Equipment Notes were issued, or the related Lease, Participation Agreement or other related document, (i) if no Indenture Default shall have occurred and be continuing with respect to such Indenture, the Subordination Agent shall request directions from the Trustee of the Trust which holds each series of such Equipment Notes and shall vote or consent in accordance with the directions of such Trustee, and (ii) if any Indenture Default (which, in the case of any Indenture pertaining to a Leased Aircraft, has not been cured by the applicable Owner Trustee or the applicable Owner Participant, if applicable, pursuant to Section 4.03 of such Indenture) shall have occurred and be continuing with respect to such Indenture, the Subordination Agent will exercise its voting rights as directed by the Controlling Party, subject to Sections 4.1 and 4.4 hereof; provided that no such amendment, modification or waiver shall, without the consent of each Liquidity Provider, reduce the amount of rent, supplemental rent termination values, purchase price or stipulated loss values payable by ATA under any Lease or reduce the amount of principal or interest payable by ATA under any Equipment Note issued under any Indenture in respect of an Owned Aircraft; and provided further that no amendment of or supplement to any Indenture, any Lease, any Purchase Agreement, any Purchase Agreement Assignment, any Consent and Agreement, any Engine Warranty Assignment, the Guarantee, the Note Purchase Agreement or any Participation Agreement (the terms "Purchase Agreement", "Purchase Agreement Assignment", "Consent and Agreement", "Engine Warranty Assignment" and "Guarantee" having the meanings specified in the Participation Agreements or the Note Purchase Agreement) or waiver or modification of the terms of, or consent under, any thereof, shall, without the consent of each Liquidity Provider, have any of the effects listed in the proviso to Section 9.01(b) of such Indenture, if such Indenture is an Leased Aircraft Indenture, or 10.01(b) of such Indenture if such Indenture is an Owned Aircraft Indenture. (d) If with respect to any Owned Aircraft, ATA issues Class C Certificates, this Agreement shall be amended to provide for the subordination of such Class C Certificates to the Class A Certificates and the Class B Certificates substantially in the same manner as the Class B Certificates are subordinated hereunder to the Class A Certificates. The amendments to this Agreement to give effect to the issuance of any Class C Certificates shall include, without limitation: (i) the trustee of the Class C Trust shall be added as a party to this Agreement; (ii) the definitions of "Cash Collateral Account," "Certificate," "Class," "Equipment Notes," "Final Legal Distribution Date," "Liquidity Facilities," "Liquidity Provider," "LTV Ratio" "Stated Interest Rate," "Trust," "Trust Agreement," "Controlling Party" shall be revised, as appropriate, to reflect the issuance of Class C Certificates (and the subordination thereof); and (iii) the provisions of this Agreement governing payments with respect to Certificates and related notices, including, without limitation, Sections 2.4, 3.1, 3.2, 3.3 49 and 3.6(e), shall be revised to provide for distributions on the Class C Certificates after payment of all relevant distributions on the Class B Certificates. If, with respect to any Aircraft, Series C Equipment Notes are issued to any Person other than the Class C Trust, this Agreement shall be amended by written agreement of ATA and the Subordination Agent to (i) provide for each holder of a Series C Equipment Note to be bound by the provisions of Section 2.6(a) hereof so that the Controlling Party shall, among other things, be entitled to direct the Loan Trustee as provided therein (and such Series C Equipment Notes shall make effective provision therefor so as to bind each holder thereof to such provisions of Section 2.6(a) hereof) and (ii) to revise the definitions of "Controlling Party" and "Equipment Notes", as appropriate, to reflect the issuance of the Series C Equipment Notes (and the prior rights, as against the holders of such Series C Equipment Notes, of the Class A Trustee and the Class B Trustee to be such "Controlling Party"). Each Liquidity Provider hereby agrees and confirms that (i) it shall be deemed to consent to the issuance of any Class C Certificates and Series C Equipment Notes and the amendments to this Agreement made in connection therewith in accordance with this Section 9.1 and (ii) any such issuance and amendments shall not affect any of its respective obligations under its Liquidity Facility or any other document relating to the Certificates to which it is a party. The parties hereto agree that no amendments shall be made to this Agreement pursuant to this Section 9.1(d) unless the Rating Agency shall have provided written confirmation that the issuance of the Class C Certificates will not cause a reduction of the rating then in effect for any Class of Certificates by such Rating Agency. (e) Without the consent of each Liquidity Provider, the Trustee for each Class of Certificates agrees that it will not consent to any amendment or modification of, or grant any waiver with respect to, the Escrow and Paying Agent Agreement to which it is a party or the Deposit Agreement with respect to such Class. SECTION 9.2. Subordination Agent Protected. If, in the opinion of counsel or the reasonable opinion of the institution acting as the Subordination Agent hereunder, any document required to be executed pursuant to the terms of Section 9.1 adversely affects any right, duty, immunity or indemnity with respect to it under this Agreement or any Liquidity Facility, the Subordination Agent may in its discretion decline to execute such document. SECTION 9.3. Effect of Supplemental Agreements. Upon the execution of any amendment, consent or supplement hereto pursuant to the provisions hereof, this Agreement shall be and be deemed to be and shall be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Agreement of the parties hereto and beneficiaries hereof shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental agreement shall be and be deemed to be and shall 50 be part of the terms and conditions of this Agreement for any and all purposes. In executing or accepting any supplemental agreement permitted by this Article IX, the Subordination Agent shall be entitled to receive, and shall be fully protected in relying upon, an opinion of counsel stating that the execution of such supplemental agreement is authorized or permitted by this Agreement. SECTION 9.4. Notice to Rating Agency. Promptly following its receipt of each amendment, consent, modification, supplement or waiver contemplated by this Article IX, the Subordination Agent shall send a copy thereof to the Rating Agency. ARTICLE X MISCELLANEOUS SECTION 10.1. Termination of Intercreditor Agreement. Following payment of Final Distributions with respect to each Class of Certificates and the payment in full of all Liquidity Obligations to the Liquidity Providers and provided that there shall then be no other amounts due to the Certificateholders, the Trustees, the Liquidity Providers and the Subordination Agent hereunder or under the Trust Agreements, and that the commitment of the Liquidity Providers under the Liquidity Facilities shall have expired or been terminated, this Agreement and the trusts created hereby shall terminate and this Agreement shall be of no further force or effect. Except as aforesaid or otherwise provided, this Agreement and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. SECTION 10.2. Intercreditor Agreement for Benefit of Trustees, Liquidity Providers and Subordination Agent. Subject to the second sentence of Section 10.6 and the provisions of Sections 4.4 and 9.1, nothing in this Agreement, whether express or implied, shall be construed to give to any Person other than the Trustees, the Liquidity Providers and the Subordination Agent any legal or equitable right, remedy or claim under or in respect of this Agreement. SECTION 10.3. Notices. Unless otherwise expressly specified or permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Agreement to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy and (i) if to the Subordination Agent, addressed to at its office at: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890 51 Facsimile: (302) 636-4140 Attention: Corporate Trust Administration (ii) if to any Trustee addressed to it at its office at: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890 Facsimile: (302) 636-4140 Attention: Corporate Trust Administration (iii) if to any Liquidity Provider, addressed to it at its office at: prior to April 7, 2002: AIG Matched Funding Corp. 100 Nyala Farm Westport, CT 06880 Facsimile: (203) 222-4780 Attention: Chief Financial Officer on or after April 7, 2002: AIG Matched Funding Corp. 50 Danbury Road Wilton, CT 06897-4444 Facsimile: (203) 222-4780 Attention: Chief Financial Officer Whenever any notice in writing is required to be given by any Trustee, Liquidity Provider or the Subordination Agent to any of the other of them, such notice shall be deemed given and such requirement satisfied when such notice is received unless received outside of business hours, in which case on the open of business on the next Business Day. SECTION 10.4. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the 52 extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 10.5. No Oral Modifications or Continuing Waivers. No terms or provisions of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other Person against whom enforcement of the change, waiver, discharge or termination is sought and any other party or other Person whose consent is required pursuant to this Agreement and any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given. SECTION 10.6. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and assigns of each, all as herein provided. SECTION 10.7. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 10.8. Counterpart Form. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same agreement. SECTION 10.9. Subordination. (a) As between the Liquidity Providers, on the one hand, and the Trustees and the Certificateholders, on the other hand, and as among the Trustees, this Agreement shall be a subordination agreement for purposes of Section 510 of the United States Bankruptcy Code, as amended from time to time. (b) Notwithstanding the provisions of this Agreement, if prior to the payment in full to the Liquidity Providers of all Liquidity Obligations then due and payable, any party hereto shall have received any payment or distribution in respect of Equipment Notes or any other amount under the Indentures or other Operative Agreements which, had the subordination provisions of this Agreement been properly applied to such payment, distribution or other amount, would not have been distributed to such Person, then such payment, distribution or other amount shall be received and held in trust by such Person and paid over or delivered to the Subordination Agent for application as provided herein. (c) If any Trustee, any Liquidity Provider or the Subordination Agent receives any payment in respect of any obligations owing hereunder (or, in the case of the Liquidity Providers, in respect of the Liquidity Obligations), which is subsequently invalidated, declared preferential, set aside and/or required to be repaid to a trustee, receiver or other party, then, to the extent of such payment, such 53 obligations (or, in the case of the Liquidity Providers, such Liquidity Obligations) intended to be satisfied shall be revived and continue in full force and effect as if such payment had not been received. (d) The Trustees (on behalf of themselves and the holders of Certificates), the Liquidity Providers and the Subordination Agent confirm that the payment priorities specified in Sections 2.4, 3.2 and 3.3 shall apply in all circumstances, notwithstanding the fact that the obligations owed to the Trustees and the holders of Certificates are secured by certain assets and the Liquidity Obligations may not be so secured. The Trustees expressly agree (on behalf of themselves and the holders of Certificates) not to assert priority over the holders of Liquidity Obligations (except as specifically set forth in Section 2.4, 3.2 or 3.3) due to their status as secured creditors in any bankruptcy, insolvency or other legal proceeding. (e) Each of the Trustees (on behalf of themselves and the holders of Certificates), the Liquidity Providers and the Subordination Agent may take any of the following actions without impairing its rights under this Agreement: (i) obtain a Lien on any property to secure any amounts owing to it hereunder, including, in the case of the Liquidity Providers, the Liquidity Obligations, (ii) obtain the primary or secondary obligation of any other obligor with respect to any amounts owing to it hereunder, including, in the case of the Liquidity Providers, any of the Liquidity Obligations, (iii) renew, extend, increase, alter or exchange any amounts owing to it hereunder, including, in the case of the Liquidity Providers, any of the Liquidity Obligations, or release or compromise any obligation of any obligor with respect thereto, (iv) refrain from exercising any right or remedy, or delay in exercising such right or remedy, which it may have, or (v) take any other action which might discharge a subordinated party or a surety under applicable law; provided, however, that the taking of any such actions by any of the Trustees, the Liquidity Providers or the Subordination Agent shall not prejudice the rights or adversely affect the obligations of any other party under this Agreement; (iv) refrain from exercising any right or remedy, or delay in exercising such right or remedy, which it may have, or (v) take any other action which might discharge a subordinated party or a surety under applicable law. 54 SECTION 10.10. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. SECTION 10.11. Submission to Jurisdiction; Waiver of Jury Trial. (a) Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement, or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York located in the City of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to each party hereto at its address set forth in Section 10.3 hereof, or at such other address of which the other parties shall have been notified pursuant thereto; and (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (b) EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including, without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each of the parties warrants and represents that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with such legal counsel. THIS WAIVER CANNOT BE MODIFIED ORALLY. SECTION 10.12. Transfer. Except as provided herein, no party hereto shall be entitled to assign or otherwise transfer this Agreement (or any interest herein) other than (in the case of the Subordination Agent or Trustee) to a successor subordination agent or trustee, as the 55 case may be, and any purported assignment in violation hereof shall be void. This Agreement shall be binding upon the parties hereto and their respective successors and (in the case of the Subordination Agent) permitted assigns. SECTION 10.13. Subordination Agent's Liability. Notwithstanding anything contained herein to the contrary, it is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Wilmington Trust Company in connection with its role as Pass Through Trustee and Subordination Agent, not individually or personally but solely as Pass Through Trustee and Subordination Agent, in the exercise of the powers and authority conferred and vested in it under the Pass Through Trust Agreement and herein respectively, (b) each of the representations, undertakings and agreements herein made on the part of the Pass Through Trustee or Subordination Agent is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose for binding only the Pass Through Trustee or Subordination Agent, as the case may be, and (c) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Pass Through Trustee or Subordination Agent, or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Pass Through Trustee or Subordination Agent under this Agreement or the other related documents. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written, and acknowledge that this Agreement has been made and delivered in the City of New York, and this Agreement has become effective only upon such execution and delivery. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee for each of the Trusts By -------------------------------------- Name: Title: AIG MATCHED FUNDING CORP. as Class A Liquidity Provider and Class B Liquidity Provider By -------------------------------------- Name: Title: WILMINGTON TRUST COMPANY, not in its individual capacity except as expressly set forth herein but solely as Subordination Agent and trustee By -------------------------------------- Name: Title: EX-4.10 10 file009.txt REGISTRATION RIGHTS AGREEMENT EXECUTION COPY Registration Rights Agreement Dated as of March 28, 2002 among AMERICAN TRANS AIR, INC., AMTRAN, INC. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee under American Trans Air 2002-1A Pass Through Trust and American Trans Air 2002-1B Pass Through Trust and NYALA FUNDING LLC and PK AIRFINANCE US, INC. REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of March 28, 2002, among American Trans Air, Inc., an Indiana corporation (the "Company"), Amtran, Inc., an Indiana corporation ("Amtran"), Wilmington Trust Company, not in its individual capacity but solely as trustee under each of the Trusts (as defined below), and Nyala Funding LLC and PK AirFinance US, Inc. (collectively, the "Investors"). This Agreement is made pursuant to (i) the Certificates Purchase Agreement dated as of March 28, 2002 among the Company, Amtran, and Nyala Funding LLC (the "Class A Certificates Purchase Agreement"), which provides that the Trustee will issue and sell $111,716,000.00 principal amount of the pass through certificates of the Class A Trust (as defined below) and (ii) the Certificates Purchase Agreement dated as of March 28, 2002 among the Company, Amtran, Inc. and PK AirFinance US, Inc. (the "Class B Certificates Purchase Agreement") which provides that the Trustee will issue and sell $31,131,000.00 principal amount of the pass through certificates of the Class B Trust (as defined below) (the Class A Trust and Class B Trust together, the "Trusts" (and each a "Trust") and such pass through certificates of the Trusts, together, the "Initial Certificates"), in each case with Escrow Receipts (as defined below) attached thereto. In order to induce the Investors to enter into the Certificates Purchase Agreements, the Company and Amtran have agreed to provide the Investors and their direct and indirect transferees the exchange and registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Certificates Purchase Agreements. The Company and Amtran have contemporaneously herewith entered into two separate letter agreements (i) one with the Nyala Funding LLC and AIG Financial Products Corp. providing for the purchase of an additional $91,896,000.00 principal amount of the Class A Certificates (the "Additional Class A Certificates") and (ii) one with PK AirFinance US, Inc. providing for the purchase of an additional $26,904,000.00 principal amount of the Class B Certificates (the "Additional Class B Certificates", and together with the Additional Class A Certificates, the "Additional Certificates"), in each case on October 15, 2002 or such other date mutually agreed to by the Company, Amtran, Nyala Funding LLC and PK AirFinance US, Inc. Upon issuance, the Additional Certificates shall be subject to the terms of this Agreement as set forth herein. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended from time to time. "1934 Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. 2 "Additional Certificates" shall have the meaning set forth in the preamble of this Agreement. "Additional Class A Certificates" shall have the meaning set forth in the preamble of this Agreement. "Additional Class B Certificates" shall have the meaning set forth in the preamble of this Agreement. "Class A Certificates Purchase Agreement" shall have the meaning set forth in the preamble of this Agreement. "Class B Certificates Purchase Agreement" shall have the meaning set forth in the preamble of this Agreement. "Class A Trust" shall mean the American Trans Air 2002-1A Pass Through Trust. "Class B Trust" shall mean the American Trans Air 2002-1B Pass Through Trust. "Certificates Purchase Agreements" shall mean the Class A Certificates Purchase Agreement and the Class B Certificates Purchase Agreement. "Closing Date" shall mean the Closing Date as defined in the Certificates Purchase Agreements. "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors. "Deposit" shall have the meaning set forth in the Deposit Agreements. "Deposit Agreement" shall have the meaning set forth in the Certificates Purchase Agreement related to such Trust. "Equipment Notes" shall have the meaning set forth in the Pass Through Trust Agreements for the Trusts. "Escrow Receipts" shall, with respect to the pass through certificates issued by each Trust, have the meaning set forth in the Certificates Purchase Agreement related to such Trust. "Exchange Certificates" shall mean the pass through certificates issued under the Pass Through Trust Agreements and otherwise containing terms identical in all material respects to the Initial Certificates and Additional Certificates (except that, with respect to the Exchange Certificates of each Trust, (i) interest thereon shall accrue as set forth in Section 2(a) hereof, (ii) the transfer restrictions thereon shall be eliminated, (iii) certain provisions relating to an increase in the stated rate of interest thereon shall be eliminated and (iv) such Exchange Certificates shall initially be available only in book-entry form), 3 to be offered to Holders of Initial Certificates and Additional Certificates in exchange for Initial Certificates and Additional Certificates pursuant to the Exchange Offer. "Exchange Date" shall have the meaning set forth in Section 2(a)(ii) hereof. "Exchange Offer" shall mean the exchange offer by Amtran and the Company of Exchange Certificates for Registrable Certificates pursuant to Section 2(a) hereof. "Exchange Offer Registration" shall mean a registration under the 1933 Act effected pursuant to Section 2(a) hereof. "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Holder" shall mean the Investors, for so long as they own any Registrable Certificates, and each of their successors, assigns and direct and indirect transferees who become registered owners of Registrable Certificates under the Pass Through Trust Agreements; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Holder" shall include Participating Broker-Dealers. "Initial Certificates" shall have the meaning set forth in the preamble of this Agreement. "Investors" shall have the meaning set forth in the preamble of this Agreement. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Certificates; when indicated by context, the term "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Certificates issued by each Trust; provided that whenever the consent or approval of Holders of a specified percentage or principal amount of Registrable Certificates is required hereunder, Registrable Certificates held by Amtran, the Company or any of their affiliates (as such term is defined in Rule 405 under the 1933 Act) (other than the Investors or subsequent Holders of Registrable Certificates if such subsequent Holders are deemed to be such affiliates solely by reason of their holding of such Registrable Certificates) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount. "Participating Broker-Dealers" shall have the meaning set forth in Section 4(a) hereof. "Pass Through Trust Agreements" shall mean each of the Pass Through Trust Agreements dated as of March 28, 2002 relating to the Initial Certificates and the Additional Certificates among the Company, Amtran, Inc. and the Trustee, as may be amended from time to time in accordance with the terms thereof. 4 "Person" shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Certificates covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including all documents incorporated by reference therein. "Registrable Certificates" shall mean the Initial Certificates and the Additional Certificates; provided, however, that an Initial Certificate or Additional Certificate shall cease to be a Registrable Certificate (i) when a Registration Statement with respect to such Initial Certificate or Additional Certificate shall have been declared effective under the 1933 Act and such Initial Certificate or Additional Certificate shall have been disposed of pursuant to such Registration Statement, (ii) when such Initial Certificate or Additional Certificate has been sold to the public pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the 1933 Act or may then be sold to the public pursuant to paragraph (k) of Rule 144 (or any similar provision then in force) by Holders other than "affiliates" or former "affiliates" (as such term is defined in paragraph (a) of Rule 144) of Amtran or the Company; (iii) when such Initial Certificate or Additional Certificate shall have ceased to be outstanding. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by Amtran, the Company and the Trustees with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. ("NASD") registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state or other securities or blue sky laws and compliance with the rules of the NASD (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with state or other securities or blue sky qualification of any of the Exchange Certificates or Registrable Certificates), (iii) all expenses incurred in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, the Exchange Certificates, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and disbursements relating to the qualification of the Pass Through Trust Agreements under applicable securities laws, (vi) the fees and disbursements of counsel for Amtran and the Company and of the independent public accountants of Amtran and the Company, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, (vii) the reasonable fees and expenses of the Trustees, including their counsel, and any escrow agent, administrative agent, security agent or custodian, (viii) in the case of a Shelf Registration Statement, the reasonable fees and disbursements of one counsel for the Holders of Registrable Certificates issued by the Class A Trust and subject to such Registration Statement (which counsel shall be selected by the Majority Holders of the Class A Trust) and one counsel for the Holders of Registrable Certificates 5 issued by the Class B Trust and subject to such Registration Statement (which counsel shall be selected by the Majority Holders of the Class B Trust) and (ix) any reasonable fees and disbursements of the underwriters, if any, in connection with any Shelf Registration Statement, and the fees and expenses of any special experts retained by Amtran or the Company in connection with any Registration Statement, in each case as are customarily required to be paid by issuers, but excluding (with respect to clauses (iii) through (ix) above) fees and expenses of counsel to the underwriters (other than fees and expenses set forth in clause (ii) above) and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Certificates by a Holder. "Registration Statement" shall mean any registration statement of Amtran and the Company that covers any of the Exchange Certificates or Registrable Certificates pursuant to the provisions of this Agreement and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission. "Shelf Registration" shall mean a registration effected pursuant to Section 2(b) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of Amtran and the Company pursuant to the provisions of Section 2(b) of this Agreement which covers all of the Registrable Certificates (but no other securities unless approved by the Holders whose Registrable Certificates are covered by such shelf registration statement) on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Trustees" shall mean the trustees under the Pass Through Trust Agreements. "Trusts" shall have the meaning set forth in the preamble of this Agreement. "Underwriter" shall have the meaning set forth in Section 3 hereof. "Underwritten Registration" or "Underwritten Offering" shall mean an SEC registration of Registrable Certificates in which Registrable Certificates are sold to an Underwriter for reoffering to the public. 2. Registration Under the 1933 Act. (a) To the extent not prohibited by any applicable law or applicable interpretation of the Staff of the SEC, Amtran and the Company shall (i) use their reasonable best efforts to file with the SEC within 240 days after the original issuance date of the Initial Certificates, an 6 Exchange Offer Registration Statement covering the offer by Amtran and the Company to the Holders to exchange all of the Registrable Certificates for Exchange Certificates, (ii) use their reasonable best efforts to cause such Exchange Offer Registration Statement to be declared effective by the SEC within 300 days after the original issuance date of the Initial Certificates, (iii) use their reasonable best efforts to have such Exchange Offer Registration Statement remain continuously effective until the closing of the Exchange Offer and (iv) use their reasonable best efforts to consummate the Exchange Offer within 330 days after the original issuance date of the Initial Certificates. Amtran and the Company shall commence the Exchange Offer promptly after the Exchange Offer Registration Statement has been declared effective by the SEC and use their reasonable best efforts to have the Exchange Offer consummated not later than 60 days after such effective date. Amtran and the Company shall commence the Exchange Offer by mailing the related exchange offer Prospectus and accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law: (i) that the Exchange Offer is being made pursuant to this Registration Rights Agreement and that all Registrable Certificates validly tendered will be accepted for exchange; (ii) the dates of acceptance for exchange (which shall be a period of at least 20 business days from the date such notice is mailed) (the "Exchange Dates"; the last business day on which the exchange is open is referred to herein as the "last Exchange Date"); (iii) that any Registrable Certificate included in the Exchange Offer but not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Registration Rights Agreement; (iv) that Holders electing to have a Registrable Certificate exchanged pursuant to the Exchange Offer will be required to surrender such Registrable Certificate, together with the letters of transmittal accompanying the Exchange Offer, to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice prior to the close of business on the last Exchange Date; and (v) that Holders will be entitled to withdraw their tendered Registrable Certificates at any time prior to the close of business on the last Exchange Date, by sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Certificates delivered for exchange and a statement that such Holder is withdrawing his election with respect to all or a portion of such Registrable Certificates originally elected to be exchanged. As soon as practicable after the last Exchange Date, Amtran and the Company shall, or shall direct the Trustees to and the Trustees shall: (i) accept for exchange Registrable Certificates or portions thereof tendered and not validly withdrawn pursuant to the Exchange Offer; 7 (ii) deliver, or cause to be delivered, to the Trustees for cancellation all Registrable Certificates or portions thereof so accepted for exchange by Amtran and the Company and issue, and cause the Trustees to promptly authenticate and mail to each Holder, an Exchange Certificate equal in principal amount to the principal amount of the Registrable Certificates surrendered by such Holder. Amtran and the Company shall use their reasonable best efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the 1933 Act, the 1934 Act and other applicable laws and regulations in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate applicable law or any applicable interpretation of the Staff of the SEC. Prior to the effectiveness of the Exchange Offer Registration Statement, Amtran and the Company shall provide a supplemental letter to the SEC (A) stating that Amtran and the Company are conducting the Exchange Offer in reliance on the position of the SEC in Exxon Capital Holdings Corporation (pub. Avail. May 13, 1988), Morgan Stanley and Co., Inc. (pub. Avail. June 5, 1991) and related SEC "no-action" letters; and (B) making any required representations to the SEC as contemplated by such "no-action" letters. (b) In the event that (i) the Company reasonably determines that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be completed as soon as practicable after the last Exchange Date because it would violate applicable law or the applicable interpretations of the Staff of the SEC, (ii) the Exchange Offer is not for any other reason consummated within 330 days after the original issuance date of the Initial Certificates or the Exchange Offer Registration Statement is not declared effective within 300 days after the original issuance date of the Initial Certificates; or (iii) any Holder of Registrable Certificates is not eligible to participate in an Exchange Offer Registration, Amtran and the Company shall use their reasonable best efforts to cause to be filed as soon as practicable after such determination, date or notice of such opinion of counsel is given to Amtran and the Company, as the case may be, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Certificates in accordance with the method or methods of distribution elected by such Holders and as described in the Registration Statement and to have such Shelf Registration Statement declared effective by the SEC as soon as practicable after such Registration Statement is filed. Amtran and the Company agree to use their reasonable best efforts to keep the Shelf Registration Statement continuously effective and in compliance with applicable law until the expiration of the period referred to in Rule 144(k) with respect to the Registrable Certificates or such shorter period that will terminate when all of the Registrable Certificates covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement. Amtran and the Company further agree to supplement or amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by Amtran and the Company for such Shelf Registration Statement or by the 1933 Act or by any other rules and regulations thereunder for shelf registration or if reasonably requested by a Holder with respect to information relating to such Holder, and to use their reasonable best efforts to cause any such amendment to become effective and such Shelf Registration Statement to become usable as soon as thereafter practicable. Amtran and the Company agree to furnish to the Holders of Registrable Certificates copies of any such supplement or amendment promptly after its being used or filed with the SEC. 8 (c) The Company shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) or Section 2(b). The Company shall reimburse any Registration Expenses incurred, assumed and paid by any Person (which shall not include underwriting discounts and commissions and transfer taxes, if any). (d) (i) Amtran and the Company will be deemed not to have used their reasonable best efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if either of Amtran or the Company voluntarily takes any action that would result in any such Registration Statement not being declared effective or in the Holders of Registrable Certificates covered thereby not being able to exchange or offer and sell such Registrable Certificates during that period, unless (A) such action is required by applicable law or (B) such action is taken by Amtran or the Company to postpone the filing or effectiveness (or suspend the effectiveness) of any Registration Statement if (1) Amtran or the Company would be required to disclose in such Registration Statement a material business situation, transaction or negotiation affecting Amtran or the Company not otherwise then required by law to be publicly disclosed, and (2) in the good faith judgment of the board of directors of Amtran or the Company, such disclosure would materially and adversely affect such business situation, transaction or negotiation, so long as Amtran and the Company promptly comply with the requirements of Section 3(i) hereof, Section 2(a)(i) hereof or Section 2(a)(ii) hereof, as applicable. (ii) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that, if, after it has been declared effective, the offering of Registrable Certificates pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference until the offering of Registrable Certificates pursuant to such Registration Statement may legally resume. In the event the Exchange Offer is not consummated and the Shelf Registration Statement is not declared effective on or prior to the 330th day after the original issuance date of the Initial Certificates, the interest rate on the Registrable Certificates will be increased by 0.50% per annum from and including such 330th day to, but excluding, the earlier of (i) the date on which the Exchange Offer is consummated or (ii) the date on which a Shelf Registration Statement is declared effective by the SEC, which additional interest shall be paid through a combination of an increase in the interest rate per annum borne by the Equipment Notes of 0.50% and, if applicable, an increase in the interest rate per annum payable on the Deposits of 0.50% pursuant to the Deposit Agreements. In the event (i) that the Shelf Registration Statement ceases to be effective at any time during the period during which it should remain continuously effective as specified by Section 2(b) hereof, (ii) the filing of any Registration Statement is postponed under circumstances contemplated by Section 2(d)(i)(B) or (iii) at the request of the Company or Amtran, the effectiveness of any filed Registration Statement is postponed under circumstances contemplated by Section 2(d)(i)(B), for more than 60 days in the aggregate, whether or not consecutive, during any 12 month period, the interest rate payable in respect of the Registrable Certificates shall be increased by 0.50% per annum from the 61st day of the applicable 12 month period such Registration Statement ceases to be effective, or the filing or effectiveness of the Registration Statement is postponed, as the case may be, until such time as the Shelf Registration 9 Statement is filed or becomes effective, as the case may be, (or, if earlier, the end of the period specified by Section 2(b) hereof), which additional interest shall be paid through a combination of an increase in the interest rate per annum borne by the Equipment Notes of 0.50% and, if applicable, an increase in the interest rate per annum payable on the Deposits of 0.50% pursuant to the Deposit Agreements. (e) Without limiting the remedies available the Holders, the Company acknowledges that any failure by the Company to comply with its obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Section 2(a) and Section 2(b) hereof. 3. Registration Procedures. In connection with the obligations of Amtran and the Company with respect to the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof, Amtran and the Company shall as expeditiously as possible: (a) prepare and file with the SEC a Registration Statement on the appropriate form under the 1933 Act, which form (x) shall be selected by Amtran and the Company and (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Certificates by the selling Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and use their reasonable best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the required period applicable to the registration form utilized by Amtran and the Company or required by the 1933 Act or otherwise necessary to keep the Registration Statement effective for the period specified in Section 2, and cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the 1933 Act; comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Certificates subject to such Registration Statement during the period specified in Section 2 in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; keep each Prospectus current during the period described under Section 4(3) and Rule 174 under the 1933 Act that is applicable to transactions by brokers or dealers with respect to the Registrable Certificates or Exchange Certificates; (c) in the case of a Shelf Registration, furnish to each Holder of Registrable Certificates, to counsel for the Holders and to each Underwriter of an Underwritten Offering of Registrable Certificates, if any, without charge, as many copies of each 10 Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or Underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Certificates; and, subject to the last paragraph of this Section 3, Amtran and the Company consent to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Certificates and any such Underwriters in connection with the offering and sale of the Registrable Certificates covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law; (d) prior to the effectiveness of any Registration Statement, use their reasonable best efforts to register or qualify the Registrable Certificates (or, in the event the Registrable Certificates are "covered securities" pursuant to Section 18(b)(1) of the 1933 Act, use their best efforts to register or qualify the Registrable Certificates, if any such registration or qualification is necessary in order to facilitate the public sale or distribution of the Registrable Certificates) and cooperate with the Holders of Registrable Certificates and their counsel in the registration or qualification of such Registrable Certificates under all applicable securities or "blue sky" laws of such jurisdictions of the United States as any Holder of Registrable Certificates covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC and to keep such registrations or qualifications in effect for so long as may be necessary to permit such Holder to complete its distribution of Registrable Certificates pursuant to the Registration Statement, to cooperate with such Holders in connection with any filings required to be made with the National Association of Securities Dealers, Inc. and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Certificates owned by such Holder; provided, however, that the Company shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process or (iii) take any action which would subject it to taxation in any such jurisdiction if it is not then so subject; (e) in the case of a Shelf Registration (or, with respect to Section 3(e)(v), an Exchange Offer Registration Statement) notify each Holder of Registrable Certificates and counsel for the Holders promptly and, if requested by any such Holder or counsel, confirm in writing (i) when a Registration Statement has become effective and when any post-effective amendment thereto has been filed and becomes effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement or Prospectus or for additional information after the Registration Statement has become effective, (iii) in case of either a Shelf Registration or an Exchange Offer Registration of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Certificates covered thereby, the representations and warranties of Amtran or the Company contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the 11 offering cease to be true and correct in all material respects or if Amtran or the Company receives any notification with respect to the suspension of the qualification of the Registrable Certificates for sale in any jurisdiction or the initiation of any proceeding for such purpose, (v) of the happening of any event during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus misleading or untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading or untrue in any material respect or, as contemplated by Section 2(d)(i)(B) hereof, the occurrence of circumstances which would allow the Company or Amtran to postpone or suspend the filing or the effectiveness of any Registration Statement, and (vi) of any determination by Amtran or the Company that a post-effective amendment to a Registration Statement would be appropriate; (f) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement as promptly as practicable and provide immediate notice to each Holder of the withdrawal of any such order; (g) in the case of a Shelf Registration, furnish to each Holder of Registrable Certificates, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested) and such number of copies of the Registration Statement and post-effective amendments as such Holders may reasonably request to effectuate the disposition of the Registrable Certificates; (h) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Certificates to facilitate the timely preparation and delivery of certificates representing Registrable Certificates to be sold and not bearing any restrictive legends and enable such Registrable Certificates to be in such denominations (consistent with the provisions of the Pass Through Trust Agreements) and registered in such names as the selling Holders may reasonably request at least one business day prior to the closing of any sale of Registrable Certificates; (i) in respect of any Registration Statement, upon the occurrence of any event or discovery of any facts as contemplated by Section 2(d)(i)(B) or Section 3(e)(v) hereof, use their reasonable best efforts to promptly prepare and file with the SEC an amendment, a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Certificates, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Amtran and the Company agree to notify the Holders to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and the Holders hereby agree to suspend use of the Prospectus upon receipt of such notice until Amtran and the Company have amended or supplemented the Prospectus to correct such misstatement or omission; 12 (j) furnish to the Holders having Registrable Certificates included in any Shelf Registration Statement and their counsel, a reasonable time prior to the initial filing of any Shelf Registration Statement, any Prospectus included therein or any amendments or supplements to any such Shelf Registration Statement or Prospectus included therein, copies of such documents to be filed, which documents shall be subject to the review and comment of such Holders in connection with such sale, if any, for a period not to exceed five business days, and Amtran and the Company will not file any such Shelf Registration Statement or Prospectus or any amendment or supplement to any such Shelf Registration Statement or Prospectus to which such Holders shall reasonably object within the five business days (two business days in the case of any amendment or supplement) after the receipt thereof. A Holder shall be deemed to have reasonably objected to such filing if such Shelf Registration Statement, amendment, Prospectus or supplement, as applicable, proposed to be filed, contains any untrue statement of material fact or omits to state any material fact necessary to make the statements therein not misleading, fails to comply in any material respect with the applicable requirements of the 1933 Act or contains incorrect information with respect to such Holder or its plan of distribution; (k) obtain a CUSIP number for all Exchange Certificates or Registrable Certificates, as the case may be, not later than the effective date of a Registration Statement; (l) (i) cause the Pass Through Trust Agreements to be qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), in connection with the registration of the Exchange Certificates, or Registrable Certificates, as the case may be, (ii) cooperate with the Trustees and the Holders to effect such changes to the Pass Through Trust Agreements as may be required for the Pass Through Trust Agreements to be so qualified in accordance with the terms of the TIA and (iii) execute, and use their reasonable best efforts to cause the Trustees to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable the Pass Through Trust Agreements to be so qualified in a timely manner; (m) in the case of a Shelf Registration, make available for inspection by a representative of the Holders of the Registrable Certificates, any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, all financial and other records relevant to the Shelf Registration Statement, pertinent documents and properties of Amtran and the Company, and cause the respective officers, directors and employees of Amtran and the Company to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with a Shelf Registration Statement; (n) in the case of a Shelf Registration, use their reasonable best efforts to cause all Registrable Certificates to be listed on any securities exchange or any automated quotation system on which similar securities issued by the Company or Amtran are then listed if requested by the Majority Holders of the Registrable Certificates issued by either Trust, to the extent such Registrable Certificates satisfy applicable listing requirements; 13 (o) use their reasonable best efforts to cause the Exchange Certificates to continue to be rated by one nationally recognized statistical rating organization (as such term is defined in Rule 436(g) (2) under the 1933 Act); (p) if reasonably requested by any Holder of Registrable Certificates covered by a Registration Statement, (i) promptly incorporate in a Prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after Amtran and the Company have received notification of the matters to be incorporated in such filing; and (q) in the case of a Shelf Registration, enter into such customary agreements and take all such other actions in connection therewith (including those reasonably requested by the Majority Holders of the Registrable Certificates issued by each Trust being sold and, if an underwriting agreement is entered into, Amtran and the Company will use their reasonable best efforts to include therein indemnification provisions no less favorable than those set forth in Section 5 hereof) in order to expedite or facilitate the disposition of such Registrable Certificates including, but not limited to, an Underwritten Offering and in such connection, (i) make such representations and warranties to the Holders and any Underwriters of such Registrable Certificates with respect to the business of Amtran, the Company and their subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings and confirm the same if and when reasonably requested, (ii) obtain opinions of counsel to the Company (which counsel may include the general counsel of Amtran or the Company with respect to certain matters and which opinions, in form, scope and substance, shall be reasonably satisfactory to the Majority Holders of the Registrable Certificates issued by each Trust being sold and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Certificates, covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may reasonably be requested by the appointed representative or counsel of the Majority Holders of the Registrable Certificates issued by each Trust being sold, (iii) obtain "cold comfort" letters from the independent certified public accountants of Amtran and the Company (and, if necessary, any other certified public accountant of any subsidiary of Amtran or the Company, or of any business acquired by Amtran or the Company for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder and Underwriter of Registrable Certificates, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with similar underwritten offerings, and (iv) deliver such documents and certificates as may be reasonably requested by the Holders of a majority in principal amount of the Registrable Certificates being sold or the Underwriters, and which are customarily delivered in similar underwritten offerings, to evidence the continued validity of the representations and warranties of Amtran and the Company made pursuant to clause (i) above and to 14 evidence compliance with any customary conditions contained in an underwriting agreement; (r) otherwise use all reasonable efforts to comply with applicable laws and to make generally available to its security holders as soon as practicable, but in any event not later than eighteen months after (i) the effective date (as defined in Rule 158(c) under the 1933 Act) of a Registration Statement, (ii) the effective date of each post-effective amendment to the Registration Statement, and (ii) the date of each filing by Amtran and the Company with the SEC of an Annual Report on Form 10-K that is incorporated by reference in a Registration Statement, an earning statement of Amtran and the Company and their subsidiaries complying with Section 11(a) of the 1933 Act and the rules and regulations of the SEC thereunder (including, at the option of the Company, Rule 158). In the case of a Shelf Registration Statement, Amtran and the Company may, upon reasonable notice, require each Holder of Registrable Certificates to furnish to Amtran and the Company such information regarding the Holder and the proposed distribution by such Holder of such Registrable Certificates as is required to be disclosed in the Shelf Registration Statement pursuant to the 1933 Act, such information to be requested in writing by the Company for inclusion in such Registration Statement and the Company may exclude from such registration the Registrable Certificates of any Holder that fails to furnish such information within a reasonable time after receiving such request. In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 2(d)(i)(B) or Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Certificates pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by the Company, such Holder will deliver to the Company (at its expense) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Certificates current at the time of receipt of such notice. If the Company shall give any such notice to suspend the disposition of Registrable Certificates pursuant to a Registration Statement, the Company shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. The Company may give notice of a suspension with respect to circumstances contemplated by Section 2(d)(i)(B) or Section 3(e)(v) or a postponement of the filing of a Registration Statement or of the effectiveness of a filed Registration Statement (in each such case, a "Postponement") with respect to circumstances contemplated by Section 2(d)(i)(B) only twice during any 365 day period. Any single suspension or Postponement may not exceed 45 days and there may not be more than two suspensions or Postponements in effect during any 365 day period, which two suspensions or Postponements in effect during any 365 day period shall not exceed a total of 60 days in the aggregate. 15 The Holders of Registrable Certificates covered by a Shelf Registration Statement who desire to do so may sell such Registrable Certificates in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers (the "Underwriters") that will administer the offering will be selected by the Majority Holders of the Registrable Certificates included in such offering; provided, however, that (i) such investment bankers and managers and underwriting arrangements must be reasonably satisfactory to the Company and (ii) the Company shall not, during the period the Shelf Registration is required to be effective pursuant to Section 2(b) hereof, be obligated to arrange for more than two underwritten offerings. In any underwritten offering contemplated hereby, the Holders of Registrable Certificates issued by the Class B Trust may participate as selling Holders in any underwritten offering requested by the Majority Holders of the Registrable Securities of the Class A Trust on a pro rata basis, and vice versa (with the Company being obligated to give notice to all of the Holders of Registrable Certificates of any request of an underwritten offering by any of the Holders of Registrable Certificates). No Holder may participate in any underwritten offering contemplated hereby unless such Holder agrees to sell such Holder's Registrable Certificates in accordance with any approved underwriting arrangements. 4. Participation of Broker-Dealers in Exchange Offer. (a) The Staff of the SEC has taken the position that any broker-dealer that receives Exchange Certificates for its own account in the Exchange Offer in exchange for Registrable Certificates that were acquired by such broker-dealer as a result of market-making or other trading activities (a "Participating Broker-Dealer"), may be deemed to be an "underwriter" within the meaning of the 1933 Act and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Certificates. Amtran and the Company understand that it is the Staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Certificates, without naming the Participating Broker-Dealers or specifying the amount of Exchange Certificates owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the 1933 Act in connection with resales of Exchange Certificates for their own accounts, so long as the Prospectus otherwise meets the requirements of the 1933 Act. (b) In light of the above, notwithstanding the other provisions of this Agreement, Amtran and the Company agree that the provisions of this Agreement as they relate to a Shelf Registration shall also apply to an Exchange Offer Registration to the extent, and with such reasonable modifications thereto as may be, reasonably requested by one or more Participating Broker-Dealers, in each case as provided in clause (ii) below, in order to expedite or facilitate the disposition of any Exchange Certificates by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above; provided that: (i) Amtran and the Company shall not be required to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(i), for a period exceeding 180 days after the last Exchange Date (as such period may be extended pursuant to the penultimate paragraph of 16 Section 3 of this Agreement) and Participating Broker-Dealers shall not be authorized by Amtran and the Company to deliver and shall not deliver such Prospectus after such period in connection with the resales contemplated by this Section 4; and (ii) the application of the Shelf Registration procedures set forth in Section 3 of this Agreement to an Exchange Offer Registration, to the extent not required by the positions of the Staff of the SEC or the 1933 Act and the rules and regulations thereunder, will be in conformity with the reasonable request in writing to Amtran and the Company by one or more broker-dealers who certify to Amtran and the Company in writing that they anticipate that they will be Participating Broker-Dealers; and provided further that, in connection with such application of the Shelf Registration procedures set forth in Section 3 to an Exchange Offer Registration, Amtran and the Company shall be obligated (x) to communicate with only one entity representing all Participating Broker-Dealers, which shall be Morgan Stanley & Co. Incorporated unless it elects not to act as such representative, (y) to pay the fees and expenses of only one counsel representing the Participating Broker-Dealers, which shall be counsel to the Morgan Stanley & Co. Incorporated unless such counsel elects not to so act and (z) to cause to be delivered only one, if any, "cold comfort" letter with respect to the Prospectus in the form existing on the last Exchange Date and with respect to each subsequent amendment or supplement, if any, effected during the period specified in clause (i) above. (c) Morgan Stanley & Co. Incorporated shall have no liability to Amtran, the Company or any Holder with respect to any request that is made in accordance with Section 4(b) above. 5. Indemnification and Contribution. + (a) Amtran and the Company agree to indemnify and hold harmless each Holder and each of their respective officers and directors and each Person, if any, who controls any Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, or is under common control with, or is controlled by, any Holder, from and against all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by any Holder or any such controlling or affiliated Person in connection with defending or investigating any such loss, damage, liability action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Exchange Certificates or Registrable Certificates were registered under the 1933 Act, including all documents incorporated therein by reference, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented if Amtran and the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Holder furnished to Amtran or the Company in writing by such selling Holder expressly for use therein; provided, however, that the foregoing indemnity 17 agreement with respect to any preliminary Prospectus shall not inure to the benefit of any Person from whom the Person asserting any such losses, claims, damages or liabilities purchased Registrable Certificates, or any person controlling such seller, if a copy of the final Prospectus (as then amended or supplemented if Amtran and the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such seller to such purchaser with or prior to the written confirmation of the sale of the Registrable Certificates to such Person, and if the final Prospectus (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities. In connection with any Underwritten Offering permitted by Section 3, Amtran and the Company will also indemnify the Underwriters, if any, selling brokers, dealers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the 1933 Act and the 1934 Act) to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection with any Registration Statement. (b) Each selling Holder agrees, severally and not jointly, to indemnify and hold harmless Amtran and the Company, and each of their respective directors, officers who sign the Registration Statement and each Person, if any, who controls Amtran or the Company within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from Amtran and the Company to the Holders, but only with reference to information relating to such Holder furnished to the Company in writing by such Holder expressly for use in such Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto) that is the subject of the indemnity. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above, such Person (the "indemnified party") shall promptly, after its receipt of notice of any such proceeding, notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing of the commencement thereof; provided, however, that the failure to so notify the indemnifying party (i) will not relieve the indemnifying party from liability under paragraph (a) or (b) above unless and to the extent the indemnifying party did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of material rights and defenses, and (ii) will not, in any event, relieve the indemnifying party from any obligations to an indemnified party other than the indemnification obligations provided in paragraph (a) and (b) above. The indemnifying party, upon request of the indemnified party, shall promptly retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own separate counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would, in the reasonable opinion of the indemnified party, be inappropriate due to actual or potential differing interests between them and such counsel. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (a) the fees and expenses 18 of more than one separate firm (in addition to any local counsel) for Amtran and the Company, their respective directors, their respective officers who sign the Registration Statement and each Person, if any, who controls Amtran or the Company within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, and (b) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Holders of Registrable Certificates issued by the Class A Trust and each Person, if any, who controls any such Holders within the meaning of either such Section and one separate firm (in addition to any local counsel) for the Holders of Registrable Certificates issued by the Class B Trust and each Person, if any, who controls any such Holders within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In such case involving the Holders and such Persons who control Holders, such firm shall be designated in writing by the Majority Holders of the Registrable Certificates issued by the respective Trust. In all other cases, such firm shall be designated by Amtran and the Company. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but, if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which such indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) If the indemnification provided for in paragraph (a) or paragraph (b) of this Section 5 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of Amtran and the Company and the Holders shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by Amtran and the Company or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Holders' respective obligations to contribute pursuant to this Section 5(d) are several in proportions to the respective principal amount of Registrable Certificates of such Holder that were registered pursuant to a Registration Statement. (e) Amtran and the Company and each Holder agree that it would not be just or equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5, no Holder shall be 19 required to indemnify or contribute any amount in excess of the amount by which the total price at which Registrable Certificates were sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Holder or any Person controlling any Holder, or by or on behalf of Amtran or the Company, their respective officers or directors or any Person controlling Amtran or the Company, (iii) acceptance of any of the Exchange Certificates and (iv) any sale of Registrable Certificates pursuant to a Shelf Registration Statement. 6. Rule 144. Amtran and the Company covenant to the Holders of Registrable Certificates that to the extent it shall be required to do so under the 1934 Act, Amtran and the Company shall timely file the reports required to be filed by it under the 1934 Act or the 1933 Act (including, but not limited to, the reports under Section 13 and 15(d) of the 1934 Act referred to in subparagraph (c)(1) of Rule 144 under the 1933 Act) and the rules and regulations, and shall take such further action as any Holder of Registrable Certificates may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Certificates without registration under the 1933 Act within the limitations of the exemption provided by Rule 144 under the 1933 Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder of Registrable Certificates, Amtran and the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. 7. Miscellaneous. (a) No Inconsistent Agreements. Neither Amtran nor the Company has entered into, and on or after the date of this Agreement will not enter into, any agreement which is inconsistent with the rights granted to the Holders of Registrable Certificates in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of Amtran's or the Company's other issued and outstanding securities under any such agreements. (b) Amendments and Waivers. Subject to the last sentence of this Section 7(b), the provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless Amtran or the Company has obtained the written consent of the Majority Holders of the outstanding Registrable Certificates issued by each Trust affected by such amendment, modification, supplement, waiver or consent; provided, however, that no 20 amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder (as such term applies to Section 5) unless consented to in writing by such Holder. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 7(c), which address initially is, with respect to the Investors, the address set forth in the Class A Certificates Purchase Agreement or in the Class B Certificates Purchase Agreement, as the case may be; and (ii) if to Amtran or the Company, initially at the addresses set forth in the Certificates Purchase Agreements and thereafter at such other addresses, notice of which is given in accordance with the provisions of this Section 7(c). All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustees, at the address specified in the Pass Through Trust Agreement. (d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Certificates in violation of the terms of the Certificates Purchase Agreements. If any transferee of any Holder shall acquire Registrable Certificates, in any manner, whether by operation of law or otherwise, such Registrable Certificates shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Certificates such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. (e) Purchases and Sales of Registrable Certificates. Amtran and the Company shall not, and shall use their reasonable best efforts to cause their respective affiliates (as defined in Rule 405 under the 1933 Act) not to, purchase and then resell or otherwise transfer any Registrable Certificates. (f) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between Amtran and the Company, on the one hand, and the Investors, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. Morgan Stanley & Co. Incorporated shall be a third party beneficiary with respect to the provisions set forth in Sections 4(b) and 4(c) hereof and shall have the right to enforce such provisions directly to the extent it deems such enforcement necessary or advisable. 21 (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. This Agreement shall be governed by the laws of the State of New York. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) Survival. The respective indemnities, agreements, representations, warranties and each other provision set forth in this Agreement or made pursuant hereto shall remain in full force and effect regardless of any investigation (or statement as to the results thereof) made by or on behalf of any Holder of Registrable Certificates, any director, officer or partner of such Holder, any agent or underwriter or any director, officer or partner thereof, or any controlling person of the foregoing. (l) Limitation of Trustee Liability. Notwithstanding anything contained herein to the contrary, it is expressly understood and agreed by the parties hereto that (i) this Agreement is executed and delivered by Wilmington Trust Company, not individually or personally but solely as Trustee in the exercise of the powers and authority conferred and vested in it under the Pass Through Trust Agreements, (ii) each of the representations, undertakings and agreements herein made on the part of the Trustee is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made for the purpose of binding only the Trustee and (iii) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trustee under this Agreement or the other related documents. [Remainder of page intentionally left blank.] 22 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. AMERICAN TRANS AIR, INC. By: -------------------------------- Name: Title: AMTRAN, INC. By: -------------------------------- Name: Title: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee under each of the Trusts By: -------------------------------- Name: Title: NYALA FUNDING LLC By: -------------------------------- Name: Title: PK AIRFINANCE US, INC. By: -------------------------------- Name: Title: 23 EX-4.11 11 file010.txt DEPOSIT AGREEMENT CLASS B EXECUTION COPY - -------------------------------------------------------------------------------- DEPOSIT AGREEMENT (Class B) Dated as of March 28, 2002 between WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION as Escrow Agent and INTESABCI S.P.A., acting through its NEW YORK BRANCH, as Depositary - -------------------------------------------------------------------------------- DEPOSIT AGREEMENT (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time, this "Agreement") between WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking association, as Escrow Agent under the Escrow and Paying Agent Agreement referred to below (in such capacity, together with its successors in such capacity, the "Escrow Agent"), and INTESABCI S.P.A, acting through its NEW YORK BRANCH, as depositary bank hereunder (the "Depositary"). W I T N E S S E T H - - - - - - - - - - WHEREAS, American Trans Air, Inc. ("ATA") has entered into a Certificate Purchase Agreement dated as of March 26, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Certificate Purchase Agreement") with Amtran, Inc. ("Amtran") and PK AirFinance US, Inc. (the "Purchaser", and together with its transferees and assigns as owners of the Certificates, the "Investors") which provides for the purchase of the American Trans Air Pass Through Trust, Series 2002-1B Certificates (the "Certificates"); WHEREAS, ATA, Amtran and Wilmington Trust Company have entered into a Pass Through Trust Agreement dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pass Through Trust Agreement") relating to American Trans Air 2002-1B Pass Through Trust pursuant to which the Certificates are being issued; WHEREAS, ATA, Amtran, the Pass Through Trustee and certain other persons concurrently herewith are entering into the Note Purchase Agreement, dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Note Purchase Agreement"), pursuant to which the Pass Through Trustee, utilizing a portion of the proceeds from the sale of the Certificates (the "Net Proceeds"), has agreed to acquire from time to time on or prior to the Delivery Period Termination Date (as defined in the Note Purchase Agreement) equipment notes (the "Equipment Notes") issued to finance or refinance the acquisition of certain aircraft by ATA, as lessee or as owner; WHEREAS, the Escrow Agent, the Purchaser, the Pass Through Trustee and Wilmington Trust Company, as paying agent for the Escrow Agent (in such capacity, together with its successors in such capacity, the "Paying Agent") concurrently herewith are entering into an Escrow and Paying Agent Agreement (Class B), dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Escrow and Paying Agent Agreement"); and WHEREAS, the Purchaser and the Pass Through Trustee intend that the Net Proceeds be held in escrow by the Escrow Agent on behalf of the Investors pursuant to the Escrow and Paying Agent Agreement, subject to withdrawal upon request of and proper -2- certification by the Pass Through Trustee for the purpose of purchasing Equipment Notes, and that pending such withdrawal the Net Proceeds be deposited by the Escrow Agent with the Depositary pursuant to this Agreement, which provides for the Depositary to pay interest for distribution to the Investors and to establish accounts from which the Escrow Agent shall requisition or demand withdrawals upon request of and proper certification by the Pass Through Trustee. NOW, THEREFORE, in consideration of the obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1.1. Acceptance of Depositary. The Depositary hereby agrees to act as depositary bank as provided herein and in connection therewith to accept all amounts to be delivered to or held by the Depositary pursuant to the terms of this Agreement. The Depositary further agrees to hold, maintain and safeguard the Deposits and the Accounts (as defined below) during the term of this Agreement in accordance with the provisions of this Agreement. The Depositary shall neither be responsible for or under, nor chargeable with knowledge of, the terms and conditions of any other agreement, instrument or document to which it is not a party, other than Section 4(a)(vii) of the Note Purchase Agreement. This Agreement sets forth all of the obligations of the Depositary, and no additional obligations shall be implied from the terms of this Agreement or any other agreement, instrument or document. The Escrow Agent shall not have any right to withdraw, assign or otherwise transfer moneys held in the Accounts except as permitted by this Agreement. SECTION 1.2. Establishment of Accounts. The Escrow Agent hereby instructs the Depositary, and the Depositary agrees, to establish (i) the separate deposit accounts listed on Schedule I hereto required in connection with the deposits contemplated by Section 2.1 hereof (each, an "Account" and collectively, the "Accounts"), and (ii) such additional separate deposit accounts as may be required in connection with the deposits contemplated by Section 2.4 hereof (each, also an "Account") in each case, in the name of the Escrow Agent and all on the terms and conditions set forth in this Agreement. SECTION 2.1. Deposits. The Escrow Agent shall direct the Purchaser to deposit with the Depositary on the date of this Agreement (the "Deposit Date") in immediately available funds by wire transfer to the Depositary at One William Street, New York, NY 10004, ABA #026005319, Attention: Paul Florcruz, Reference: American Trans Air 2002-1B, and the Depositary shall accept from the Purchaser, on behalf of the Escrow Agent, the Net Proceeds in the amount of US$24,391,148.66. Upon acceptance of such amount, the Depositary shall (i) establish each of the deposits specified in Schedule I hereto maturing on the date set forth in Schedule I hereto, (including any deposit made pursuant to Section 2.4 hereof, individually, a -3- "Deposit" and, collectively, the "Deposits") and (ii) credit each Deposit to the related Account as set forth therein. No amount shall be deposited in any Account other than the related Deposit. SECTION 2.2. Interest. Each Deposit shall bear interest from and including the date of deposit to but excluding the date of withdrawal at the rate of 10.699% per annum (calculated on the basis of a year of twelve 30-day months) payable to the Paying Agent on behalf of the Escrow Agent quarterly in arrears on each February 20, May 20, August 20 and November 20 (each, an "Interest Payment Date") and on the date of each Prepayment Withdrawal and the Final Withdrawal (as defined below), commencing on May 20, 2002 all in accordance with the terms of this Agreement (whether or not any such Deposit is withdrawn on an Interest Payment Date). Interest accrued on any Deposit that is withdrawn pursuant to a Notice of Purchase Withdrawal (as defined below) shall be paid on the next Interest Payment Date, notwithstanding any intervening Final Withdrawal (as defined below). In addition, interest accrued on any Deposit that is withdrawn pursuant to a Notice of Replacement Withdrawal (as defined below) but not paid on the date of the Replacement Withdrawal shall be paid on the next Interest Payment Date. SECTION 2.3. Withdrawals. (a) On and after the date seven days after the establishment of any Deposit, the Escrow Agent may, by providing at least one Business Day's prior notice of withdrawal to the Depositary in the form of Exhibit A hereto (a "Notice of Purchase Withdrawal"), request withdrawal of the entire balance of such Deposit, except that at any time prior to the actual withdrawal of such Deposit, the Escrow Agent or the Pass Through Trustee may, by notice to the Depositary, cancel such withdrawal (including on the scheduled date therefor), and thereafter such Deposit shall continue to be maintained by the Depositary in accordance with the original terms thereof. Following such withdrawal the balance in the related Account shall be zero and the Depositary shall close such Account. As used herein, "Business Day" means any day, other than a Saturday, Sunday or other day on which commercial banks are authorized or required by law to close in New York, New York, Indianapolis, Indiana, Wilmington, Delaware or Salt Lake City, Utah. (b) (i) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit B hereto (a "Notice of Final Withdrawal"), request withdrawal of the entire amount of all of the remaining Deposits together with the payment by the Depositary of all accrued and unpaid interest earned on such Deposits to but excluding the specified date of withdrawal (a "Final Withdrawal"), on such date as shall be specified in such Notice of Final Withdrawal. If a Notice of Final Withdrawal has not been given to the Depositary on or before September 29, 2002 and there are unwithdrawn Deposits on such date, the Depositary shall pay the amount of the Final Withdrawal to the Paying Agent on October 14, 2002. -4- (ii) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit C hereto (a "Notice of Replacement Withdrawal"), request withdrawal of the entire amount of all Deposits then held by the Depositary together with, if the Replacement Withdrawal occurs on an Interest Payment Date, the payment by the Depositary of all accrued and unpaid interest on such Deposits to but excluding the specified date of withdrawal (a "Replacement Withdrawal"), on such date as shall be specified in such Notice of Replacement Withdrawal. (iii) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit D hereto (a "Notice of Prepayment Withdrawal"), withdraw all or a portion of the Deposit together with all accrued and unpaid interest thereon to but excluding the specified date of withdrawal (a "Prepayment Withdrawal"), on such date as shall be specified in such Notice of Prepayment Withdrawal. Following such withdrawal the balance in the Account shall be reduced by the amount of the withdrawal. Upon any Prepayment Withdrawal, the Depositary shall pay to the Paying Agent the amount requested in the related Notice of Prepayment Withdrawal. (c) If the Depositary receives a duly completed Notice of Purchase Withdrawal, Notice of Prepayment Withdrawal, Notice of Final Withdrawal or Notice of Replacement Withdrawal (each, a "Withdrawal Notice") complying on its face with the provisions of this Agreement, it shall make the payments specified therein in accordance with the provisions of this Agreement. If such complying Withdrawal Notice is received by the Depositary no later than 3:00 p.m. (New York City time) on a Business Day, the Depositary shall make the payments requested in such Withdrawal Notice no later than 11:00 a.m. (New York City time) on the next succeeding Business Day or such later day specified in such Withdrawal Notice, and if such complying Withdrawal Notice is received by the Depositary after 3:00 p.m. (New York City time) on a Business Day, the Depositary shall make the payments requested in such Withdrawal Notice no later than 11:00 a.m. (New York time) on the second Business Day next following such Business Day or such later date specified in such Withdrawal Notice. SECTION 2.4. Other Accounts. On the date of withdrawal of any Deposit (pursuant to a Notice of Purchase Withdrawal), the Escrow Agent, or the Pass Through Trustee on behalf of the Escrow Agent, shall be entitled to re-deposit (or cause to be re-deposited) with the Depositary any portion thereof and the Depositary shall accept the same for deposit hereunder. Any sums so received for deposit shall be established as a new Deposit and credited to a new Account, all as more fully provided in Section 2.1 hereof, and thereafter the provisions of this Agreement shall apply thereto as fully and with the same force and effect as if such Deposit had been established on the Deposit Date except that (i) such Deposit may not be withdrawn prior to the date seven days after the establishment thereof and (ii) such Deposit shall mature on the date set forth in Schedule I hereto, and bear interest as provided in Section 2.2. -5- The Depositary shall promptly give notice to the Escrow Agent of receipt of each such re-deposit and the Account number assigned thereto. SECTION 3. Termination. (a) This Agreement shall terminate on the fifth Business Day after the later of the date on which (i) all of the Deposits shall have been withdrawn and paid as provided herein without any re-deposit of any portion thereof being made and (ii) all accrued and unpaid interest earned on the Deposits shall have been paid as provided herein, but in no event prior to the date on which the Depositary shall have performed in full its obligations hereunder. (b) For the avoidance of doubt, the obligations of the Depositary under the last two sentences of Section 2.2 hereof shall remain in full force and effect notwithstanding the execution and delivery of a Replacement Deposit Agreement in accordance with Section 4(a)(vii) of the Note Purchase Agreement. SECTION 4. Payments. All payments (including, without limitation, those payments made in respect of Taxes (as defined and provided for below)) made by the Depositary hereunder shall be paid in United States Dollars and in immediately available funds by wire transfer (i) in the case of accrued interest on the Deposits payable under Section 2.2 hereof, any Prepayment Withdrawal or any Final Withdrawal, directly to the Paying Agent at Wilmington Trust Company, Wilmington, DE, ABA # 031-100-092, Account No. 57831-0, Attention: Jeanne Oller, Reference: American Trans Air 2002-1B, or to such other account as the Paying Agent may direct from time to time in writing to the Depositary and the Escrow Agent and, (ii) in the case of any withdrawal of one or more Deposits pursuant to a Notice of Purchase Withdrawal or Notice of Replacement Withdrawal, directly to or as directed by the Pass Through Trustee as specified and in the manner provided in such Notice of Purchase Withdrawal or Notice of Replacement Withdrawal. The Depositary hereby waives any and all rights of set-off, combination of accounts, right of retention or any similar right (whether arising under applicable law, contract or otherwise) it may have against the Deposits howsoever arising. Except as provided below, all payments on or in respect of each Deposit shall be made by the Depositary free and clear of and without reduction for or on account of any and all taxes, levies or other impositions or charges (collectively, "Taxes"). However, if the Depositary or the Paying Agent (pursuant to Section 2.04 of the Escrow and Paying Agent Agreement) shall be required by law to deduct or withhold any Taxes from or in respect of any sum payable hereunder, the Depositary shall (i) make such deductions or withholding, (ii) pay the full amount deducted or withheld (including in respect of such additional amounts) to the relevant taxation authority and (iii) if the Taxes required to be deducted or withheld are imposed by the Republic of Italy or any political subdivision thereof, pay such additional amounts as may be necessary in order that the actual amount received by the designated recipient of such sum under this Agreement or the Escrow and Paying Agent Agreement after such deduction or withholding equals the sum it would have received had no such deduction or withholding been required. If the date on which any payment -6- due on any Deposit would otherwise fall on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day, and no additional interest shall accrue in respect of such extension. SECTION 5. Representation and Warranties. The Depositary hereby represents and warrants to ATA, the Escrow Agent, the Pass Through Trustee, the Investors and the Paying Agent that: (a) it is a banking corporation duly organized and existing under the laws of the Republic of Italy, acting through its New York branch; (b) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement; (c) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of it and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and this Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof; and (d) no authorization, consent or approval of or other action by, and, except for administrative and ministerial filings which the Depositary is obligated to make in the ordinary course of its business, no notice to or filing with, any Italian or United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement. SECTION 6. Transfer. Neither party hereto shall be entitled to assign or otherwise transfer this Agreement (or any interest herein) other than (in the case of the Escrow Agent) to a successor escrow agent under the Escrow and Paying Agent Agreement, and any purported assignment in violation thereof shall be void. This Agreement shall be binding upon the parties hereto and their respective successors and (in the case of the Escrow Agent) permitted assigns. SECTION 7. Amendment, Etc. This Agreement may not be amended, waived or otherwise modified except by an instrument in writing signed by the parties hereto. SECTION 8. Notices. (a) Unless otherwise expressly provided herein, any notice, instruction or other communication under this Agreement shall be in writing (including by facsimile) and shall be deemed to be given and effective upon receipt thereof. All notices shall be sent to (x) in the case of the Depositary, IntesaBci S.p.A., New York Branch, Attention: Transportation Finance Group (Telecopier: 212-607-3966) and with a copy to IntesaBci S.p.A. -7- New York Branch, One William Street, New York, NY 10004, Attention: Paul Florcruz, Dealing Room (Telecopier: 212-422-6235) or (y) in the case of the Escrow Agent, Wells Fargo Bank Northwest, National Association, 79 South Main Street, 3rd Floor, Salt Lake City, UT 84111, Attention: Corporate Trust Services (Telecopier: (801) 246-5053), in each case, with a copy to the Pass Through Trustee, Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, DE 19890, Attention: Corporate Trust Administration (Telecopier: (302) 636-4140), to ATA, 7337 West Washington Street, Attention: Kenneth K. Wolff, Chief Financial Officer (Telecopier: (317) 240-7091) and to the Purchaser, PK AirFinance US, Inc., 400 Madison Avenue, New York, NY 10017, Attention: Vice-President-Marketing (Telecopier: 212-397-9393) with a copy to PK AirFinance, S.A., European Bank and Business Center, 6D Route de Treves, Senningerberg, 2633 Luxembourg, Attention: Vice-President - Marketing, (Telecopier: 352- 3480-50) and Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, NY 10019, Attention: Joseph M. Juhas, Esq./Dev. R. Sen, Esq. (Telecopier: 212-259-6333) (or at such other address as any such party may specify from time to time in a written notice to the parties mentioned above). On or prior to the execution of this Agreement, the Escrow Agent has delivered to the Depositary an incumbency certificate containing specimen signatures of the representatives of the Escrow Agent who are authorized to give notices and instructions with respect to this Agreement. The Depositary may conclusively rely on such certificate until the Depositary receives written notice from the Escrow Agent to the contrary. (b) The Depositary shall be fully protected and authorized in relying upon any instruction, notice, certification, demand, consent, authorization, receipt, power of attorney or other writing delivered to it by the Escrow Agent without being required to make any investigation or inquiry thereof, determine the authenticity or validity thereof or the correctness of any fact stated therein, the propriety or validity of the service thereof, or the jurisdiction of the court issuing any judgment or order. The Depositary may act in reliance upon any signature believed by it to be genuine and reflected in the above-mentioned incumbency certificate, and may assume that the person so signing has been properly authorized to do so. Except as provided in this Agreement, the Depositary shall not be deemed to have any duty or notice hereunder unless and until it has been provided with written notice. (c) Anything to the contrary notwithstanding, the Depositary may consult with legal counsel of its selection in the event of any dispute, or question as to the meaning or construction of any of the provisions hereof or its duties hereunder, and it shall incur no liability and shall be fully authorized and protected in acting in accordance with the opinion and instructions of such counsel. -8- SECTION 9. Obligations Unconditional. The Depositary hereby acknowledges and agrees that its obligation to repay each Deposit together with interest earned thereon as provided herein is absolute, irrevocable and unconditional and constitutes a full recourse obligation of the Depositary enforceable against it to the full extent of all of its assets and properties. SECTION 10. Funds Transfers. In the event funds transfer instructions are given (other than in writing at the time of execution of this Agreement), whether in writing, by telecopier or otherwise, the Depositary is authorized to seek confirmation of such instructions by telephone call back to the person or persons designated by the Escrow Agent, and the Depositary may rely upon the confirmations of anyone purporting to be the person or persons so designated. To assure accuracy of the instructions it receives, the Depositary may record such telephone call backs. If the Depositary is unable to confirm any instructions, or if not satisfied with the confirmation it receives, it will not execute the instruction until all issues have been resolved. The person and telephone numbers for call backs may be changed only in writing actually received and acknowledged by the Depositary. The Depositary shall receive notification of any errors, delays or other problems within thirty (30) days after a transaction has been executed. SECTION 11. Entire Agreement. This Agreement (including all attachments hereto) sets forth all of the promises, covenants, agreements, conditions and understandings between the Depositary and the Escrow Agent with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and undertakings, inducements or conditions, express or implied, oral or written. SECTION 12. Governing Law. This Agreement, and the rights and obligations of the Depositary and the Escrow Agent with respect to the Deposits, shall be governed by, and entirely construed in accordance with, the laws of the State of New York and subject to the provisions of Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. SECTION 13. Waiver of Jury Trial Right. EACH OF THE DEPOSITARY AND THE ESCROW AGENT ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY. SECTION 14. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. IN WITNESS WHEREOF, the Escrow Agent and the Depositary have caused this Deposit Agreement (Class B) to be duly executed as of the day and year first above written. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By --------------------------------- Name: Title: INTESABCI S.P.A., acting through its NEW YORK BRANCH, as Depositary By --------------------------------- Name: Title: By --------------------------------- Name: Title: Schedule I Schedule of Deposits -------------------- (Class B)
Aircraft Deposit Date Tail No. Deposit Amount Account No. ------------ -------- -------------- ----------- March 28, 2002 N320TZ $6,147,939.09 12060 081 004 March 28, 2002 N322TZ $6,161,827.96 12060 081 006 March 28, 2002 N324TZ $6,109,566.93 12060 081 008 March 28, 2002 N325TZ $5,971,814.68 12060 081 0010
EXHIBIT A NOTICE OF PURCHASE WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Deposit Agreement (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Deposit Agreement. In accordance with Section 2.3(a) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of the Deposit, $_______, held by the Depositary in Account No. ____________. The undersigned hereby directs the Depositary to pay the proceeds of the Deposit to [________________, Account No. _____, Reference: _________] on _________ __, 2002, upon the telephonic request of a representative of Wilmington Trust Company, the Pass Through Trustee. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By ---------------------------- Name: Title: Dated: ___________, ____ EXHIBIT B NOTICE OF FINAL WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Deposit Agreement (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Deposit Agreement. In accordance with Section 2.3(b) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of all Deposits (as defined in the Deposit Agreement). The undersigned hereby directs the Depositary to pay, on ___________, 2002, the proceeds of the Deposits and accrued and unpaid interest thereon to the Paying Agent at Wilmington Trust Company, ABA # _______________, Account No. ___________, Reference: American Trans Air 2002-1B. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------ Name: Title: Dated: _________, _____ EXHIBIT C NOTICE OF REPLACEMENT WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Deposit Agreement (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Deposit Agreement. In accordance with Section 2.3(b)(ii) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of all Deposits [plus all accrued and unpaid interest on the Deposits to but excluding the date of withdrawal] for payment on _______________, 2002. The undersigned hereby directs the Depositary to pay the proceeds of the Deposits to [Name of Replacement Depositary] at __________________________, ABA# _____________, Account No. _____________, Reference: American Trans Air 2002-1B [and to pay accrued and unpaid interest thereon to the Paying Agent at ___________, ABA #___________, Acct. No. ___________, Reference: American Trans Air 2002-1B]. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By: ----------------------- Name: Title: Dated: _________, _____ EXHIBIT D NOTICE OF PREPAYMENT WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Deposit Agreement (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Deposit Agreement. In accordance with Section 2.3(b)(iii) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the following amount of the Deposit: $______________, Account No.:__________________ plus all accrued and unpaid interest on such Deposits to but excluding the date of withdrawal for payment on _______________, 2002. The undersigned hereby directs the Depositary to pay the proceeds of the Deposits and accrued and unpaid interest thereon to the Paying Agent at ___________, ABA #___________, Acct. No. ___________, Reference: American Trans Air 2002-1B. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By: ----------------------- Name: Title: Dated: _________, _____ EX-4.12 12 file011.txt DEPOSIT AGREEMENT CLASS B EXECUTION COPY - -------------------------------------------------------------------------------- DEPOSIT AGREEMENT (Class B) Dated as of March 28, 2002 between WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION as Escrow Agent and INTESABCI S.P.A., acting through its NEW YORK BRANCH, as Depositary - -------------------------------------------------------------------------------- DEPOSIT AGREEMENT (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time, this "Agreement") between WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking association, as Escrow Agent under the Escrow and Paying Agent Agreement referred to below (in such capacity, together with its successors in such capacity, the "Escrow Agent"), and INTESABCI S.P.A, acting through its NEW YORK BRANCH, as depositary bank hereunder (the "Depositary"). W I T N E S S E T H - - - - - - - - - - WHEREAS, American Trans Air, Inc. ("ATA") has entered into a Certificate Purchase Agreement dated as of March 26, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Certificate Purchase Agreement") with Amtran, Inc. ("Amtran") and PK AirFinance US, Inc. (the "Purchaser", and together with its transferees and assigns as owners of the Certificates, the "Investors") which provides for the purchase of the American Trans Air Pass Through Trust, Series 2002-1B Certificates (the "Certificates"); WHEREAS, ATA, Amtran and Wilmington Trust Company have entered into a Pass Through Trust Agreement dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pass Through Trust Agreement") relating to American Trans Air 2002-1B Pass Through Trust pursuant to which the Certificates are being issued; WHEREAS, ATA, Amtran, the Pass Through Trustee and certain other persons concurrently herewith are entering into the Note Purchase Agreement, dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Note Purchase Agreement"), pursuant to which the Pass Through Trustee, utilizing a portion of the proceeds from the sale of the Certificates (the "Net Proceeds"), has agreed to acquire from time to time on or prior to the Delivery Period Termination Date (as defined in the Note Purchase Agreement) equipment notes (the "Equipment Notes") issued to finance or refinance the acquisition of certain aircraft by ATA, as lessee or as owner; WHEREAS, the Escrow Agent, the Purchaser, the Pass Through Trustee and Wilmington Trust Company, as paying agent for the Escrow Agent (in such capacity, together with its successors in such capacity, the "Paying Agent") concurrently herewith are entering into an Escrow and Paying Agent Agreement (Class B), dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Escrow and Paying Agent Agreement"); and WHEREAS, the Purchaser and the Pass Through Trustee intend that the Net Proceeds be held in escrow by the Escrow Agent on behalf of the Investors pursuant to the Escrow and Paying Agent Agreement, subject to withdrawal upon request of and proper -2- certification by the Pass Through Trustee for the purpose of purchasing Equipment Notes, and that pending such withdrawal the Net Proceeds be deposited by the Escrow Agent with the Depositary pursuant to this Agreement, which provides for the Depositary to pay interest for distribution to the Investors and to establish accounts from which the Escrow Agent shall requisition or demand withdrawals upon request of and proper certification by the Pass Through Trustee. NOW, THEREFORE, in consideration of the obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1.1. Acceptance of Depositary. The Depositary hereby agrees to act as depositary bank as provided herein and in connection therewith to accept all amounts to be delivered to or held by the Depositary pursuant to the terms of this Agreement. The Depositary further agrees to hold, maintain and safeguard the Deposits and the Accounts (as defined below) during the term of this Agreement in accordance with the provisions of this Agreement. The Depositary shall neither be responsible for or under, nor chargeable with knowledge of, the terms and conditions of any other agreement, instrument or document to which it is not a party, other than Section 4(a)(vii) of the Note Purchase Agreement. This Agreement sets forth all of the obligations of the Depositary, and no additional obligations shall be implied from the terms of this Agreement or any other agreement, instrument or document. The Escrow Agent shall not have any right to withdraw, assign or otherwise transfer moneys held in the Accounts except as permitted by this Agreement. SECTION 1.2. Establishment of Accounts. The Escrow Agent hereby instructs the Depositary, and the Depositary agrees, to establish (i) the separate deposit accounts listed on Schedule I hereto required in connection with the deposits contemplated by Section 2.1 hereof (each, an "Account" and collectively, the "Accounts"), and (ii) such additional separate deposit accounts as may be required in connection with the deposits contemplated by Section 2.4 hereof (each, also an "Account") in each case, in the name of the Escrow Agent and all on the terms and conditions set forth in this Agreement. SECTION 2.1. Deposits. The Escrow Agent shall direct the Purchaser to deposit with the Depositary on the date of this Agreement (the "Deposit Date") in immediately available funds by wire transfer to the Depositary at One William Street, New York, NY 10004, ABA #026005319, Attention: Paul Florcruz, Reference: American Trans Air 2002-1B, and the Depositary shall accept from the Purchaser, on behalf of the Escrow Agent, the Net Proceeds in the amount of US$24,391,148.66. Upon acceptance of such amount, the Depositary shall (i) establish each of the deposits specified in Schedule I hereto maturing on the date set forth in Schedule I hereto, (including any deposit made pursuant to Section 2.4 hereof, individually, a -3- "Deposit" and, collectively, the "Deposits") and (ii) credit each Deposit to the related Account as set forth therein. No amount shall be deposited in any Account other than the related Deposit. SECTION 2.2. Interest. Each Deposit shall bear interest from and including the date of deposit to but excluding the date of withdrawal at the rate of 10.699% per annum (calculated on the basis of a year of twelve 30-day months) payable to the Paying Agent on behalf of the Escrow Agent quarterly in arrears on each February 20, May 20, August 20 and November 20 (each, an "Interest Payment Date") and on the date of each Prepayment Withdrawal and the Final Withdrawal (as defined below), commencing on May 20, 2002 all in accordance with the terms of this Agreement (whether or not any such Deposit is withdrawn on an Interest Payment Date). Interest accrued on any Deposit that is withdrawn pursuant to a Notice of Purchase Withdrawal (as defined below) shall be paid on the next Interest Payment Date, notwithstanding any intervening Final Withdrawal (as defined below). In addition, interest accrued on any Deposit that is withdrawn pursuant to a Notice of Replacement Withdrawal (as defined below) but not paid on the date of the Replacement Withdrawal shall be paid on the next Interest Payment Date. SECTION 2.3. Withdrawals. (a) On and after the date seven days after the establishment of any Deposit, the Escrow Agent may, by providing at least one Business Day's prior notice of withdrawal to the Depositary in the form of Exhibit A hereto (a "Notice of Purchase Withdrawal"), request withdrawal of the entire balance of such Deposit, except that at any time prior to the actual withdrawal of such Deposit, the Escrow Agent or the Pass Through Trustee may, by notice to the Depositary, cancel such withdrawal (including on the scheduled date therefor), and thereafter such Deposit shall continue to be maintained by the Depositary in accordance with the original terms thereof. Following such withdrawal the balance in the related Account shall be zero and the Depositary shall close such Account. As used herein, "Business Day" means any day, other than a Saturday, Sunday or other day on which commercial banks are authorized or required by law to close in New York, New York, Indianapolis, Indiana, Wilmington, Delaware or Salt Lake City, Utah. (b) (i) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit B hereto (a "Notice of Final Withdrawal"), request withdrawal of the entire amount of all of the remaining Deposits together with the payment by the Depositary of all accrued and unpaid interest earned on such Deposits to but excluding the specified date of withdrawal (a "Final Withdrawal"), on such date as shall be specified in such Notice of Final Withdrawal. If a Notice of Final Withdrawal has not been given to the Depositary on or before September 29, 2002 and there are unwithdrawn Deposits on such date, the Depositary shall pay the amount of the Final Withdrawal to the Paying Agent on October 14, 2002. 4 (ii) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit C hereto (a "Notice of Replacement Withdrawal"), request withdrawal of the entire amount of all Deposits then held by the Depositary together with, if the Replacement Withdrawal occurs on an Interest Payment Date, the payment by the Depositary of all accrued and unpaid interest on such Deposits to but excluding the specified date of withdrawal (a "Replacement Withdrawal"), on such date as shall be specified in such Notice of Replacement Withdrawal. (iii) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit D hereto (a "Notice of Prepayment Withdrawal"), withdraw all or a portion of the Deposit together with all accrued and unpaid interest thereon to but excluding the specified date of withdrawal (a "Prepayment Withdrawal"), on such date as shall be specified in such Notice of Prepayment Withdrawal. Following such withdrawal the balance in the Account shall be reduced by the amount of the withdrawal. Upon any Prepayment Withdrawal, the Depositary shall pay to the Paying Agent the amount requested in the related Notice of Prepayment Withdrawal. (c) If the Depositary receives a duly completed Notice of Purchase Withdrawal, Notice of Prepayment Withdrawal, Notice of Final Withdrawal or Notice of Replacement Withdrawal (each, a "Withdrawal Notice") complying on its face with the provisions of this Agreement, it shall make the payments specified therein in accordance with the provisions of this Agreement. If such complying Withdrawal Notice is received by the Depositary no later than 3:00 p.m. (New York City time) on a Business Day, the Depositary shall make the payments requested in such Withdrawal Notice no later than 11:00 a.m. (New York City time) on the next succeeding Business Day or such later day specified in such Withdrawal Notice, and if such complying Withdrawal Notice is received by the Depositary after 3:00 p.m. (New York City time) on a Business Day, the Depositary shall make the payments requested in such Withdrawal Notice no later than 11:00 a.m. (New York time) on the second Business Day next following such Business Day or such later date specified in such Withdrawal Notice. SECTION 2.4. Other Accounts. On the date of withdrawal of any Deposit (pursuant to a Notice of Purchase Withdrawal), the Escrow Agent, or the Pass Through Trustee on behalf of the Escrow Agent, shall be entitled to re-deposit (or cause to be re-deposited) with the Depositary any portion thereof and the Depositary shall accept the same for deposit hereunder. Any sums so received for deposit shall be established as a new Deposit and credited to a new Account, all as more fully provided in Section 2.1 hereof, and thereafter the provisions of this Agreement shall apply thereto as fully and with the same force and effect as if such Deposit had been established on the Deposit Date except that (i) such Deposit may not be withdrawn prior to the date seven days after the establishment thereof and (ii) such Deposit shall mature on the date set forth in Schedule I hereto, and bear interest as provided in Section 2.2. 5 The Depositary shall promptly give notice to the Escrow Agent of receipt of each such re-deposit and the Account number assigned thereto. SECTION 3. Termination. (a) This Agreement shall terminate on the fifth Business Day after the later of the date on which (i) all of the Deposits shall have been withdrawn and paid as provided herein without any re-deposit of any portion thereof being made and (ii) all accrued and unpaid interest earned on the Deposits shall have been paid as provided herein, but in no event prior to the date on which the Depositary shall have performed in full its obligations hereunder. (b) For the avoidance of doubt, the obligations of the Depositary under the last two sentences of Section 2.2 hereof shall remain in full force and effect notwithstanding the execution and delivery of a Replacement Deposit Agreement in accordance with Section 4(a)(vii) of the Note Purchase Agreement. SECTION 4. Payments. All payments (including, without limitation, those payments made in respect of Taxes (as defined and provided for below)) made by the Depositary hereunder shall be paid in United States Dollars and in immediately available funds by wire transfer (i) in the case of accrued interest on the Deposits payable under Section 2.2 hereof, any Prepayment Withdrawal or any Final Withdrawal, directly to the Paying Agent at Wilmington Trust Company, Wilmington, DE, ABA # 031-100-092, Account No. 57831-0, Attention: Jeanne Oller, Reference: American Trans Air 2002-1B, or to such other account as the Paying Agent may direct from time to time in writing to the Depositary and the Escrow Agent and, (ii) in the case of any withdrawal of one or more Deposits pursuant to a Notice of Purchase Withdrawal or Notice of Replacement Withdrawal, directly to or as directed by the Pass Through Trustee as specified and in the manner provided in such Notice of Purchase Withdrawal or Notice of Replacement Withdrawal. The Depositary hereby waives any and all rights of set-off, combination of accounts, right of retention or any similar right (whether arising under applicable law, contract or otherwise) it may have against the Deposits howsoever arising. Except as provided below, all payments on or in respect of each Deposit shall be made by the Depositary free and clear of and without reduction for or on account of any and all taxes, levies or other impositions or charges (collectively, "Taxes"). However, if the Depositary or the Paying Agent (pursuant to Section 2.04 of the Escrow and Paying Agent Agreement) shall be required by law to deduct or withhold any Taxes from or in respect of any sum payable hereunder, the Depositary shall (i) make such deductions or withholding, (ii) pay the full amount deducted or withheld (including in respect of such additional amounts) to the relevant taxation authority and (iii) if the Taxes required to be deducted or withheld are imposed by the Republic of Italy or any political subdivision thereof, pay such additional amounts as may be necessary in order that the actual amount received by the designated recipient of such sum under this Agreement or the Escrow and Paying Agent Agreement after such deduction or withholding equals the sum it would have received had no such deduction or withholding been required. If the date on which any payment 6 due on any Deposit would otherwise fall on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day, and no additional interest shall accrue in respect of such extension. SECTION 5. Representation and Warranties. The Depositary hereby represents and warrants to ATA, the Escrow Agent, the Pass Through Trustee, the Investors and the Paying Agent that: (a) it is a banking corporation duly organized and existing under the laws of the Republic of Italy, acting through its New York branch; (b) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement; (c) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of it and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and this Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof; and (d) no authorization, consent or approval of or other action by, and, except for administrative and ministerial filings which the Depositary is obligated to make in the ordinary course of its business, no notice to or filing with, any Italian or United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement. SECTION 6. Transfer. Neither party hereto shall be entitled to assign or otherwise transfer this Agreement (or any interest herein) other than (in the case of the Escrow Agent) to a successor escrow agent under the Escrow and Paying Agent Agreement, and any purported assignment in violation thereof shall be void. This Agreement shall be binding upon the parties hereto and their respective successors and (in the case of the Escrow Agent) permitted assigns. SECTION 7. Amendment, Etc. This Agreement may not be amended, waived or otherwise modified except by an instrument in writing signed by the parties hereto. SECTION 8. Notices. (a) Unless otherwise expressly provided herein, any notice, instruction or other communication under this Agreement shall be in writing (including by facsimile) and shall be deemed to be given and effective upon receipt thereof. All notices shall be sent to (x) in the case of the Depositary, IntesaBci S.p.A., New York Branch, Attention: Transportation Finance Group (Telecopier: 212-607-3966) and with a copy to IntesaBci S.p.A. 7 New York Branch, One William Street, New York, NY 10004, Attention: Paul Florcruz, Dealing Room (Telecopier: 212-422-6235) or (y) in the case of the Escrow Agent, Wells Fargo Bank Northwest, National Association, 79 South Main Street, 3rd Floor, Salt Lake City, UT 84111, Attention: Corporate Trust Services (Telecopier: (801) 246-5053), in each case, with a copy to the Pass Through Trustee, Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, DE 19890, Attention: Corporate Trust Administration (Telecopier: (302) 636-4140), to ATA, 7337 West Washington Street, Attention: Kenneth K. Wolff, Chief Financial Officer (Telecopier: (317) 240-7091) and to the Purchaser, PK AirFinance US, Inc., 400 Madison Avenue, New York, NY 10017, Attention: Vice-President-Marketing (Telecopier: 212-397-9393) with a copy to PK AirFinance, S.A., European Bank and Business Center, 6D Route de Treves, Senningerberg, 2633 Luxembourg, Attention: Vice-President - Marketing, (Telecopier: 352- 3480-50) and Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, NY 10019, Attention: Joseph M. Juhas, Esq./Dev. R. Sen, Esq. (Telecopier: 212-259-6333) (or at such other address as any such party may specify from time to time in a written notice to the parties mentioned above). On or prior to the execution of this Agreement, the Escrow Agent has delivered to the Depositary an incumbency certificate containing specimen signatures of the representatives of the Escrow Agent who are authorized to give notices and instructions with respect to this Agreement. The Depositary may conclusively rely on such certificate until the Depositary receives written notice from the Escrow Agent to the contrary. (b) The Depositary shall be fully protected and authorized in relying upon any instruction, notice, certification, demand, consent, authorization, receipt, power of attorney or other writing delivered to it by the Escrow Agent without being required to make any investigation or inquiry thereof, determine the authenticity or validity thereof or the correctness of any fact stated therein, the propriety or validity of the service thereof, or the jurisdiction of the court issuing any judgment or order. The Depositary may act in reliance upon any signature believed by it to be genuine and reflected in the above-mentioned incumbency certificate, and may assume that the person so signing has been properly authorized to do so. Except as provided in this Agreement, the Depositary shall not be deemed to have any duty or notice hereunder unless and until it has been provided with written notice. (c) Anything to the contrary notwithstanding, the Depositary may consult with legal counsel of its selection in the event of any dispute, or question as to the meaning or construction of any of the provisions hereof or its duties hereunder, and it shall incur no liability and shall be fully authorized and protected in acting in accordance with the opinion and instructions of such counsel. 8 SECTION 9. Obligations Unconditional. The Depositary hereby acknowledges and agrees that its obligation to repay each Deposit together with interest earned thereon as provided herein is absolute, irrevocable and unconditional and constitutes a full recourse obligation of the Depositary enforceable against it to the full extent of all of its assets and properties. SECTION 10. Funds Transfers. In the event funds transfer instructions are given (other than in writing at the time of execution of this Agreement), whether in writing, by telecopier or otherwise, the Depositary is authorized to seek confirmation of such instructions by telephone call back to the person or persons designated by the Escrow Agent, and the Depositary may rely upon the confirmations of anyone purporting to be the person or persons so designated. To assure accuracy of the instructions it receives, the Depositary may record such telephone call backs. If the Depositary is unable to confirm any instructions, or if not satisfied with the confirmation it receives, it will not execute the instruction until all issues have been resolved. The person and telephone numbers for call backs may be changed only in writing actually received and acknowledged by the Depositary. The Depositary shall receive notification of any errors, delays or other problems within thirty (30) days after a transaction has been executed. SECTION 11. Entire Agreement. This Agreement (including all attachments hereto) sets forth all of the promises, covenants, agreements, conditions and understandings between the Depositary and the Escrow Agent with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and undertakings, inducements or conditions, express or implied, oral or written. SECTION 12. Governing Law. This Agreement, and the rights and obligations of the Depositary and the Escrow Agent with respect to the Deposits, shall be governed by, and entirely construed in accordance with, the laws of the State of New York and subject to the provisions of Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time.t SECTION 13. Waiver of Jury Trial Right. EACH OF THE DEPOSITARY AND THE ESCROW AGENT ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY. SECTION 14. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. IN WITNESS WHEREOF, the Escrow Agent and the Depositary have caused this Deposit Agreement (Class B) to be duly executed as of the day and year first above written. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By --------------------------------- Name: Title: INTESABCI S.P.A., acting through its NEW YORK BRANCH, as Depositary By --------------------------------- Name: Title: By --------------------------------- Name: Title: Schedule I Schedule of Deposits -------------------- (Class B)
Aircraft Deposit Date Tail No. Deposit Amount Account No. ------------ -------- -------------- ----------- March 28, 2002 N320TZ $6,147,939.09 12060 081 004 March 28, 2002 N322TZ $6,161,827.96 12060 081 006 March 28, 2002 N324TZ $6,109,566.93 12060 081 008 March 28, 2002 N325TZ $5,971,814.68 12060 081 0010
EXHIBIT A NOTICE OF PURCHASE WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Deposit Agreement (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Deposit Agreement. In accordance with Section 2.3(a) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of the Deposit, $_______, held by the Depositary in Account No. ____________. The undersigned hereby directs the Depositary to pay the proceeds of the Deposit to [________________, Account No. _____, Reference: _________] on _________ __, 2002, upon the telephonic request of a representative of Wilmington Trust Company, the Pass Through Trustee. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By ---------------------------- Name: Title: Dated: ___________, ____ EXHIBIT B NOTICE OF FINAL WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Deposit Agreement (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Deposit Agreement. In accordance with Section 2.3(b) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of all Deposits (as defined in the Deposit Agreement). The undersigned hereby directs the Depositary to pay, on ___________, 2002, the proceeds of the Deposits and accrued and unpaid interest thereon to the Paying Agent at Wilmington Trust Company, ABA # _______________, Account No. ___________, Reference: American Trans Air 2002-1B. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------ Name: Title: Dated: _________, _____ EXHIBIT C NOTICE OF REPLACEMENT WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Deposit Agreement (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Deposit Agreement. In accordance with Section 2.3(b)(ii) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of all Deposits [plus all accrued and unpaid interest on the Deposits to but excluding the date of withdrawal] for payment on _______________, 2002. The undersigned hereby directs the Depositary to pay the proceeds of the Deposits to [Name of Replacement Depositary] at __________________________, ABA# _____________, Account No. _____________, Reference: American Trans Air 2002-1B [and to pay accrued and unpaid interest thereon to the Paying Agent at ___________, ABA #___________, Acct. No. ___________, Reference: American Trans Air 2002-1B]. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By: ----------------------- Name: Title: Dated: _________, _____ EXHIBIT D NOTICE OF PREPAYMENT WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Deposit Agreement (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Deposit Agreement. In accordance with Section 2.3(b)(iii) of the Deposit Agreement, the undersigned hereby requests the withdrawal of the following amount of the Deposit: $______________, Account No.:__________________ plus all accrued and unpaid interest on such Deposits to but excluding the date of withdrawal for payment on _______________, 2002. The undersigned hereby directs the Depositary to pay the proceeds of the Deposits and accrued and unpaid interest thereon to the Paying Agent at ___________, ABA #___________, Acct. No. ___________, Reference: American Trans Air 2002-1B. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By: ----------------------- Name: Title: Dated: _________, _____ EX-4.13 13 file012.txt ESCROW AND PAYING AGENT AGREEMENT CLASS A EXECUTION COPY - -------------------------------------------------------------------------------- ESCROW AND PAYING AGENT AGREEMENT (Class A) Dated as of March 28, 2002 among WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent NYALA FUNDING LLC, as Purchaser WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Trans Air 2002-1A Pass Through Trust as Pass Through Trustee and WILMINGTON TRUST COMPANY, as Paying Agent - -------------------------------------------------------------------------------- ESCROW AND PAYING AGENT AGREEMENT (Class A) dated as of March 28, 2002 (as amended, modified or supplemented from time to time, this "Agreement") among WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking association, as Escrow Agent (in such capacity, together with its successors in such capacity, the "Escrow Agent"); NYALA FUNDING LLC (the "Purchaser", and together with its transferees and assigns as registered owners of the Certificates referred to below, the "Investors"); WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity but solely as trustee (in such capacity, together with its successors in such capacity, the "Pass Through Trustee") under the Pass Through Trust Agreement referred to below; and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as paying agent hereunder (in such capacity, together with its successors in such capacity, the "Paying Agent"). W I T N E S S E T H - - - - - - - - - - WHEREAS, American Trans Air, Inc. ("ATA"), Amtran, Inc. ("Amtran") and the Pass Through Trustee have entered into a Pass Through Trust Agreement, dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pass Through Trust Agreement") relating to American Trans Air 2002-1A Pass Through Trust (the "Pass Through Trust") pursuant to which the American Trans Air Pass Through Trust, Series 2002-1A Certificates (the "Certificates") are being issued; WHEREAS, ATA, the Pass Through Trustee and certain other persons concurrently herewith are entering into the Note Purchase Agreement, dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Note Purchase Agreement"), pursuant to which the Pass Through Trustee has agreed to acquire from time to time on or prior to the Delivery Period Termination Date (as defined in the Note Purchase Agreement) equipment notes (the "Equipment Notes") issued to finance the acquisition of Aircraft (as defined in the Note Purchase Agreement) by ATA, as lessee or as owner, utilizing a portion of the proceeds from the sale of the Certificates (the "Net Proceeds"); WHEREAS, the Purchaser and the Pass Through Trustee intend that the Net Proceeds be held in escrow by the Escrow Agent on behalf of the Investors, subject to withdrawal upon request by the Pass Through Trustee and satisfaction of the conditions set forth in the Note Purchase Agreement for the purpose of purchasing Equipment Notes, and that pending such withdrawal (i) the Net Proceeds from the sale of the Certificates on the date hereof be deposited on behalf of the Escrow Agent with IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary", which shall also be deemed to refer to any Replacement Depositary (as defined in the Note Purchase Agreement) from and after the date on which the Deposits (as defined in the Deposit Agreement) are transferred to such Replacement Depositary) under the Deposit Agreement (Class A), dated as of the date hereof between the Depositary and the Escrow Agent relating to the Pass Through Trust (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Initial Deposit Agreement") and (ii) the Net Proceeds from the sale of the Certificates on the Delayed Funding Date (as defined in the -2- Delayed Funding Implementation Agreement) be deposited on behalf of the Escrow Agent with the Depositary under the Delayed Deposit Agreement (Class A) dated as of the date hereof between the Depositary and the Escrow Agent relating to the Pass Through Trust (as amended, modified or supplemented from time to time in accordance with the terms thereto), the "Delayed Deposit Agreement"). As used herein, the term "Deposit Agreement" shall mean, prior to the Delayed Funding Date, the Initial Deposit Agreement, and on and after the Delayed Funding Date, the Initial Deposit Agreement (to the extent of any payment to be made by the Depositary thereunder on or after the Delayed Funding Date) and the Delayed Deposit Agreement. The terms "Initial Deposit Agreement" and "Delayed Deposit Agreement" shall be deemed to refer to any Replacement Deposit Agreement (as defined in the Note Purchase Agreement) to which the Escrow Agent becomes a party pursuant to Section 1.02(a) hereof from and after the transfer of the Deposits from the Depositary to the Replacement Depositary) pursuant to which, among other things, the Depositary will pay interest for distribution to the Investors and establish accounts from which the Escrow Agent shall make withdrawals upon the request of and proper certification by the Pass Through Trustee; WHEREAS, ATA, Amtran, the Pass Through Trustee, the Escrow Agent, the Paying Agent and certain other parties concurrently herewith are entering into a Delayed Funding Implementation Agreement dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the "Delayed Funding Implementation Agreement") pursuant to which the parties thereto agree to supplement and modify the Operative Agreements, as defined therein; WHEREAS, the Escrow Agent wishes to appoint the Paying Agent to pay amounts required to be distributed to the Investors in accordance with this Agreement; and WHEREAS, capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Pass Through Trust Agreement. NOW, THEREFORE, in consideration of the obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Escrow Agent. Section 1.01. Appointment of Escrow Agent. The Purchaser hereby irrevocably appoints, authorizes and directs the Escrow Agent to act as escrow agent and fiduciary hereunder and under the Deposit Agreement for such specific purposes and with such powers as are specifically delegated to the Escrow Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Any and all monies received and held by the Escrow Agent under this Agreement or the Deposit Agreement shall be held in trust by the Escrow Agent in accordance with the terms of this Agreement. This Agreement is irrevocable and the Investors' rights with respect to any monies received and held in trust by the Escrow Agent under this Agreement or the Deposit Agreement shall only be as provided under the terms and conditions of this Agreement and the Deposit Agreement. The Escrow Agent (which term as used in this sentence shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those -3- expressly set forth in this Agreement and the Deposit Agreement; (b) shall not be responsible to the Pass Through Trustee or the Investors for any recitals, statements, representations or warranties of any person other then itself contained in this Agreement or the Deposit Agreement or for the failure by the Pass Through Trustee, the Investors, the Paying Agent or any other person or entity (other than the Escrow Agent) to perform any of its obligations hereunder (whether or not the Escrow Agent shall have any knowledge thereof); and (c) shall not be responsible for any action taken or omitted to be taken by it hereunder or provided for herein or in connection herewith, except for its own willful misconduct or gross negligence (or simple negligence in connection with the handling of funds). Section 1.02. Instruction; Etc. The Purchaser hereby irrevocably directs the establishment of an escrow and accordingly instructs the Escrow Agent, and the Escrow Agent agrees, (a) to enter into the Initial Deposit Agreement and the Delayed Deposit Agreement and, if requested by ATA pursuant to Section 4(a)(vii) of the Note Purchase Agreement, to enter into a Replacement Deposit Agreement with the Replacement Depositary specified by the Company, (b) to appoint the Paying Agent as provided for in this Agreement, (c) upon receipt at any time and from time to time prior to the Termination Date (as defined below) of a certificate substantially in the form of Exhibit B hereto (a "Withdrawal Certificate") executed by the Pass Through Trustee, together with an attached Notice of Purchase Withdrawal in substantially the form of Exhibit A to the Deposit Agreement duly completed by the Pass Through Trustee (the "Applicable Notice of Purchase Withdrawal" and the withdrawal to which it relates, a "Purchase Withdrawal"), immediately to execute the Applicable Notice of Purchase Withdrawal as Escrow Agent and transmit it to the Depositary by facsimile transmission in accordance with the Deposit Agreement; provided that, upon the request of the Pass Through Trustee after such transmission, the Escrow Agent shall cancel such Applicable Notice of Purchase Withdrawal, (d) upon receipt at any time and from time to time prior to the Delivery Period Termination Date of a certificate substantially in the form of Exhibit C hereto (a "Prepayment Withdrawal Certificate") executed by the Pass Through Trustee, together with an attached Notice of Prepayment Withdrawal in substantially the form of Exhibit D to the Deposit Agreement duly completed by the Pass Through Trustee (the "Applicable Notice of Prepayment Withdrawal" and the withdrawal to which it relates, a "Prepayment Withdrawal"), immediately to execute the Applicable Notice of Prepayment Withdrawal as Escrow Agent and transmit it to the Depositary by facsimile transmission in accordance with the Deposit Agreement; provided that, upon the request of the Pass Through Trustee after such transmission, the Escrow Agent shall cancel such Applicable Notice of Prepayment Withdrawal, and (e) upon receipt of a Withdrawal Certificate executed by the Pass Through Trustee, together with an attached Notice of Replacement Withdrawal in substantially the form of Exhibit C to the Deposit Agreement duly completed by the Pass Through Trustee, to (i) give such Notice of Replacement Withdrawal to the Depositary requesting a withdrawal, on the date specified in such notice, which shall not be less than 15 days after such notice is given (the "Replacement Withdrawal Date"), of all Deposits then held by the Depositary together with, if the Replacement Withdrawal Date occurs on a Regular Distribution Date, all accrued and unpaid interest on such Deposits to but excluding the Replacement Withdrawal Date, and (ii) direct the Depositary to transfer such Deposits on behalf of the Escrow Agent to the Replacement Depositary in accordance with the Replacement Deposit Agreement and (f) if there are any undrawn Deposits on the "Termination Date", which shall mean the earlier of (i) September 29, 2002 and (ii) the day on which the Escrow Agent receives -4- notice from the Pass Through Trustee that the Pass Through Trustee's obligation to purchase Equipment Notes under the Note Purchase Agreement has terminated, to give notice to the Depositary (with a copy to the Paying Agent) substantially in the form of Exhibit B to the Deposit Agreement requesting a withdrawal of all of the remaining Deposits, together with accrued and unpaid interest on such Deposits to the date of withdrawal, on the 15th day after the date that such notice of withdrawal is given to the Depositary (or, if not a Business Day, on the next succeeding Business Day) (a "Final Withdrawal"), provided that if the day scheduled for the Final Withdrawal in accordance with the foregoing is within 10 days before or after a Regular Distribution Date, then the Escrow Agent shall request that such requested Final Withdrawal be made on such Regular Distribution Date (the date of such requested withdrawal, the "Final Withdrawal Date"). If for any reason the Escrow Agent shall have failed to give the Final Withdrawal Notice to the Depositary on or before September 29, 2002, and there are unwithdrawn Deposits on such date, the Final Withdrawal Date shall be deemed to be October 14, 2002. Section 1.03. Initial Escrow Amount; Issuance of Escrow Receipts. The Escrow Agent hereby directs the Purchaser to, and the Purchaser hereby acknowledges that on the date hereof it shall, irrevocably deliver by wire transfer to the Depositary on behalf of the Escrow Agent an amount in U.S. dollars ("Dollars") and immediately available funds equal to $89,886,351.34 for deposit on behalf of the Escrow Agent with the Depositary in accordance with Section 2.1 of the Deposit Agreement. The Purchaser hereby instructs the Escrow Agent, upon receipt of such sum from the Purchaser, to confirm such receipt by executing and delivering to the Pass Through Trustee an Escrow Receipt in the form of Exhibit A hereto (an "Escrow Receipt"), (a) to be affixed by the Pass Through Trustee to each Certificate and (b) to evidence the same percentage interest (the "Escrow Interest") in the Account Amounts (as defined in Section 1.04) as the Fractional Undivided Interest in the Pass Through Trust evidenced by the Certificate to which it is to be affixed. The Escrow Agent shall provide to the Pass Through Trustee for attachment to each Certificate newly issued under and in accordance with the Pass Through Trust Agreement an executed Escrow Receipt as the Pass Through Trustee may from time to time request of the Escrow Agent. Each Escrow Receipt shall be registered by the Escrow Agent in a register (the "Register") maintained by the Escrow Agent in the same name and same manner as the Certificate to which it is attached and may not thereafter be detached from such Certificate to which it is to be affixed prior to the distribution of the Final Withdrawal (the "Final Distribution"). After the Final Distribution, no Escrow Receipts shall be issued and the Pass Through Trustee shall request the return to the Escrow Agent for cancellation of all outstanding Escrow Receipts. Section 1.04. Payments to Receiptholders. All payments and distributions made to holders of an Escrow Receipt (collectively "Receiptholders") in respect of the Escrow Receipt shall be made only from amounts deposited in the Paying Agent Account ("Account Amounts"). Each Receiptholder, by its acceptance of an Escrow Receipt, agrees that (a) it will look solely to the Account Amounts for any payment or distribution due to such Receiptholder pursuant to the terms of the Escrow Receipt and this Agreement and (b) it will have no recourse to ATA, the Pass Through Trustee, the Paying Agent or the Escrow Agent for any such payment or distribution, except as expressly provided herein or in the Pass Through Trust Agreement. No Receiptholder shall have any right to vote or in any manner otherwise control the operation and -5- management of the Paying Agent Account or the obligations of the parties hereto, nor shall anything set forth herein, or contained in the terms of the Escrow Receipt, be construed so as to constitute the Receiptholders from time to time as partners or members of an association. Section 1.05. Mutilated, Destroyed Lost or Stolen Escrow Receipt. If (a) any mutilated Escrow Receipt is surrendered to the Escrow Agent or the Escrow Agent receives evidence to its satisfaction of the destruction, loss or theft of any Escrow Receipt and (b) there is delivered to the Escrow Agent and the Pass Through Trustee such security, indemnity or bond, as may be required by them to hold each of them harmless, then, absent notice to the Escrow Agent or the Pass Through Trustee that such destroyed, lost or stolen Escrow Receipt has been acquired by a protected purchaser, and provided that the requirements of Section 8-405 of the Uniform Commercial Code in effect in any applicable jurisdiction are met, the Escrow Agent shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Escrow Receipt, a new Escrow Receipt or Escrow Receipts and of like Escrow Interest in the Account Amounts and bearing a number not contemporaneously outstanding. In connection with the issuance of any new Escrow Receipt under this Section 1.05, the Escrow Agent may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Pass Through Trustee and the Escrow Agent) connected therewith. Any duplicate Escrow Receipt issued pursuant to this Section 1.05 shall constitute conclusive evidence of the appropriate Escrow Interest in the Account Amounts, as if originally issued, whether or not the lost, stolen or destroyed Escrow Receipt shall be found at any time. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Escrow Receipts. Section 1.06. Additional Escrow Amounts. On the date of any Purchase Withdrawal, the Pass Through Trustee may re-deposit with the Depositary some or all of the amounts so withdrawn in accordance with Section 2.4 of the Deposit Agreement. Section 1.07. Resignation or Removal of Escrow Agent. Subject to the appointment and acceptance of a successor Escrow Agent as provided below, the Escrow Agent may resign at any time by giving 30 days' prior written notice thereof to the Investors, but may not otherwise be removed except for cause by the written consent of the Investors with respect to Investors representing Escrow Interests aggregating not less than a majority in interest in the Account Amounts (an "Action of Investors"). Upon any such resignation or removal, the Investors, by an Action of Investors, shall have the right to appoint a successor Escrow Agent. If no successor Escrow Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Escrow Agent's giving of notice of resignation or the removal of the retiring Escrow Agent, then the retiring Escrow Agent may appoint a successor Escrow Agent, which shall be a commercial bank which has an office in the United States with a combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Escrow Agent hereunder by a successor Escrow Agent, such successor Escrow -6- Agent shall enter into such documents as the Pass Through Trustee shall require and shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Escrow Agent, and the retiring Escrow Agent shall be discharged from its duties and obligations hereunder. No resignation or removal of the Escrow Agent shall be effective unless a written confirmation shall have been obtained from Moody's Investors Service, Inc. that the replacement of the Escrow Agent with the successor Escrow Agent will not result in (a) a reduction of the rating for the Certificates below the then current rating for the Certificates or (b) a withdrawal or suspension of the rating of the Certificates. Section 1.08. Persons Deemed Owners. Prior to due presentment of a Certificate for registration of transfer, the Escrow Agent and the Paying Agent may treat the Person in whose name any Escrow Receipt is registered (as of the day of determination) as the owner of such Escrow Receipt for the purpose of receiving distributions pursuant to this Agreement and for all other purposes whatsoever, and none of the Escrow Agent or the Paying Agent shall be affected by any notice to the contrary. Section 1.09. Further Assurances. The Escrow Agent agrees to take such actions, and execute such other documents, as may be reasonably requested by the Pass Through Trustee in order to effectuate the purposes of this Agreement and the performance by the Escrow Agent of its obligations hereunder. SECTION 2. Paying Agent. Section 2.01. Appointment of Paying Agent. The Escrow Agent hereby irrevocably appoints and authorizes the Paying Agent to act as its paying agent hereunder, for the benefit of the Investors, for such specific purposes and with such powers as are specifically delegated to the Paying Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. The Paying Agent is authorized to enter into the Delayed Funding Implementation Agreement. Any and all money received and held by the Paying Agent under this Agreement or the Deposit Agreement shall be held in the Paying Agent Account (as defined below) for the benefit of the Investors. The Paying Agent (which term as used in this sentence shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities hereunder except those expressly set forth in this Agreement, and shall not by reason of this Agreement be a trustee for the Escrow Agent; (b) shall not be responsible to the Escrow Agent for any recitals, statements, representations or warranties of any person other than itself contained in this Agreement or for the failure by the Escrow Agent or any other person or entity (other than the Paying Agent) to perform any of its obligations hereunder (whether or not the Paying Agent shall have any knowledge thereof); and (c) except in respect of its express obligations hereunder, shall not be responsible for any action taken or omitted to be taken by it hereunder or provided for herein or in connection herewith, except for its own willful misconduct or gross negligence (or simple negligence in connection with the handling of funds). Section 2.02. Establishment of Paving Agent Account. The Paying Agent shall establish a deposit account (the "Paying Agent Account") at Wilmington Trust Company in the name of the Escrow Agent. It is expressly understood by the parties hereto that the Paying Agent -7- is acting as the paying agent of the Escrow Agent hereunder and that no amounts on deposit in the Paying Agent Account constitute part of the Trust Property. Section 2.03. Payments from Paying Agent Account. The Escrow Agent hereby irrevocably instructs the Paying Agent, and the Paying Agent agrees to act, as follows: (a) On each Interest Payment Date (as defined in the Deposit Agreement) or as soon thereafter as the Paying Agent has confirmed receipt in the Paying Agent Account from the Depositary of any amount in respect of accrued interest on the Deposits, the Paying Agent shall distribute out of the Paying Agent Account the entire amount deposited therein by the Depositary. There shall be so distributed to each Receiptholder of record on the 15th day (whether or not a Business Day) preceding such Interest Payment Date by check mailed to such Receiptholder, at the address appearing in the Register, such Receiptholder's pro rata share (based on the Escrow Interest in the Account Amounts held by such Receiptholder) of the total amount of interest deposited by the Depositary in the Paying Agent Account on such date, except that, with respect to Escrow Receipts registered on the Record Date in the name of The Depository Trust Company ("DTC") or the Purchaser, such distribution shall be made by wire transfer in immediately available funds to the account designated by DTC or the Purchaser, as the case may be. (b) Upon the confirmation by the Paying Agent of receipt in the Paying Agent Account from the Depositary of any amount in respect of the Final Withdrawal, the Paying Agent shall forthwith distribute the entire amount of the Final Withdrawal deposited therein by the Depositary to each Receiptholder of record on the 15th day (whether or not a Business Day) preceding the Final Withdrawal Date by check mailed to such Receiptholder, at the address appearing in the Register, such Receiptholder's pro rata share (based on the Escrow Interest in the Account Amounts held by such Receiptholder) of the total amount in the Paying Agent Account on account of such Final Withdrawal, except that, with respect to Escrow Receipts registered on such record date in the name of DTC or the Purchaser, such distribution shall be made by wire transfer in immediately available funds to the account designated by DTC or the Purchaser, as the case may be. (c) If any payment of interest or principal in respect of the Final Withdrawal is not received by the Paying Agent within five days of the applicable date when due, then it shall be distributed to Receiptholders after actual receipt by the Paying Agent on the same basis as a Special Payment is distributed under the Pass Through Trust Agreement. (d) Upon the confirmation by the Paying Agent of receipt in the Paying Agent Account from the Depositary of any amount in respect of a Prepayment Withdrawal, the Paying Agent shall forthwith distribute the entire amount of such Prepayment Withdrawal upon not less than 15 days prior notice to the Receipt holders. There shall be distributed to each Receiptholder of record on the 15th day (whether or not a Business Day) preceding such date of distribution by check mailed to such Receiptholder, at the address appearing in the Register, such Receiptholder's pro rata share (based on the Escrow Interest in the Account Amounts held by such Receiptholder) of the total amount in the Paying Agent Account on account of such Prepayment Withdrawal, except that, with respect to the Escrow Receipts registered on such -8- record date in the name of a nominee of DTC, such distribution shall be made by wire transfer in immediately available funds to the account designated by DTC. (e) The Paying Agent shall include with any check mailed pursuant to this Section or any payment to the Purchaser, any notice required to be distributed under the Pass Through Trust Agreement that is furnished to the Paying Agent by the Pass Through Trustee. Section 2.04. Withholding Taxes. The Paying Agent shall exclude and withhold from each distribution of accrued interest on the Deposits (as defined in the Deposit Agreement) and any amount in respect of any Prepayment Withdrawal or the Final Withdrawal any and all withholding taxes applicable thereto as required by federal law of the United States. The Paying Agent agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Deposits (as defined in the Deposit Agreement) or the escrow amounts, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Receiptholders, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Receiptholder appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Receiptholder may reasonably request from time to time. The Paying Agent agrees to file any other information reports as it may be required to file under United States law. Each Receiptholder or beneficial owner of an interest in an Escrow Receipt that is a Non-U.S. Person, by its acceptance of an Escrow Receipt or a beneficial interest therein, agrees to indemnify and hold harmless the Escrow Agent and the Paying Agent from and against any improper failure to withhold Taxes from amounts payable to it or for its benefit other than an improper failure attributable to the gross negligence or willful misconduct of the Escrow Agent or the Paying Agent, as the case may be. The Paying Agent agrees, to the extent required by the Internal Revenue Code of 1986, as amended (the "Code"), and applicable federal regulations thereunder, to withhold from each payment due hereunder or under any Escrow Receipts, United States withholding taxes at the appropriate rate, and, on a timely basis, to deposit such amounts with the appropriate taxing authority and make such returns, filings and other reports in connection therewith as are required by the Code and as promptly as possible after the payment thereof to deliver to each such Receiptholder appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Receiptholder may reasonably request from time to time. In the event that any withholding tax is imposed on a payment to a Receiptholder, such tax shall reduce the amount otherwise distributable to the Receiptholder in accordance with this Section. Any Receiptholder which is organized under the laws of a jurisdiction outside the United States shall, on or prior to the date such Receiptholder becomes a Receiptholder, (a) so notify the Paying Agent, (b) (i) provide the Paying Agent with Internal Revenue Service Form W-8BEN or W-8ECI, as appropriate (or any successor form), or (ii) notify the Paying Agent that it is not entitled to an exemption from United States withholding tax or a reduction in the rate thereof on payments of interest. Any such Receiptholder agrees by its acceptance of an Escrow Receipt, on an ongoing basis, to provide like certification for each taxable year and to notify the Paying Agent should subsequent circumstances arise affecting the information provided the Paying Agent in clauses (a) and (b) above. The Paying Agent shall be fully protected in relying upon, and each Receiptholder by its acceptance of an Escrow Receipt agrees to indemnify and hold the Paying Agent harmless -9- against all claims or liability of any kind arising in connection with or related to the Paying Agent's reliance upon any documents, forms or information provided by any Receiptholder to the Paying Agent. In addition, if the Paying Agent has not withheld taxes on any payment made to any Receiptholder, and the Paying Agent is subsequently required to remit to any taxing authority any such amount not withheld, such Receiptholder shall return such amount to the Paying Agent upon written demand by the Paying Agent. The Paying Agent shall be liable only for direct (but not consequential) damages to any Receiptholder due to the Paying Agent's violation of the Code and only to the extent such liability is caused by the Paying Agent's gross negligence or willful misconduct. Section 2.05. Resignation or Removal of Paying Agent. Subject to the appointment and acceptance of a successor Paying Agent as provided below, the Paying Agent may resign at any time by giving 30 days' prior written notice thereof to the Escrow Agent, but may not otherwise be removed except for cause by the Escrow Agent. Upon any such resignation or removal, the Escrow Agent shall have the right to appoint a successor Paying Agent, which shall be a commercial bank which has an office in the United States with a combined capital and surplus of at least $100,000,000. If no successor Paying Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Paying Agent's giving of notice of resignation or the removal of the retiring Paying Agent, then the retiring Paying Agent may (i) appoint a successor Paying Agent, which shall be a commercial bank which has an office in the United States with a combined capital and surplus of at least $100,000,000 or (ii) petition a court of competent jurisdiction to appoint such a successor. Upon the acceptance of any appointment as Paying Agent hereunder by a successor Paying Agent, such successor Paying Agent shall enter into such documents as the Escrow Agent shall require and shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Paying Agent, and the retiring Paying Agent shall be discharged from its duties and obligations hereunder. Section 2.06. Notice of Prepayment Withdrawal and Final Withdrawal. Promptly after receipt by the Paying Agent of notice that the Escrow Agent has requested a Prepayment Withdrawal or a Final Withdrawal or that a Prepayment Withdrawal or a Final Withdrawal will be made, the Paying Agent shall cause notice of the distribution of the Final Withdrawal to be mailed to each of the Receiptholders at its address as it appears in the Register. Such notice shall be mailed not less than 15 days prior to the distribution date of such Prepayment Withdrawal (the "Prepayment Withdrawal Date") or the Final Withdrawal Date. Such notice shall set forth: (i) the Prepayment Withdrawal Date or the Final Withdrawal Date and the date for determining Receiptholders of record who shall be entitled to receive distributions in respect of the Prepayment Withdrawal or the Final Withdrawal, (ii) the amount of the payment in respect of the Prepayment Withdrawal or Final Withdrawal for each $1,000 face amount Certificate (based on information provided by the Pass Through Trustee) and the amount thereof constituting unused Deposits (as defined in the Deposit Agreement) and interest thereon, and (iii) if the Prepayment Withdrawal Date or the Final Withdrawal Date is the same date as a Regular Distribution Date, the total amount to be received on such date for -10- each $1,000 face amount Certificate (based on information provided by the Pass Through Trustee). Such mailing may include any notice required to be given to Certificateholders in connection with such distribution pursuant to the Pass Through Trust Agreement. SECTION 3. Payments. If, notwithstanding the instructions in Section 4 of the Deposit Agreement that certain amounts payable to the Escrow Agent under the Deposit Agreement be paid by the Depositary directly to the Paying Agent or the Pass Through Trustee (depending on the circumstances), the Escrow Agent receives any such payment thereunder, then the Escrow Agent shall forthwith pay such amount in Dollars and in immediately available funds by wire transfer to (a) in the case of a payment of accrued interest on the Deposits (as defined in the Deposit Agreement), any Prepayment Withdrawal or any Final Withdrawal, directly to the Paying Agent Account, (b) in the case of any Purchase Withdrawal, directly to the Pass Through Trustee or its designee as specified and in the manner provided in the Applicable Notice of Purchase Withdrawal and (c) in the case of any Replacement Withdrawal (other than accrued interest), to the Replacement Depositary as provided in the Replacement Depositary Agreement. The Escrow Agent hereby waives any and all rights of set-off, combination of accounts, right of retention or any similar right (whether arising under applicable law, contract or otherwise) it may have against amounts payable to the Paying Agent howsoever arising. SECTION 4. Other Actions. The Escrow Agent shall take such other actions under or in respect of the Deposit Agreement (including, without limitation, the enforcement of the obligations of the Depositary thereunder) as the Investors, by an Action of Investors, may from time to time request. SECTION 5. Representations and Warranties of the Escrow Agent. The Escrow Agent represents and warrants to ATA, the Investors, the Paying Agent and the Pass Through Trustee as follows: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America; (ii) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement, the Deposit Agreement and any Replacement Deposit Agreement; (iii) the execution, delivery and performance of each of this Agreement, the Deposit Agreement and any Replacement Deposit Agreement have been duly authorized by all necessary corporate action on the part of it and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and each such document has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof or thereof except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws -11- or equitable principles of general application to or affecting the enforcement of creditors' rights generally (regardless of whether such enforceability is considered in a proceeding in equity or at law); (iv) no authorization, consent or approval of or other action by, and no notice to or filing with, any United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement or the Deposit Agreement or any Replacement Deposit Agreement; (v) neither the execution, delivery or performance by it of this Agreement or the Deposit Agreement or any Replacement Deposit Agreement, nor compliance with the terms and provisions hereof or thereof, conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of it or any similar instrument binding on it or any order, writ, injunction or decree of any court or governmental authority against it or by which it or any of its properties is bound or any indenture, mortgage or contract or other agreement or instrument to which it is a party or by which it or any of its properties is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any lien upon any of its properties; and (vi) there are no pending or, to its knowledge, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of it) against or affecting it or any of its property before or by any court or administrative agency which, if adversely determined, (A) would adversely affect the ability of it to perform its obligations under this Agreement or the Deposit Agreement or any Replacement Deposit Agreement or (B) would call into question or challenge the validity of this Agreement or the Deposit Agreement or the enforceability hereof or thereof in accordance with the terms hereof or thereof, nor is the Escrow Agent in default with respect to any order of any court, governmental authority, arbitration board or administrative agency so as to adversely affect its ability to perform its obligations under this Agreement or the Deposit Agreement. SECTION 6. Representations and Warranties of the Paying Agent. The Paying Agent represents and warrants to ATA, the Investors, the Escrow Agent and the Pass Through Trustee as follows: (i) it is a Delaware banking corporation duly organized and validly existing in good standing under the laws of the State of Delaware; -12- (ii) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement; (iii) the execution, delivery and performance of this Agreement has been duly authorized by all necessary corporate action on the part of it and does not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and such document has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights generally (regardless of whether such enforceability is considered in a proceeding in equity or at law); (iv) no authorization, consent or approval of or other action by, and no notice to or filing with, any Delaware state governmental or United States federal authority or regulatory body governing its banking or trust powers is required for the execution, delivery or performance by it of this Agreement; (v) neither the execution, delivery or performance by it of this Agreement, nor compliance with the terms and provisions hereof, conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of it or any similar instrument binding on it or any order, writ, injunction or decree of any court or governmental authority against it or by which it or any of its properties is bound or any indenture, mortgage or contract or other agreement or instrument to which it is a party or by which it or any of its properties is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any lien upon any of its properties; and (vi) there are no pending or, to its knowledge, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of it) against or affecting it or any of its property before or by any court or administrative agency which, if adversely determined, (A) would adversely affect the ability of it to perform its obligations under this Agreement or (B) would call into question or challenge the validity of this Agreement or the enforceability hereof in accordance with the terms hereof, nor is the Paying Agent in default with respect to any order of any court, governmental authority, arbitration board or administrative agency so as to adversely affect its ability to perform its obligations under this Agreement. -13- SECTION 7. Indemnification. Except for actions expressly authorized or required of the Escrow Agent or the Paying Agent hereunder, each of the Escrow Agent and the Paying Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall have been indemnified by the party requesting such action in a manner reasonably satisfactory to it against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. In the event ATA requests any amendment to any Operative Agreement (as defined in Annex A to the Note Purchase Agreement), the Pass Through Trustee agrees to pay all reasonable fees and expenses (including, without limitation, reasonable fees and disbursements of counsel) of the Escrow Agent and the Paying Agent in connection therewith. SECTION 8. Amendment, Etc. Upon request of the Pass Through Trustee and approval by an Action of Investors, the Escrow Agent and the Paying Agent shall enter into an amendment to this Agreement, so long as such amendment does not adversely affect the rights or obligations of the Escrow Agent or the Paying Agent or the rights of the Investors, provided that upon request of the Pass Through Trustee and without any consent of the Investors, the Escrow Agent shall enter into an amendment to this Agreement for any of the following purposes: (1) to correct or supplement any provision in this Agreement which may be defective or inconsistent with any other provision herein or to cure any ambiguity or correct any mistake or to modify any other provision with respect to matters or questions arising under this Agreement, provided that any such action shall not materially adversely affect the interests of the Investors; or (2) to comply with applicable law, any requirement of the SEC, any federal or state banking rule or regulation or the rules or regulations of any applicable regulatory body; or (3) to evidence and provide for the acceptance of appointment under this Agreement of a successor Escrow Agent, successor Paying Agent or successor Pass Through Trustee. Notwithstanding any provision of this Agreement, upon and simultaneously with the issuance of the Additional Certificates (as defined in the Delayed Funding Implementation Agreement), this Agreement shall be forthwith amended as provided in the Delayed Funding Implementation Agreement, without any need for further action on the part of any party hereto and without any consent of any of the Receiptholders. SECTION 9. Notices. Unless otherwise expressly provided herein, any notice or other communication under this Agreement shall be in writing (including by facsimile) and shall be deemed to be given and effective upon receipt thereof. All notices shall be sent to (a) in the case of the Investors, as their respective addresses shall appear in the Register, (b) in the case of the Escrow Agent, Wells Fargo Bank Northwest, National Association, 79 South Main Street, 3rd Floor, Salt Lake City, UT 84111, Attention: Corporate Trust Services (Telecopier: (801) 246-5053), (c) in the case of the Pass Through Trustee, Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, DE 19890, Attention: Corporate Trust Administration (Telecopier: (302) 636-4140) or (d) in the case of the Paying Agent, Wilmington -14- Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, DE 19890, Attention: Corporate Trust Administration (Telecopier: (302) 636-4140), in each case with a copy to American Trans Air, Inc., 7337 West Washington Street, Indianapolis, Indiana 46231, Attention: Kenneth K. Wolff, Chief Financial Officer (Telecopier: (317) 240-7091) (or at such other address as any such party may specify from time to time in a written notice to the other parties). On or prior to the execution of this Agreement, the Pass Through Trustee has delivered to the Escrow Agent a certificate containing specimen signatures of the representatives of the Pass Through Trustee who are authorized to give notices and instructions with respect to this Agreement. The Escrow Agent may conclusively rely on such certificate until the Escrow Agent receives written notice from the Pass Through Trustee to the contrary. SECTION 10. Transfer. No party hereto shall be entitled to assign or otherwise transfer this Agreement (or any interest herein) other than (in the case of the Escrow Agent) to a successor escrow agent under Section 1.07 hereof or (in the case of the Paying Agent) to a successor paying agent under Section 2.05 hereof, and any purported assignment in violation thereof shall be void. This Agreement shall be binding upon the parties hereto and their respective successors and (in the case of the Escrow Agent and the Paying Agent) their respective permitted assigns. SECTION 11. Non-Petition. Each of the Escrow Agent, the Pass Through Trustee and the Paying Agent hereby agrees that it will not institute against, or join any other person in instituting against, the Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any Federal or state bankruptcy or similar law, for one year and a day after the latest maturing note issued by the Purchaser is paid in full. The provisions of this Section 11 shall survive the termination of this Agreement. SECTION 12. Limited Recourse. Notwithstanding anything to the contrary contained in this Agreement, the obligations of the Purchaser under this Agreement are solely the corporate obligations of the Purchaser and shall be payable by the Purchaser solely as provided in this Section 12. Each of the Escrow Agent, the Pass Through Trustee and the Paying Agent agrees that the Purchaser shall only be required to pay (a) any fees or liabilities that it may incur hereunder only to the extent the Purchaser has Excess Funds (as defined below) and (b) any expenses, indemnities or other liabilities that it may incur hereunder only to the extent the Purchaser has Excess Funds. In addition, no amount owing by the Purchaser hereunder in excess of the liabilities that the Purchaser is required to pay in accordance with the preceding sentence shall constitute a claim (as defined in Section 101 to Title 11 of the United States Code) against the Purchaser. No recourse shall be had for the payment of any amount owing hereunder or for the payment of any fee hereunder or any other obligation of, or claim against, the Purchaser arising out of or based upon this Agreement, against any stockholder, employee, officer, director, incorporator or manager of the Purchaser or affiliate thereof except as otherwise provided in this Section 12; provided, however, that the foregoing shall not relieve any such person or entity of any liability they might otherwise have as a result of fraudulent actions or omissions taken by them. Any and all claims against the Purchaser shall be subordinate to the claims of the holders of the notes issued by the Purchaser. The obligations of the Escrow Agent, the Pass Through Trustee and the Paying Agent under this Section 12 shall survive the termination of this Agreement. For purposes of this Section 12, "Excess Funds" shall mean, as of any date of -15- determination, all funds not required, after giving effect to all amounts on deposit in the commercial paper account of the Purchaser and the issuer account of the Purchaser or expected to be on deposit in the commercial paper account of the Purchaser, to pay or provide for the payment of any outstanding notes issued by the Purchaser when due. SECTION 13. Entire Agreement. This Agreement sets forth all of the promises, covenants, agreements, conditions and understandings among the Escrow Agent, the Paying Agent, the Investors and the Pass Through Trustee with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and undertakings, inducements or conditions, express or implied, oral or written. SECTION 14. Survival. This Agreement shall remain in full force and effect through March 17, 2003. SECTION 15. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 16. Waiver of Jury Trial Right. EACH OF THE ESCROW AGENT, THE PAYING AGENT, THE INVESTORS AND THE PASS THROUGH TRUSTEE ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY. SECTION 17. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. SECTION 18. Notwithstanding anything contained herein to the contrary, it is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Wilmington Trust Company in connection with its role as Pass Through Trustee, not individually or personally but solely as Pass Through Trustee in the exercise of the powers and authority conferred and vested in it under the Pass Through Trust Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Pass Through Trustee is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose for binding only the Pass Through Trustee and (c) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Pass Through Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Pass Through Trustee under this Agreement or the other related documents. IN WITNESS WHEREOF, the Escrow Agent, the Paying Agent, the Purchaser and the Pass Through Trustee have caused this Escrow and Paying Agent Agreement (Class A) to be duly executed as of the day and year first above written. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By --------------------------------- Name: Title: NYALA FUNDING LLC, as Purchaser By --------------------------------- Name: Title: WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Trans Air 2002-1A Pass Through Trust By --------------------------------- Name: Title: WILMINGTON TRUST COMPANY, as Paying Agent By --------------------------------- Name: Title: EXHIBIT A AMERICAN TRANS AIR 2002-1A ESCROW RECEIPT No. __ This Escrow Receipt evidences a fractional undivided interest in amounts ("Account Amounts") from time to time deposited into a certain paying agent account (the "Paying Agent Account") described in the Escrow and Paying Agent Agreement (Class A) dated as of March 28, 2002 (as amended, modified or supplemented from time to time, the "Escrow and Paying Agent Agreement") among Wells Fargo Bank Northwest, National Association, as Escrow Agent (in such capacity, together with its successors in such capacity, the "Escrow Agent"), Nyala Funding LLC, Wilmington Trust Company, as Pass Through Trustee (in such capacity, together with its successors in such capacity, the "Pass Through Trustee") and Wilmington Trust Company, as paying agent (in such capacity, together with its successors in such capacity, the "Paying Agent"). Capitalized terms not defined herein shall have the meanings assigned to them in the Escrow and Paying Agent Agreement. This Escrow Receipt is issued under and is subject to the terms, provisions and conditions of the Escrow and Paying Agent Agreement. By virtue of its acceptance hereof the holder of this Escrow Receipt assents and agrees to be bound by the provisions of the Escrow and Paying Agent Agreement and this Escrow Receipt. This Escrow Receipt represents a fractional undivided interest in amounts deposited from time to time in the Paying Agent Account, and grants or represents no rights, benefits or interests of any kind in respect of any assets or property other than such amounts. This Escrow Receipt evidences the same percentage interest in the Account Amounts as the Fractional Undivided Interest in the Pass Through Trust evidenced by the Certificate to which this Escrow Receipt is affixed. All payments and distributions made to Receiptholders in respect of the Escrow Receipt shall be made only from Account Amounts deposited in the Paying Agent Account. The holder of this Escrow Receipt, by its acceptance of this Escrow Receipt, agrees that it will look solely to the Account Amounts for any payment or distribution due to it pursuant to this Escrow Receipt and that it will not have any recourse to ATA, the Pass Through Trustee, the Paying Agent or the Escrow Agent for any such payment or distribution, except as expressly provided herein or in the Pass Through Trust Agreement. No Receiptholder of this Escrow Receipt shall have any right to vote or in any manner otherwise control the operation and management of the Paying Agent Account, nor shall anything set forth herein, or contained in the terms of this Escrow Receipt, be construed so as to constitute the Receiptholders from time to time as partners or members of an association. This Escrow Receipt may not be assigned or transferred except in connection with the assignment or transfer of the Certificate to which this Escrow Receipt is affixed. After payment to the holder hereof of its Escrow Interest in the Final Distribution, upon the request of -2- the Pass Through Trustee, the holder hereof will return this Escrow Receipt to the Pass Through Trustee. The Paying Agent may treat the person in whose name the Certificate to which this Escrow Receipt is attached as the owner hereof for all purposes, and the Paying Agent shall not be affected by any notice to the contrary. THIS ESCROW RECEIPT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the Escrow Agent has caused this Escrow Receipt to be duly executed. Dated: WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION as Escrow Agent By --------------------------------- Name: Title: EXHIBIT B WITHDRAWAL CERTIFICATE (Class A) Wells Fargo Bank Northwest, National Association, as Escrow Agent Dear Sirs: Reference is made to the Escrow and Paying Agent Agreement (Class A), dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Agreement"). [We hereby certify to you that the conditions to the obligations of the undersigned to execute a Participation Agreement pursuant to the Note Purchase Agreement have been satisfied.] [We hereby notify you that the Depositary is being replaced in accordance with Section 4(a)(vii) of the Note Purchase Agreement.] Pursuant to Section 1.02(c) of the Agreement, please execute the attached Notice of Withdrawal and immediately transmit by facsimile to the Depositary, at (212) 793-1246, Attention: Global Agency & Trust Services. Very truly yours, WILMINGTON TRUST COMPANY not in its individual capacity but solely as Pass Through Trustee By: --------------------------------- Name: Title: Dated: _________, ____ -2- EXHIBIT C PREPAYMENT WITHDRAWAL CERTIFICATE (Class A) Wells Fargo Bank Northwest, National Association, as Escrow Agent Dear Sirs: Reference is made to the Escrow and Paying Agent Agreement (Class A), dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Agreement"). The undersigned has been notified by American Trans Air, Inc. (the "Company") that (i) as a result of a downgrading of the Company's corporate credit ratings, General Electric Capital Corporation has elected to exercise its contractual rights not to act as an Owner Participant with respect to a GE Aircraft (as defined in the Note Purchase Agreement), (ii) pursuant to the separate financing agreement between the Company and General Electric Capital Corporation, the Company will not own or lease such GE Aircraft and (iii) the Company will not identify and substitute a Substitute Aircraft (as defined in the Note Purchase Agreement) for such GE Aircraft. Pursuant to Section 1.02(d) of the Agreement, please execute the attached Notice of Prepayment Withdrawal and immediately transmit by facsimile to the Depositary, at (212) 793-1246, Attention: Global Agency and Trust Services. Very truly yours, WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Pass Through Trustee By --------------------------------- Name Dated: _________, ____ EX-4.14 14 file013.txt ESCROW AND PAYING AGENT AGREEMENT CLASS B EXECUTION COPY - -------------------------------------------------------------------------------- ESCROW AND PAYING AGENT AGREEMENT (Class B) Dated as of March 28, 2002 among WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent PK AIRFINANCE US, INC. as Purchaser WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Trans Air 2002-1B Pass Through Trust as Pass Through Trustee and WILMINGTON TRUST COMPANY, as Paying Agent - -------------------------------------------------------------------------------- ESCROW AND PAYING AGENT AGREEMENT (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time, this "Agreement") among WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking association, as Escrow Agent (in such capacity, together with its successors in such capacity, the "Escrow Agent"); PK AIRFINANCE US, INC. (the "Purchaser", and together with its transferees and assigns as registered owners of the Certificates referred to below, the "Investors"); WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity but solely as trustee (in such capacity, together with its successors in such capacity, the "Pass Through Trustee") under the Pass Through Trust Agreement referred to below; and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as paying agent hereunder (in such capacity, together with its successors in such capacity, the "Paying Agent"). W I T N E S S E T H ------------------- WHEREAS, American Trans Air, Inc. ("ATA"), Amtran, Inc. ("Amtran") and the Pass Through Trustee have entered into a Pass Through Trust Agreement, dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pass Through Trust Agreement") relating to American Trans Air 2002-1B Pass Through Trust (the "Pass Through Trust") pursuant to which the American Trans Air Pass Through Trust, Series 2002-1B Certificates (the "Certificates") are being issued; WHEREAS, ATA, the Pass Through Trustee and certain other persons concurrently herewith are entering into the Note Purchase Agreement, dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Note Purchase Agreement"), pursuant to which the Pass Through Trustee has agreed to acquire from time to time on or prior to the Delivery Period Termination Date (as defined in the Note Purchase Agreement) equipment notes (the "Equipment Notes") issued to finance the acquisition of Aircraft (as defined in the Note Purchase Agreement) by ATA, as lessee or as owner, utilizing a portion of the proceeds from the sale of the Certificates (the "Net Proceeds"); WHEREAS, the Purchaser and the Pass Through Trustee intend that the Net Proceeds be held in escrow by the Escrow Agent on behalf of the Investors, subject to withdrawal upon request by the Pass Through Trustee and satisfaction of the conditions set forth in the Note Purchase Agreement for the purpose of purchasing Equipment Notes, and that pending such withdrawal (i) the Net Proceeds from the sale of the Certificates on the date hereof be deposited on behalf of the Escrow Agent with IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary", which shall also be deemed to refer to any Replacement Depositary (as defined in the Note Purchase Agreement) from and after the date on which the Deposits (as defined in the Deposit Agreement) are transferred to such Replacement Depositary) under the Deposit Agreement (Class B), dated as of the date hereof between the Depositary and the Escrow Agent relating to the Pass Through Trust (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Initial Deposit Agreement") and (ii) the Net Proceeds from the sale of the Certificates on the Delayed Funding Date (as defined in the -2- Delayed Funding Implementation Agreement) be deposited on behalf of the Escrow Agent with the Depositary under the Delayed Deposit Agreement (Class B) dated as of the date hereof between the Depositary and the Escrow Agent relating to the Pass Through Trust (as amended, modified or supplemented from time to time in accordance with the terms thereto), the "Delayed Deposit Agreement"). As used herein, the term "Deposit Agreement" shall mean, prior to the Delayed Funding Date, the Initial Deposit Agreement, and on and after the Delayed Funding Date, the Initial Deposit Agreement (to the extent of any payment to be made by the Depositary thereunder on or after the Delayed Funding Date) and the Delayed Deposit Agreement. The terms "Initial Deposit Agreement" and "Delayed Deposit Agreement" shall be deemed to refer to any Replacement Deposit Agreement (as defined in the Note Purchase Agreement) to which the Escrow Agent becomes a party pursuant to Section 1.02(a) hereof from and after the transfer of the Deposits from the Depositary to the Replacement Depositary) pursuant to which, among other things, the Depositary will pay interest for distribution to the Investors and establish accounts from which the Escrow Agent shall make withdrawals upon the request of and proper certification by the Pass Through Trustee; WHEREAS, ATA, Amtran, the Pass Through Trustee, the Escrow Agent, the Paying Agent and certain other parties concurrently herewith are entering into a Delayed Funding Implementation Agreement dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the "Delayed Funding Implementation Agreement") pursuant to which the parties thereto agree to supplement and modify the Operative Agreements, as defined therein; WHEREAS, the Escrow Agent wishes to appoint the Paying Agent to pay amounts required to be distributed to the Investors in accordance with this Agreement; and WHEREAS, capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Pass Through Trust Agreement. NOW, THEREFORE, in consideration of the obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Escrow Agent. Section 1.01. Appointment of Escrow Agent. The Purchaser hereby irrevocably appoints, authorizes and directs the Escrow Agent to act as escrow agent and fiduciary hereunder and under the Deposit Agreement for such specific purposes and with such powers as are specifically delegated to the Escrow Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Any and all monies received and held by the Escrow Agent under this Agreement or the Deposit Agreement shall be held in trust by the Escrow Agent in accordance with the terms of this Agreement. This Agreement is irrevocable and the Investors' rights with respect to any monies received and held in trust by the Escrow Agent under this Agreement or the Deposit Agreement shall only be as provided under the terms and conditions of this Agreement and the Deposit Agreement. The Escrow Agent (which term as used in this sentence shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities except those -3- expressly set forth in this Agreement and the Deposit Agreement; (b) shall not be responsible to the Pass Through Trustee or the Investors for any recitals, statements, representations or warranties of any person other then itself contained in this Agreement or the Deposit Agreement or for the failure by the Pass Through Trustee, the Investors, the Paying Agent or any other person or entity (other than the Escrow Agent) to perform any of its obligations hereunder (whether or not the Escrow Agent shall have any knowledge thereof); and (c) shall not be responsible for any action taken or omitted to be taken by it hereunder or provided for herein or in connection herewith, except for its own willful misconduct or gross negligence (or simple negligence in connection with the handling of funds). Section 1.02. Instruction; Etc. The Purchaser hereby irrevocably directs the establishment of an escrow and accordingly instructs the Escrow Agent, and the Escrow Agent agrees, (a) to enter into the Initial Deposit Agreement and the Delayed Deposit Agreement and, if requested by ATA pursuant to Section 4(a)(vii) of the Note Purchase Agreement, to enter into a Replacement Deposit Agreement with the Replacement Depositary specified by the Company, (b) to appoint the Paying Agent as provided for in this Agreement, (c) upon receipt at any time and from time to time prior to the Termination Date (as defined below) of a certificate substantially in the form of Exhibit B hereto (a "Withdrawal Certificate") executed by the Pass Through Trustee, together with an attached Notice of Purchase Withdrawal in substantially the form of Exhibit A to the Deposit Agreement duly completed by the Pass Through Trustee (the "Applicable Notice of Purchase Withdrawal" and the withdrawal to which it relates, a "Purchase Withdrawal"), immediately to execute the Applicable Notice of Purchase Withdrawal as Escrow Agent and transmit it to the Depositary by facsimile transmission in accordance with the Deposit Agreement; provided that, upon the request of the Pass Through Trustee after such transmission, the Escrow Agent shall cancel such Applicable Notice of Purchase Withdrawal, (d) upon receipt at any time and from time to time prior to the Delivery Period Termination Date of a certificate substantially in the form of Exhibit C hereto (a "Prepayment Withdrawal Certificate") executed by the Pass Through Trustee, together with an attached Notice of Prepayment Withdrawal in substantially the form of Exhibit D to the Deposit Agreement duly completed by the Pass Through Trustee (the "Applicable Notice of Prepayment Withdrawal" and the withdrawal to which it relates, a "Prepayment Withdrawal"), immediately to execute the Applicable Notice of Prepayment Withdrawal as Escrow Agent and transmit it to the Depositary by facsimile transmission in accordance with the Deposit Agreement; provided that, upon the request of the Pass Through Trustee after such transmission, the Escrow Agent shall cancel such Applicable Notice of Prepayment Withdrawal, and (e) upon receipt of a Withdrawal Certificate executed by the Pass Through Trustee, together with an attached Notice of Replacement Withdrawal in substantially the form of Exhibit C to the Deposit Agreement duly completed by the Pass Through Trustee, to (i) give such Notice of Replacement Withdrawal to the Depositary requesting a withdrawal, on the date specified in such notice, which shall not be less than 15 days after such notice is given (the "Replacement Withdrawal Date"), of all Deposits then held by the Depositary together with, if the Replacement Withdrawal Date occurs on a Regular Distribution Date, all accrued and unpaid interest on such Deposits to but excluding the Replacement Withdrawal Date, and (ii) direct the Depositary to transfer such Deposits on behalf of the Escrow Agent to the Replacement Depositary in accordance with the Replacement Deposit Agreement and (f) if there are any undrawn Deposits on the "Termination Date", which shall mean the earlier of (i) September 29, 2002 and (ii) the day on which the Escrow Agent receives -4- notice from the Pass Through Trustee that the Pass Through Trustee's obligation to purchase Equipment Notes under the Note Purchase Agreement has terminated, to give notice to the Depositary (with a copy to the Paying Agent) substantially in the form of Exhibit B to the Deposit Agreement requesting a withdrawal of all of the remaining Deposits, together with accrued and unpaid interest on such Deposits to the date of withdrawal, on the 15th day after the date that such notice of withdrawal is given to the Depositary (or, if not a Business Day, on the next succeeding Business Day) (a "Final Withdrawal"), provided that if the day scheduled for the Final Withdrawal in accordance with the foregoing is within 10 days before or after a Regular Distribution Date, then the Escrow Agent shall request that such requested Final Withdrawal be made on such Regular Distribution Date (the date of such requested withdrawal, the "Final Withdrawal Date"). If for any reason the Escrow Agent shall have failed to give the Final Withdrawal Notice to the Depositary on or before September 29, 2002, and there are unwithdrawn Deposits on such date, the Final Withdrawal Date shall be deemed to be October 14, 2002. Section 1.03. Initial Escrow Amount; Issuance of Escrow Receipts. The Escrow Agent hereby directs the Purchaser to, and the Purchaser hereby acknowledges that on the date hereof it shall, irrevocably deliver by wire transfer to the Depositary on behalf of the Escrow Agent an amount in U.S. dollars ("Dollars") and immediately available funds equal to $24,391,148.66 for deposit on behalf of the Escrow Agent with the Depositary in accordance with Section 2.1 of the Deposit Agreement. The Purchaser hereby instructs the Escrow Agent, upon receipt of such sum from the Purchaser, to confirm such receipt by executing and delivering to the Pass Through Trustee an Escrow Receipt in the form of Exhibit A hereto (an "Escrow Receipt"), (a) to be affixed by the Pass Through Trustee to each Certificate and (b) to evidence the same percentage interest (the "Escrow Interest") in the Account Amounts (as defined in Section 1.04) as the Fractional Undivided Interest in the Pass Through Trust evidenced by the Certificate to which it is to be affixed. The Escrow Agent shall provide to the Pass Through Trustee for attachment to each Certificate newly issued under and in accordance with the Pass Through Trust Agreement an executed Escrow Receipt as the Pass Through Trustee may from time to time request of the Escrow Agent. Each Escrow Receipt shall be registered by the Escrow Agent in a register (the "Register") maintained by the Escrow Agent in the same name and same manner as the Certificate to which it is attached and may not thereafter be detached from such Certificate to which it is to be affixed prior to the distribution of the Final Withdrawal (the "Final Distribution"). After the Final Distribution, no Escrow Receipts shall be issued and the Pass Through Trustee shall request the return to the Escrow Agent for cancellation of all outstanding Escrow Receipts. Section 1.04. Payments to Receiptholders. All payments and distributions made to holders of an Escrow Receipt (collectively "Receiptholders") in respect of the Escrow Receipt shall be made only from amounts deposited in the Paying Agent Account ("Account Amounts"). Each Receiptholder, by its acceptance of an Escrow Receipt, agrees that (a) it will look solely to the Account Amounts for any payment or distribution due to such Receiptholder pursuant to the terms of the Escrow Receipt and this Agreement and (b) it will have no recourse to ATA, the Pass Through Trustee, the Paying Agent or the Escrow Agent for any such payment or distribution, except as expressly provided herein or in the Pass Through Trust Agreement. No Receiptholder shall have any right to vote or in any manner otherwise control the operation and -5- management of the Paying Agent Account or the obligations of the parties hereto, nor shall anything set forth herein, or contained in the terms of the Escrow Receipt, be construed so as to constitute the Receiptholders from time to time as partners or members of an association. Section 1.05. Mutilated, Destroyed Lost or Stolen Escrow Receipt. If (a) any mutilated Escrow Receipt is surrendered to the Escrow Agent or the Escrow Agent receives evidence to its satisfaction of the destruction, loss or theft of any Escrow Receipt and (b) there is delivered to the Escrow Agent and the Pass Through Trustee such security, indemnity or bond, as may be required by them to hold each of them harmless, then, absent notice to the Escrow Agent or the Pass Through Trustee that such destroyed, lost or stolen Escrow Receipt has been acquired by a protected purchaser, and provided that the requirements of Section 8-405 of the Uniform Commercial Code in effect in any applicable jurisdiction are met, the Escrow Agent shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Escrow Receipt, a new Escrow Receipt or Escrow Receipts and of like Escrow Interest in the Account Amounts and bearing a number not contemporaneously outstanding. In connection with the issuance of any new Escrow Receipt under this Section 1.05, the Escrow Agent may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Pass Through Trustee and the Escrow Agent) connected therewith. Any duplicate Escrow Receipt issued pursuant to this Section 1.05 shall constitute conclusive evidence of the appropriate Escrow Interest in the Account Amounts, as if originally issued, whether or not the lost, stolen or destroyed Escrow Receipt shall be found at any time. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Escrow Receipts. Section 1.06. Additional Escrow Amounts. On the date of any Purchase Withdrawal, the Pass Through Trustee may re-deposit with the Depositary some or all of the amounts so withdrawn in accordance with Section 2.4 of the Deposit Agreement. Section 1.07. Resignation or Removal of Escrow Agent. Subject to the appointment and acceptance of a successor Escrow Agent as provided below, the Escrow Agent may resign at any time by giving 30 days' prior written notice thereof to the Investors, but may not otherwise be removed except for cause by the written consent of the Investors with respect to Investors representing Escrow Interests aggregating not less than a majority in interest in the Account Amounts (an "Action of Investors"). Upon any such resignation or removal, the Investors, by an Action of Investors, shall have the right to appoint a successor Escrow Agent. If no successor Escrow Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Escrow Agent's giving of notice of resignation or the removal of the retiring Escrow Agent, then the retiring Escrow Agent may appoint a successor Escrow Agent, which shall be a commercial bank which has an office in the United States with a combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Escrow Agent hereunder by a successor Escrow Agent, such successor Escrow -6- Agent shall enter into such documents as the Pass Through Trustee shall require and shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Escrow Agent, and the retiring Escrow Agent shall be discharged from its duties and obligations hereunder. No resignation or removal of the Escrow Agent shall be effective unless a written confirmation shall have been obtained from Moody's Investors Service, Inc. that the replacement of the Escrow Agent with the successor Escrow Agent will not result in (a) a reduction of the rating for the Certificates below the then current rating for the Certificates or (b) a withdrawal or suspension of the rating of the Certificates. Section 1.08. Persons Deemed Owners. Prior to due presentment of a Certificate for registration of transfer, the Escrow Agent and the Paying Agent may treat the Person in whose name any Escrow Receipt is registered (as of the day of determination) as the owner of such Escrow Receipt for the purpose of receiving distributions pursuant to this Agreement and for all other purposes whatsoever, and none of the Escrow Agent or the Paying Agent shall be affected by any notice to the contrary. Section 1.09. Further Assurances. The Escrow Agent agrees to take such actions, and execute such other documents, as may be reasonably requested by the Pass Through Trustee in order to effectuate the purposes of this Agreement and the performance by the Escrow Agent of its obligations hereunder. SECTION 2. Paying Agent. Section 2.01. Appointment of Paying Agent. The Escrow Agent hereby irrevocably appoints and authorizes the Paying Agent to act as its paying agent hereunder, for the benefit of the Investors, for such specific purposes and with such powers as are specifically delegated to the Paying Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. The Paying Agent is authorized to enter into the Delayed Funding Implementation Agreement. Any and all money received and held by the Paying Agent under this Agreement or the Deposit Agreement shall be held in the Paying Agent Account (as defined below) for the benefit of the Investors. The Paying Agent (which term as used in this sentence shall include reference to its affiliates and its own and its affiliates' officers, directors, employees and agents): (a) shall have no duties or responsibilities hereunder except those expressly set forth in this Agreement, and shall not by reason of this Agreement be a trustee for the Escrow Agent; (b) shall not be responsible to the Escrow Agent for any recitals, statements, representations or warranties of any person other than itself contained in this Agreement or for the failure by the Escrow Agent or any other person or entity (other than the Paying Agent) to perform any of its obligations hereunder (whether or not the Paying Agent shall have any knowledge thereof); and (c) except in respect of its express obligations hereunder, shall not be responsible for any action taken or omitted to be taken by it hereunder or provided for herein or in connection herewith, except for its own willful misconduct or gross negligence (or simple negligence in connection with the handling of funds). Section 2.02. Establishment of Paving Agent Account. The Paying Agent shall establish a deposit account (the "Paying Agent Account") at Wilmington Trust Company in the name of the Escrow Agent. It is expressly understood by the parties hereto that the Paying Agent -7- is acting as the paying agent of the Escrow Agent hereunder and that no amounts on deposit in the Paying Agent Account constitute part of the Trust Property. Section 2.03. Payments from Paying Agent Account. The Escrow Agent hereby irrevocably instructs the Paying Agent, and the Paying Agent agrees to act, as follows: (a) On each Interest Payment Date (as defined in the Deposit Agreement) or as soon thereafter as the Paying Agent has confirmed receipt in the Paying Agent Account from the Depositary of any amount in respect of accrued interest on the Deposits, the Paying Agent shall distribute out of the Paying Agent Account the entire amount deposited therein by the Depositary. There shall be so distributed to each Receiptholder of record on the 15th day (whether or not a Business Day) preceding such Interest Payment Date by check mailed to such Receiptholder, at the address appearing in the Register, such Receiptholder's pro rata share (based on the Escrow Interest in the Account Amounts held by such Receiptholder) of the total amount of interest deposited by the Depositary in the Paying Agent Account on such date, except that, with respect to Escrow Receipts registered on the Record Date in the name of The Depository Trust Company ("DTC") or the Purchaser, such distribution shall be made by wire transfer in immediately available funds to the account designated by DTC or the Purchaser, as the case may be. (b) Upon the confirmation by the Paying Agent of receipt in the Paying Agent Account from the Depositary of any amount in respect of the Final Withdrawal, the Paying Agent shall forthwith distribute the entire amount of the Final Withdrawal deposited therein by the Depositary to each Receiptholder of record on the 15th day (whether or not a Business Day) preceding the Final Withdrawal Date by check mailed to such Receiptholder, at the address appearing in the Register, such Receiptholder's pro rata share (based on the Escrow Interest in the Account Amounts held by such Receiptholder) of the total amount in the Paying Agent Account on account of such Final Withdrawal, except that, with respect to Escrow Receipts registered on such record date in the name of DTC or the Purchaser, such distribution shall be made by wire transfer in immediately available funds to the account designated by DTC or the Purchaser, as the case may be. (c) If any payment of interest or principal in respect of the Final Withdrawal is not received by the Paying Agent within five days of the applicable date when due, then it shall be distributed to Receiptholders after actual receipt by the Paying Agent on the same basis as a Special Payment is distributed under the Pass Through Trust Agreement. (d) Upon the confirmation by the Paying Agent of receipt in the Paying Agent Account from the Depositary of any amount in respect of a Prepayment Withdrawal, the Paying Agent shall forthwith distribute the entire amount of such Prepayment Withdrawal upon not less than 15 days prior notice to the Receiptholders. There shall be distributed to each Receiptholder of record on the 15th day (whether or not a Business Day) preceding such date of distribution by check mailed to such Receiptholder, at the address appearing in the Register, such Receiptholder's pro rata share (based on the Escrow Interest in the Account Amounts held by such Receiptholder) of the total amount in the Paying Agent Account on account of such Prepayment Withdrawal, except that, with respect to the Escrow Receipts registered on such -8- record date in the name of a nominee of DTC, such distribution shall be made by wire transfer in immediately available funds to the account designated by DTC. (e) The Paying Agent shall include with any check mailed pursuant to this Section or any payment to the Purchaser, any notice required to be distributed under the Pass Through Trust Agreement that is furnished to the Paying Agent by the Pass Through Trustee. Section 2.04. Withholding Taxes. The Paying Agent shall exclude and withhold from each distribution of accrued interest on the Deposits (as defined in the Deposit Agreement) and any amount in respect of any Prepayment Withdrawal or the Final Withdrawal any and all withholding taxes applicable thereto as required by federal law of the United States. The Paying Agent agrees to act as such withholding agent and, in connection therewith, whenever any present or future taxes or similar charges are required to be withheld with respect to any amounts payable in respect of the Deposits (as defined in the Deposit Agreement) or the escrow amounts, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Receiptholders, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Receiptholder appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Receiptholder may reasonably request from time to time. The Paying Agent agrees to file any other information reports as it may be required to file under United States law. Each Receiptholder or beneficial owner of an interest in an Escrow Receipt that is a Non-U.S. Person, by its acceptance of an Escrow Receipt or a beneficial interest therein, agrees to indemnify and hold harmless the Escrow Agent and the Paying Agent from and against any improper failure to withhold Taxes from amounts payable to it or for its benefit other than an improper failure attributable to the gross negligence or willful misconduct of the Escrow Agent or the Paying Agent, as the case may be. The Paying Agent agrees, to the extent required by the Internal Revenue Code of 1986, as amended (the "Code"), and applicable federal regulations thereunder, to withhold from each payment due hereunder or under any Escrow Receipts, United States withholding taxes at the appropriate rate, and, on a timely basis, to deposit such amounts with the appropriate taxing authority and make such returns, filings and other reports in connection therewith as are required by the Code and as promptly as possible after the payment thereof to deliver to each such Receiptholder appropriate documentation showing the payment thereof, together with such additional documentary evidence as such Receiptholder may reasonably request from time to time. In the event that any withholding tax is imposed on a payment to a Receiptholder, such tax shall reduce the amount otherwise distributable to the Receiptholder in accordance with this Section. Any Receiptholder which is organized under the laws of a jurisdiction outside the United States shall, on or prior to the date such Receiptholder becomes a Receiptholder, (a) so notify the Paying Agent, (b) (i) provide the Paying Agent with Internal Revenue Service Form W-8BEN or W-8ECI, as appropriate (or any successor form), or (ii) notify the Paying Agent that it is not entitled to an exemption from United States withholding tax or a reduction in the rate thereof on payments of interest. Any such Receiptholder agrees by its acceptance of an Escrow Receipt, on an ongoing basis, to provide like certification for each taxable year and to notify the Paying Agent should subsequent circumstances arise affecting the information provided the Paying Agent in clauses (a) and (b) above. The Paying Agent shall be fully protected in relying upon, and each Receiptholder by its acceptance of an Escrow Receipt agrees to indemnify and hold the Paying Agent harmless -9- against all claims or liability of any kind arising in connection with or related to the Paying Agent's reliance upon any documents, forms or information provided by any Receiptholder to the Paying Agent. In addition, if the Paying Agent has not withheld taxes on any payment made to any Receiptholder, and the Paying Agent is subsequently required to remit to any taxing authority any such amount not withheld, such Receiptholder shall return such amount to the Paying Agent upon written demand by the Paying Agent. The Paying Agent shall be liable only for direct (but not consequential) damages to any Receiptholder due to the Paying Agent's violation of the Code and only to the extent such liability is caused by the Paying Agent's gross negligence or willful misconduct. Section 2.05. Resignation or Removal of Paying Agent. Subject to the appointment and acceptance of a successor Paying Agent as provided below, the Paying Agent may resign at any time by giving 30 days' prior written notice thereof to the Escrow Agent, but may not otherwise be removed except for cause by the Escrow Agent. Upon any such resignation or removal, the Escrow Agent shall have the right to appoint a successor Paying Agent, which shall be a commercial bank which has an office in the United States with a combined capital and surplus of at least $100,000,000. If no successor Paying Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Paying Agent's giving of notice of resignation or the removal of the retiring Paying Agent, then the retiring Paying Agent may (i) appoint a successor Paying Agent, which shall be a commercial bank which has an office in the United States with a combined capital and surplus of at least $100,000,000 or (ii) petition a court of competent jurisdiction to appoint such a successor. Upon the acceptance of any appointment as Paying Agent hereunder by a successor Paying Agent, such successor Paying Agent shall enter into such documents as the Escrow Agent shall require and shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Paying Agent, and the retiring Paying Agent shall be discharged from its duties and obligations hereunder. Section 2.06. Notice of Prepayment Withdrawal and Final Withdrawal. Promptly after receipt by the Paying Agent of notice that the Escrow Agent has requested a Prepayment Withdrawal or a Final Withdrawal or that Prepayment Withdrawal or a Final Withdrawal will be made, the Paying Agent shall cause notice of the distribution of the Final Withdrawal to be mailed to each of the Receiptholders at its address as it appears in the Register. Such notice shall be mailed not less than 15 days prior to the distribution date of such prepayment Withdrawal (the "Prepayment Withdrawal Date") or the Final Withdrawal Date. Such notice shall set forth: (i) the Prepayment Withdrawal Date or the Final Withdrawal Date and the date for determining Receiptholders of record who shall be entitled to receive distributions in respect of the Prepayment Withdrawal or the Final Withdrawal, (ii) the amount of the payment in respect of the Prepayment Withdrawal or the Final Withdrawal for each $1,000 face amount Certificate (based on information provided by the Pass Through Trustee) and the amount thereof constituting unused Deposits (as defined in the Deposit Agreement) and interest thereon, and (iii) if the Prepayment Withdrawal Date or the Final Withdrawal Date is the same date as a Regular Distribution Date, the total amount to be received on such date for -10- each $1,000 face amount Certificate (based on information provided by the Pass Through Trustee). Such mailing may include any notice required to be given to Certificateholders in connection with such distribution pursuant to the Pass Through Trust Agreement. SECTION 3. Payments. If, notwithstanding the instructions in Section 4 of the Deposit Agreement that certain amounts payable to the Escrow Agent under the Deposit Agreement be paid by the Depositary directly to the Paying Agent or the Pass Through Trustee (depending on the circumstances), the Escrow Agent receives any such payment thereunder, then the Escrow Agent shall forthwith pay such amount in Dollars and in immediately available funds by wire transfer to (a) in the case of a payment of accrued interest on the Deposits (as defined in the Deposit Agreement), any Prepayment Withdrawal or any Final Withdrawal, directly to the Paying Agent Account, (b) in the case of any Purchase Withdrawal, directly to the Pass Through Trustee or its designee as specified and in the manner provided in the Applicable Notice of Purchase Withdrawal and (c) in the case of any Replacement Withdrawal (other than accrued interest), to the Replacement Depositary as provided in the Replacement Depositary Agreement. The Escrow Agent hereby waives any and all rights of set-off, combination of accounts, right of retention or any similar right (whether arising under applicable law, contract or otherwise) it may have against amounts payable to the Paying Agent howsoever arising. SECTION 4. Other Actions. The Escrow Agent shall take such other actions under or in respect of the Deposit Agreement (including, without limitation, the enforcement of the obligations of the Depositary thereunder) as the Investors, by an Action of Investors, may from time to time request. SECTION 5. Representations and Warranties of the Escrow Agent. The Escrow Agent represents and warrants to ATA, the Investors, the Paying Agent and the Pass Through Trustee as follows: (i) it is a national banking association duly organized and validly existing in good standing under the laws of the United States of America; (ii) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement, the Deposit Agreement and any Replacement Deposit Agreement; (iii) the execution, delivery and performance of each of this Agreement, the Deposit Agreement and any Replacement Deposit Agreement have been duly authorized by all necessary corporate action on the part of it and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and each such document has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof or thereof except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws -11- or equitable principles of general application to or affecting the enforcement of creditors' rights generally (regardless of whether such enforceability is considered in a proceeding in equity or at law); (iv) no authorization, consent or approval of or other action by, and no notice to or filing with, any United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement or the Deposit Agreement or any Replacement Deposit Agreement; (v) neither the execution, delivery or performance by it of this Agreement or the Deposit Agreement or any Replacement Deposit Agreement, nor compliance with the terms and provisions hereof or thereof, conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of it or any similar instrument binding on it or any order, writ, injunction or decree of any court or governmental authority against it or by which it or any of its properties is bound or any indenture, mortgage or contract or other agreement or instrument to which it is a party or by which it or any of its properties is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any lien upon any of its properties; and (vi) there are no pending or, to its knowledge, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of it) against or affecting it or any of its property before or by any court or administrative agency which, if adversely determined, (A) would adversely affect the ability of it to perform its obligations under this Agreement or the Deposit Agreement or any Replacement Deposit Agreement or (B) would call into question or challenge the validity of this Agreement or the Deposit Agreement or the enforceability hereof or thereof in accordance with the terms hereof or thereof, nor is the Escrow Agent in default with respect to any order of any court, governmental authority, arbitration board or administrative agency so as to adversely affect its ability to perform its obligations under this Agreement or the Deposit Agreement. SECTION 6. Representations and Warranties of the Paying Agent. The Paying Agent represents and warrants to ATA, the Investors, the Escrow Agent and the Pass Through Trustee as follows: (i) it is a Delaware banking corporation duly organized and validly existing in good standing under the laws of the State of Delaware; -12- (ii) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement; (iii) the execution, delivery and performance of this Agreement has been duly authorized by all necessary corporate action on the part of it and does not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and such document has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights generally (regardless of whether such enforceability is considered in a proceeding in equity or at law); (iv) no authorization, consent or approval of or other action by, and no notice to or filing with, any Delaware state governmental or United States federal authority or regulatory body governing its banking or trust powers is required for the execution, delivery or performance by it of this Agreement; (v) neither the execution, delivery or performance by it of this Agreement, nor compliance with the terms and provisions hereof, conflicts or will conflict with or results or will result in a breach or violation of any of the terms, conditions or provisions of, or will require any consent or approval under, any law, governmental rule or regulation or the charter documents, as amended, or bylaws, as amended, of it or any similar instrument binding on it or any order, writ, injunction or decree of any court or governmental authority against it or by which it or any of its properties is bound or any indenture, mortgage or contract or other agreement or instrument to which it is a party or by which it or any of its properties is bound, or constitutes or will constitute a default thereunder or results or will result in the imposition of any lien upon any of its properties; and (vi) there are no pending or, to its knowledge, threatened actions, suits, investigations or proceedings (whether or not purportedly on behalf of it) against or affecting it or any of its property before or by any court or administrative agency which, if adversely determined, (A) would adversely affect the ability of it to perform its obligations under this Agreement or (B) would call into question or challenge the validity of this Agreement or the enforceability hereof in accordance with the terms hereof, nor is the Paying Agent in default with respect to any order of any court, governmental authority, arbitration board or administrative agency so as to adversely affect its ability to perform its obligations under this Agreement. -13- SECTION 7. Indemnification. Except for actions expressly authorized or required of the Escrow Agent or the Paying Agent hereunder, each of the Escrow Agent and the Paying Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall have been indemnified by the party requesting such action in a manner reasonably satisfactory to it against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. In the event ATA requests any amendment to any Operative Agreement (as defined in Annex A to the Note Purchase Agreement), the Pass Through Trustee agrees to pay all reasonable fees and expenses (including, without limitation, reasonable fees and disbursements of counsel) of the Escrow Agent and the Paying Agent in connection therewith. SECTION 8. Amendment, Etc. Upon request of the Pass Through Trustee and approval by an Action of Investors, the Escrow Agent and the Paying Agent shall enter into an amendment to this Agreement, so long as such amendment does not adversely affect the rights or obligations of the Escrow Agent or the Paying Agent or the rights of the Investors, provided that upon request of the Pass Through Trustee and without any consent of the Investors, the Escrow Agent shall enter into an amendment to this Agreement for any of the following purposes: (1) to correct or supplement any provision in this Agreement which may be defective or inconsistent with any other provision herein or to cure any ambiguity or correct any mistake or to modify any other provision with respect to matters or questions arising under this Agreement, provided that any such action shall not materially adversely affect the interests of the Investors; or (2) to comply with applicable law, any requirement of the SEC, any federal or state banking rule or regulation or the rules or regulations of any applicable regulatory body; or (3) to evidence and provide for the acceptance of appointment under this Agreement of a successor Escrow Agent, successor Paying Agent or successor Pass Through Trustee. Notwithstanding any provision of this Agreement, upon and simultaneously with the issuance of the Additional Certificates (as defined in the Delayed Funding Implementation Agreement), this Agreement shall be forthwith amended as provided in the Delayed Funding Implementation Agreement, without any need for further action on the part of any party hereto and without any consent of any of the Receiptholders. SECTION 9. Notices. Unless otherwise expressly provided herein, any notice or other communication under this Agreement shall be in writing (including by facsimile) and shall be deemed to be given and effective upon receipt thereof. All notices shall be sent to (a) in the case of the Investors, as their respective addresses shall appear in the Register, (b) in the case of the Escrow Agent, Wells Fargo Bank Northwest, National Association, 79 South Main Street, 3rd Floor, Salt Lake City, UT 84111, Attention: Corporate Trust Services (Telecopier: (801) 246-5053), (c) in the case of the Pass Through Trustee, Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, DE 19890, Attention: Corporate Trust Administration (Telecopier: (302) 636-4140) or (d) in the case of the Paying Agent, Wilmington -14- Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, DE 19890, Attention: Corporate Trust Administration (Telecopier: (302) 636-4140), in each case with a copy to American Trans Air, Inc., 7337 West Washington Street, Indianapolis, Indiana 46231, Attention: Kenneth K. Wolff, Chief Financial Officer (Telecopier: (317) 240-7091) (or at such other address as any such party may specify from time to time in a written notice to the other parties). On or prior to the execution of this Agreement, the Pass Through Trustee has delivered to the Escrow Agent a certificate containing specimen signatures of the representatives of the Pass Through Trustee who are authorized to give notices and instructions with respect to this Agreement. The Escrow Agent may conclusively rely on such certificate until the Escrow Agent receives written notice from the Pass Through Trustee to the contrary. SECTION 10. Transfer. No party hereto shall be entitled to assign or otherwise transfer this Agreement (or any interest herein) other than (in the case of the Escrow Agent) to a successor escrow agent under Section 1.07 hereof or (in the case of the Paying Agent) to a successor paying agent under Section 2.05 hereof, and any purported assignment in violation thereof shall be void. This Agreement shall be binding upon the parties hereto and their respective successors and (in the case of the Escrow Agent and the Paying Agent) their respective permitted assigns. SECTION 11. Non-Petition. Each of the Escrow Agent, the Pass Through Trustee and the Paying Agent hereby agrees that it will not institute against, or join any other person in instituting against, the Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any Federal or state bankruptcy or similar law, for one year and a day after the latest maturing note issued by the Purchaser is paid in full. The provisions of this Section 11 shall survive the termination of this Agreement. SECTION 12. Limited Recourse. Notwithstanding anything to the contrary contained in this Agreement, the obligations of the Purchaser under this Agreement are solely the corporate obligations of the Purchaser and shall be payable by the Purchaser solely as provided in this Section 12. Each of the Escrow Agent, the Pass Through Trustee and the Paying Agent agrees that the Purchaser shall only be required to pay (a) any fees or liabilities that it may incur hereunder only to the extent the Purchaser has Excess Funds (as defined below) and (b) any expenses, indemnities or other liabilities that it may incur hereunder only to the extent the Purchaser has Excess Funds. In addition, no amount owing by the Purchaser hereunder in excess of the liabilities that the Purchaser is required to pay in accordance with the preceding sentence shall constitute a claim (as defined in Section 101 to Title 11 of the United States Code) against the Purchaser. No recourse shall be had for the payment of any amount owing hereunder or for the payment of any fee hereunder or any other obligation of, or claim against, the Purchaser arising out of or based upon this Agreement, against any stockholder, employee, officer, director, incorporator or manager of the Purchaser or affiliate thereof except as otherwise provided in this Section 12; provided, however, that the foregoing shall not relieve any such person or entity of any liability they might otherwise have as a result of fraudulent actions or omissions taken by them. Any and all claims against the Purchaser shall be subordinate to the claims of the holders of the notes issued by the Purchaser. The obligations of the Escrow Agent, the Pass Through Trustee and the Paying Agent under this Section 12 shall survive the termination of this Agreement. For purposes of this Section 12, "Excess Funds" shall mean, as of any date of -15- determination, all funds not required, after giving effect to all amounts on deposit in the commercial paper account of the Purchaser and the issuer account of the Purchaser or expected to be on deposit in the commercial paper account of the Purchaser, to pay or provide for the payment of any outstanding notes issued by the Purchaser when due. SECTION 13. Entire Agreement. This Agreement sets forth all of the promises, covenants, agreements, conditions and understandings among the Escrow Agent, the Paying Agent, the Investors and the Pass Through Trustee with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and undertakings, inducements or conditions, express or implied, oral or written. SECTION 14. Survival. This Agreement shall remain in full force and effect through March 17, 2003. SECTION 15. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 16. Waiver of Jury Trial Right. EACH OF THE ESCROW AGENT, THE PAYING AGENT, THE INVESTORS AND THE PASS THROUGH TRUSTEE ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY. SECTION 17. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. SECTION 18. Notwithstanding anything contained herein to the contrary, it is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Wilmington Trust Company in connection with its role as Pass Through Trustee, not individually or personally but solely as Pass Through Trustee in the exercise of the powers and authority conferred and vested in it under the Pass Through Trust Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Pass Through Trustee is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose for binding only the Pass Through Trustee and (c) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Pass Through Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Pass Through Trustee under this Agreement or the other related documents. IN WITNESS WHEREOF, the Escrow Agent, the Paying Agent, the Purchaser and the Pass Through Trustee have caused this Escrow and Paying Agent Agreement (Class B) to be duly executed as of the day and year first above written. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By --------------------------- Name: Title: PK AIRFINANCE US, INC., as Purchaser By --------------------------- Name: Title: WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Pass Through Trustee for and on behalf of American Trans Air 2002-1B Pass Through Trust By ---------------------------- Name: Title: WILMINGTON TRUST COMPANY, as Paying Agent By ---------------------------- Name: Title: EXHIBIT A AMERICAN TRANS AIR 2002-1B ESCROW RECEIPT No. __ This Escrow Receipt evidences a fractional undivided interest in amounts ("Account Amounts") from time to time deposited into a certain paying agent account (the "Paying Agent Account") described in the Escrow and Paying Agent Agreement (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time, the "Escrow and Paying Agent Agreement") among Wells Fargo Bank Northwest, National Association, as Escrow Agent (in such capacity, together with its successors in such capacity, the "Escrow Agent"), PK AirFinance US, Inc, Wilmington Trust Company, as Pass Through Trustee (in such capacity, together with its successors in such capacity, the "Pass Through Trustee") and Wilmington Trust Company, as paying agent (in such capacity, together with its successors in such capacity, the "Paying Agent"). Capitalized terms not defined herein shall have the meanings assigned to them in the Escrow and Paying Agent Agreement. This Escrow Receipt is issued under and is subject to the terms, provisions and conditions of the Escrow and Paying Agent Agreement. By virtue of its acceptance hereof the holder of this Escrow Receipt assents and agrees to be bound by the provisions of the Escrow and Paying Agent Agreement and this Escrow Receipt. This Escrow Receipt represents a fractional undivided interest in amounts deposited from time to time in the Paying Agent Account, and grants or represents no rights, benefits or interests of any kind in respect of any assets or property other than such amounts. This Escrow Receipt evidences the same percentage interest in the Account Amounts as the Fractional Undivided Interest in the Pass Through Trust evidenced by the Certificate to which this Escrow Receipt is affixed. All payments and distributions made to Receiptholders in respect of the Escrow Receipt shall be made only from Account Amounts deposited in the Paying Agent Account. The holder of this Escrow Receipt, by its acceptance of this Escrow Receipt, agrees that it will look solely to the Account Amounts for any payment or distribution due to it pursuant to this Escrow Receipt and that it will not have any recourse to ATA, the Pass Through Trustee, the Paying Agent or the Escrow Agent for any such payment or distribution, except as expressly provided herein or in the Pass Through Trust Agreement. No Receiptholder of this Escrow Receipt shall have any right to vote or in any manner otherwise control the operation and management of the Paying Agent Account, nor shall anything set forth herein, or contained in the terms of this Escrow Receipt, be construed so as to constitute the Receiptholders from time to time as partners or members of an association. This Escrow Receipt may not be assigned or transferred except in connection with the assignment or transfer of the Certificate to which this Escrow Receipt is affixed. After payment to the holder hereof of its Escrow Interest in the Final Distribution, upon the request of -2- the Pass Through Trustee, the holder hereof will return this Escrow Receipt to the Pass Through Trustee. The Paying Agent may treat the person in whose name the Certificate to which this Escrow Receipt is attached as the owner hereof for all purposes, and the Paying Agent shall not be affected by any notice to the contrary. THIS ESCROW RECEIPT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the Escrow Agent has caused this Escrow Receipt to be duly executed. Dated: WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION as Escrow Agent By ----------------------- Name: Title: EXHIBIT B WITHDRAWAL CERTIFICATE (Class B) Wells Fargo Bank Northwest, National Association, as Escrow Agent Dear Sirs: Reference is made to the Escrow and Paying Agent Agreement (Class B), dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Agreement"). [We hereby certify to you that the conditions to the obligations of the undersigned to execute a Participation Agreement pursuant to the Note Purchase Agreement have been satisfied.] [We hereby notify you that the Depositary is being replaced in accordance with Section 4(a)(vii) of the Note Purchase Agreement.] Pursuant to Section 1.02(c) of the Agreement, please execute the attached Notice of Withdrawal and immediately transmit by facsimile to the Depositary, at (212) 793-1246, Attention: Global Agency & Trust Services. Very truly yours, WILMINGTON TRUST COMPANY not in its individual capacity but solely as Pass Through Trustee By: -------------------------------------------- Name: Title: Dated: _________, ____ -2- EXHIBIT C PREPAYMENT WITHDRAWAL CERTIFICATE (Class B) Wells Fargo Bank Northwest, National Association, as Escrow Agent Dear Sirs: Reference is made to the Escrow and Paying Agent Agreement (Class B), dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Agreement"). The undersigned has been notified by American Trans Air, Inc. (the "Company") that (i) as a result of a downgrading of the Company's corporate credit ratings, General Electric Capital Corporation has elected to exercise its contractual rights not to act as an Owner Participant with respect to a GE Aircraft (as defined in the Note Purchase Agreement), (ii) pursuant to the separate financing agreement between the Company and General Electric Capital Corporation, the Company will not own or lease such GE Aircraft and (iii) the Company will not identify and substitute a Substitute Aircraft (as defined in the Note Purchase Agreement) for such GE Aircraft. Pursuant to Section 1.02(d) of the Agreement, please execute the attached Notice of Prepayment Withdrawal and immediately transmit by facsimile to the Depositary, at (212) 793-1246, Attention: Global Agency and Trust Services. Very truly yours, WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Pass Through Trustee By __________________________ Name Dated: _________, ____ EX-4.15 15 file014.txt NOTE PURCHASE AGREEMENT EXECUTION COPY - -------------------------------------------------------------------------------- NOTE PURCHASE AGREEMENT Dated as of March 28, 2002 Among AMERICAN TRANS AIR, INC. AMTRAN, INC., as Guarantor WILMINGTON TRUST COMPANY, as Pass Through Trustee under each of the Pass Through Trust Agreements WILMINGTON TRUST COMPANY, as Subordination Agent WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent and WILMINGTON TRUST COMPANY, as Paying Agent - ------------------------------------------------------------------------------ INDEX TO NOTE PURCHASE AGREEMENT Page SECTION 1. Financing of Aircraft.......................................3 SECTION 2. Conditions Precedent........................................7 SECTION 3. Representations and Warranties..............................8 SECTION 4. Covenants..................................................12 SECTION 5. Notices....................................................15 SECTION 6. Expenses...................................................15 SECTION 7. Further Assurances.........................................16 SECTION 8. Miscellaneous..............................................16 SECTION 9. Governing Law..............................................17 SECTION 10. Subordination Agent's Liability...........................17 Schedules Schedule I-A Aircraft and Scheduled Delivery Months Schedule I-B Aircraft and Scheduled Delivery Months Schedule II Pass Through Trust Agreements Schedule III-A Deposit Agreements Schedule III-B Delayed Deposit Agreements Schedule IV Escrow and Paying Agent Agreements Schedule V Mandatory Document Terms Schedule VI Mandatory Economic Terms Schedule VII Aggregate Amortization Schedule Annex A Definitions Exhibits Exhibit A-1 Form of Leased Aircraft Participation Agreement Exhibit A-2-1 Form of 467 Lease Exhibit A-2-2 Form of Non-467 Lease Exhibit A-3 Form of Leased Aircraft Indenture Exhibit A-4-1 Form of Purchase Agreement Assignment (ATA Aircraft) Exhibit A-4-2 Form of Purchase Agreement Assignment (GE Aircraft) Exhibit A-5 Form of Leased Aircraft Trust Agreement Exhibit A-6 Form of Leased Aircraft Guarantee Exhibit B Form of Delivery Notice Exhibit C-1 Form of Owned Aircraft Participation Agreement Exhibit C-2 Form of Owned Aircraft Indenture Exhibit C-3 Form of Owned Aircraft Guarantee Exhibit D Additional Subordination Provision for Series C Equipment Notes NOTE PURCHASE AGREEMENT This NOTE PURCHASE AGREEMENT, dated as of March 28, 2002, among (i) AMERICAN TRANS AIR, INC., an Indiana corporation (the "Company"), (ii) AMTRAN, INC., an Indiana corporation (the "Guarantor"), (iii) WILMINGTON TRUST COMPANY ("WTC"), a Delaware banking corporation, not in its individual capacity except as otherwise expressly provided herein, but solely as trustee (in such capacity together with its successors in such capacity, the "Pass Through Trustee") under each of the two separate Pass Through Trust Agreements (as defined below), (iv) WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity except as otherwise expressly provided herein, but solely as subordination agent and trustee (in such capacity together with its successors in such capacity, the "Subordination Agent") under the Intercreditor Agreement (as defined below), (v) WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking association, as Escrow Agent (in such capacity together with its successors in such capacity, the "Escrow Agent"), under each of the Escrow and Paying Agent Agreements (as defined below) and (vi) WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity except as otherwise expressly provided herein, but solely as Paying Agent (in such capacity together with its successors in such capacity, the "Paying Agent") under each of the Escrow and Paying Agent Agreements. W I T N E S S E T H: WHEREAS, capitalized terms used but not defined herein shall have the meanings ascribed to such terms in Annex A hereto; WHEREAS, the Company has obtained (either directly or through GECC) commitments from the Manufacturer pursuant to the Aircraft Purchase Agreements for the delivery of, and/or has taken delivery of, the Boeing 737-800 aircraft listed in Schedule I-A hereto. WHEREAS, pursuant to each of the Pass Through Trust Agreements set forth in Schedule II hereto (as amended, supplemented or otherwise modified from time to time, the "Pass Through Trust Agreements"), and concurrently with the execution and delivery of this Agreement, separate grantor trusts (collectively, the "Pass Through Trusts" and, individually, a "Pass Through Trust") have been created to facilitate certain of the transactions contemplated hereby, including, without limitation, the issuance and sale of pass through certificates pursuant thereto (collectively, the "Certificates") to provide for a portion of the financing of the Aircraft; WHEREAS, the Company, the Guarantor, the Pass Through Trustee and the Investors (as defined in the Registration Rights Agreement) are entering into the Registration Rights Agreement dated the date hereof; WHEREAS, the Company, the Guarantor, the Pass Through Trustee, the Subordination Agent, the Escrow Agent, AIG Matched Funding Corp., not in its individual capacity except as otherwise expressly provided therein, but solely as Class A Liquidity Provider and Class B Liquidity Provider (in such capacity together with its successors in such capacity, the "Liquidity Provider"), the Paying Agent and the Purchasers concurrently herewith are entering into a Delayed Funding Implementation Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the "Delayed Funding Implementation Agreement") pursuant to which the parties thereto agree to supplement and modify the Operative Agreements, as defined therein; WHEREAS, concurrently with the execution and delivery of this Agreement, (i) the Escrow Agents and the Depositary entered into the Deposit Agreements set forth in Schedule III-A hereto and the Delayed Deposit Agreements set forth in Schedule III-B hereto and (ii) the Pass Through Trustees, the Purchasers, the Paying Agents and the Escrow Agents entered into the Escrow and Paying Agent Agreements set forth in Schedule IV hereto (as amended, supplemented or otherwise modified from time to time, the "Escrow and Paying Agent Agreements"); WHEREAS, prior to (or, in the case of the utilization of bridge financing, after) the delivery of each Aircraft, the Company will determine whether to enter into a leveraged lease transaction as lessee with respect to such Aircraft (a "Leased Aircraft") or to purchase as owner pursuant to a secured loan transaction such Aircraft (an "Owned Aircraft") and will give to the Pass Through Trustee a Delivery Notice (as defined below) specifying its election; WHEREAS, upon receipt of a Delivery Notice with respect to an Aircraft, subject to the terms and conditions of this Agreement, the applicable Pass Through Trustees will enter into the applicable Financing Agreements relating to such Aircraft; WHEREAS, on the Funding Date for each Aircraft, each Pass Through Trustee will fund its purchase of Equipment Notes with (i) the proceeds of one or more Deposits withdrawn by the applicable Escrow Agent under the related Deposit Agreement bearing the same interest rate as the Certificates issued by such Pass Through Trust or (ii) in the case an Aircraft for which the Funding Date is the Issuance Date, with a portion of the proceeds of the sale of the Certificates; and WHEREAS, concurrently with the execution and delivery of this Agreement, (i) the Liquidity Provider, has entered into two separate revolving credit agreements (as amended, supplemented or otherwise modified from time to time, each a "Liquidity Facility"), one each for the benefit of the Certificateholders of each Pass Through Trust, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust and (ii) the Pass Through Trustees, the Liquidity Provider and the Subordination Agent have entered into the Intercreditor Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the "Intercreditor Agreement"); WHEREAS, concurrently with the execution and delivery of this Agreement, American International Group, Inc. has executed two guarantee agreements, each guaranteeing 2 the obligations of the initial Liquidity Provider under the related Liquidity Facility; NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Financing of Aircraft. (a) The Company confirms that pursuant to the Aircraft Purchase Agreement with the Manufacturer, the Manufacturer has agreed to deliver, or has delivered, the Aircraft in the months specified in Schedule I-A hereto, all on and subject to terms and conditions specified in the Aircraft Purchase Agreement. The Company agrees to finance the Aircraft in the manner provided herein, all on and subject to the terms and conditions hereof and of the relevant Financing Agreements. (b) In furtherance of the foregoing, the Company agrees to give the parties hereto, the Liquidity Provider, the Depositary and the Rating Agency not less than two Business Days' prior written notice in the form of the notice set out in Exhibit B hereto (a "Delivery Notice") of the scheduled delivery date (the "Scheduled Delivery Date") (or, in the case of a substitute Delivery Notice under Section 1(e) or (g) hereof, one Business Day's prior notice) in respect of each Aircraft under the applicable Aircraft Purchase Agreement, or in the case of the utilization of bridge financing or sale/leaseback financing as contemplated by Section 1(e) and (j) hereof in respect of any Aircraft, one Business Day's prior notice of the date of the financing of such Aircraft pursuant to the relevant Financing Agreements, which notice shall: (i) specify whether such Aircraft is an ATA Aircraft or a GE Aircraft, whether the Company has elected to treat such Aircraft as a Leased Aircraft or an Owned Aircraft, and if a Leased Aircraft, whether the Lease is to be in the form of Exhibit A-2-1 or A-2-2 to this Agreement, subject to changes permitted under Section 1(c); (ii) specify the Scheduled Delivery Date (if applicable) of such Aircraft (which shall be a Business Day before the Cut-off Date) and, except as provided in Section 1(e) hereof, the date (the "Funding Date") on which the financing therefor in the manner provided herein shall be consummated; (iii) except in the case of an Aircraft with a Funding Date that is the Issuance Date, instruct the applicable Pass Through Trustee to execute and deliver to the relevant Escrow Agent a withdrawal certificate in the form of Annex A to Exhibit B hereto so as to provide a Notice of Purchase Withdrawal to the Depositary with respect to the Equipment Notes to be issued in connection with the financing of such Aircraft; (iv) instruct the applicable Pass Through Trustee to enter into the Participation Agreement included in the Financing Agreements with respect to such Aircraft in such form and at such a time on or before the Funding Date specified in such Delivery Notice and to perform its obligations thereunder; 3 (v) specify the aggregate principal amount of each series of Equipment Notes to be issued and purchased by the Pass Through Trustees in connection with the financing of such Aircraft scheduled to be financed on such Funding Date (which shall in all respects comply with the Mandatory Economic Terms); and (vi) if such Aircraft is to be a Leased Aircraft, certify that the related Owner Participant (A) is not an Affiliate of the Company and (B) based on the representations of such Owner Participant, is either (1) a Qualified Owner Participant or (2) any other person the obligations of which under the Owner Participant Agreements (as defined in the applicable Participation Agreement) are guaranteed by a Qualified Owner Participant. Notwithstanding the foregoing, in the event the Issuance Date coincides with the Scheduled Delivery Date or Funding Date of any Aircraft to be financed pursuant to the terms hereof, the Delivery Notice therefor may be delivered on such Scheduled Delivery Date or Funding Date, as the case may be. (c) Upon receipt of a Delivery Notice, the Pass Through Trustees shall, and shall cause the Subordination Agent to, enter into and perform their obligations under the Participation Agreement and other instructions specified in such Delivery Notice, provided that such Participation Agreement and the other Lease Financing Agreements or Owner Financing Agreements to be entered into pursuant to such Participation Agreement shall be in the forms thereof annexed hereto in all material respects with such changes therein as shall have been requested by the Company or the related Owner Participant (in the case of Lease Financing Agreements) or by the initial purchasers of the Series C Equipment Notes or Class C Certificates (as defined in the Intercreditor Agreement), agreed to by the Company and, if modified in any material respect as regards the interests of the Certificateholders, as to which Rating Agency Confirmation shall have been obtained by the Company from the Rating Agency (to be delivered by the Company to the applicable Pass Through Trustee on or before the relevant Delivery Date, it being understood that if Rating Agency Confirmation shall have been received with respect to any Financing Agreements and such Financing Agreements are utilized for subsequent Aircraft (or Substitute Aircraft) without material modifications, no additional Rating Agency Confirmation shall be required); provided, however, that the relevant Financing Agreements as executed and delivered shall not vary the Mandatory Economic Terms and shall contain the Mandatory Document Terms. Notwithstanding the foregoing, if any Financing Agreement annexed hereto shall not have been reviewed by the Rating Agency prior to the Issuance Date, then, prior to the use thereof in connection with the financing of any Aircraft hereunder, the Company shall obtain a Rating Agency Confirmation from the Rating Agency on or prior to the relevant Funding Date. The Company shall pay the reasonable costs and expenses of the Rating Agency in connection with obtaining the Rating Agency Confirmation. With respect to each Aircraft, the Company shall cause WTC (or such other person that meets the eligibility requirements to act as loan trustee under the Leased Aircraft Indenture or Owned Aircraft Indenture) to execute as Loan Trustee the Financing Agreements relating to such Aircraft to which such Loan Trustee is intended to be a party, and the Company shall concurrently therewith execute such Financing Agreements to which the Company is intended to be a party and perform its respective obligations thereunder. Upon the request of the Rating Agency, the Company shall 4 deliver or cause to be delivered to the Rating Agency a true and complete copy of each Financing Agreement relating to the financing of each Aircraft together with a true and complete set of the closing documentation (including legal opinions) delivered to the related Loan Trustee, Subordination Agent and Pass Through Trustee under the related Participation Agreement. (d) If after giving any Delivery Notice, there shall be a delay in the delivery of an Aircraft, or if on the Scheduled Delivery Date or Funding Date of an Aircraft the financing thereof in the manner contemplated hereby shall not be consummated for whatever reason, the Company shall give the parties hereto and the Depositary prompt notice thereof. Concurrently with the giving of such notice of postponement or subsequently, the Company shall give the parties hereto a substitute Delivery Notice specifying the date to which such delivery and/or related financing shall have been re-scheduled (which shall be a Business Day before the Cut-off Date on which the Escrow Agents shall be entitled to withdraw one or more Deposits under each of the applicable Deposit Agreements to enable each applicable Pass Through Trustee to fund its purchase of the related Equipment Notes). Upon receipt of any such notice of postponement, each applicable Pass Through Trustee shall comply with its obligations under Section 2.01(b) of each of the Pass Through Trust Agreements and thereafter the financing of the relevant Aircraft shall take place on the re-scheduled Delivery Date or Funding Date, as the case may be, therefor (all on and subject to the terms and conditions of the relevant Financing Agreements) unless further postponed as provided herein. (e) The Company shall have the right at any time on or before the Scheduled Delivery Date or Funding Date of any Aircraft, and subsequent to its giving a Delivery Notice therefor, to postpone the Scheduled Delivery Date or Funding Date of such Aircraft so as to enable the Company to change its election to treat such Aircraft as a Leased Aircraft or an Owned Aircraft by written notice of such postponement to the other parties hereto. The Company shall subsequently give the parties hereto a substitute Delivery Notice complying with the provisions of Section 1(b) hereof and specifying the new Funding Date for such postponed Aircraft (which shall be a Business Day occurring before the Cut-off Date and on which the Escrow Agents shall be entitled to withdraw Deposits under each of the applicable Deposit Agreements sufficient to enable each applicable Pass Through Trustee to fund its purchase of the related Equipment Notes). In addition, the Company shall have the further right to accept delivery of an Aircraft under the Aircraft Purchase Agreement on the Delivery Date thereof by utilization of bridge financing of such Aircraft and promptly thereafter give the parties hereto a Delivery Notice specifying a Funding Date on or before the later to occur of (i) the date 90 days after the Issuance Date and (ii) the date 90 days after the Delivery Date of such Aircraft, but in no event later than the Cut-off Date, and otherwise complying with the provisions of Section 1(b) hereof. All other terms and conditions of this Note Purchase Agreement shall apply to the financing of any such Aircraft on the Funding Date or re-scheduled Funding Date therefor except (i) the Funding Date or re-scheduled Funding Date shall be deemed the Delivery Date of such Aircraft for all purposes of this Section 1, (ii) the related Financing Agreements shall be amended to reflect the original delivery of such Aircraft to the Company, (iii) where the Company owns the Aircraft under the bridge financing, the related Financing Agreements shall be amended to reflect the seller of such Aircraft, and the recipient of payment of the purchase price therefor, as the Company, and (iv) in the case of a Leased Aircraft, the Purchase Agreement 5 Assignment shall be modified to eliminate the assignment of the right to purchase from the Manufacturer. (f) The Company shall have no liability for the failure of the Pass Through Trustees to purchase Equipment Notes with respect to any Aircraft or Substitute Aircraft, other than the Company's obligation, if any, to pay the Deposit Make-Whole Premium pursuant to Section 4(a)(i) of this Agreement. (g) If (i) the Scheduled Delivery Date for any Aircraft is delayed (x) more than 30 days beyond the last day of the month set forth opposite such Aircraft under the heading "Scheduled Delivery Month" in Schedule I-A hereto or (y) beyond September 29, 2002, or (ii) as a result of a downgrading of the Company's corporate credit ratings, GECC has elected to exercise its contractual rights not to act as an Owner Participant with respect to a GE Aircraft and pursuant to the separate financing agreement between the Company and GECC, the Company will not own or lease such GE Aircraft, the Company may identify, as a substitute therefor, a Boeing aircraft of the same model as the Aircraft to be replaced, which shall have the same specification and the same or higher appraised value as the Aircraft to be replaced and shall be, or shall have been, delivered in the same year as the Aircraft to be replaced was scheduled to be delivered (a "Substitute Aircraft"), so long as (A) such financing occurs no later than the Cut-off Date, (B) after giving effect thereto such substitution does not vary the Mandatory Economic Terms and (C) the Company shall obtain Rating Agency Confirmation in respect of the replacement of any Aircraft by a Substitute Aircraft. Upon the satisfaction of the conditions set forth above with respect to a Substitute Aircraft, the Aircraft to be replaced shall cease to be subject to this Agreement and all rights and obligations of the parties hereto concerning such Aircraft shall cease, and such Substitute Aircraft shall be deemed to be an "Aircraft" and thereafter be subject to the terms and conditions of this Agreement to the same extent as such Aircraft. (h) The parties agree that if, in connection with the delivery and/or financing of an Aircraft or a Substitute Aircraft, any Owner Participant who is to be a party to any Lease Financing Agreement shall not be a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Act, then the applicable Lease Financing Agreements shall be modified, consistent with the Mandatory Document Terms, to require such Owner Participant to enter into a voting trust, voting powers or similar arrangement satisfactory to the Company that (A) enables such Aircraft to be registered in the United States of America and (B) complies with the FAA regulations issued under the Act applicable thereto. (i) Anything herein to the contrary notwithstanding, (i) the Company shall not have the right, and shall not be entitled, at any time to request the issuance of Equipment Notes of any series to any Pass Through Trustee in an aggregate principal amount in excess of the amount of the Deposits then available for withdrawal by the Escrow Agent under and in accordance with the provisions of the related Deposit Agreement; and (ii) if any Aircraft is not delivered and financed by the Company under the Financing Agreements in its respective Scheduled Delivery Month as set forth in Schedule I hereto then the Company shall use reasonable efforts to assure that the aggregate amortization schedule of the Equipment Notes 6 with respect to such Aircraft will correspond as closely as reasonably practicable to the aggregate amortization schedule set forth in Schedule VII hereto. (j) Notwithstanding the foregoing provisions of this Section 1, (i) the Company shall have the right, with respect to any Owned Aircraft, to enter into the transactions described in Section 8.3 of the relevant Owned Aircraft Participation Agreement (a "Sale/Leaseback Transaction"), subject to the restrictions set forth therein, and (ii) the Company shall have the right, with respect to any Leased Aircraft, to enter into the transactions described in Section 2.11 of the relevant Leased Aircraft Indenture, in each case involving assumption and release of the obligations of the Company or the Owner Trustee, subject to the restrictions set forth therein. Notwithstanding the foregoing clauses (i) and (ii), the Company shall not have the right to enter into either such transaction referred to therein, unless the Company (a) either (i) causes to be delivered to the Loan Trustee an opinion of counsel reasonably satisfactory to the Loan Trustee to the effect that the Certificateholders will not recognize income, gain or loss for Federal income tax purposes as a result of such assumption and release and will be subject to Federal income tax in the same amounts, in the same manner and at the same time as would have been the case if such assumption and release had not occurred or (ii) causes to be delivered to the Loan Trustee an opinion of counsel to the effect that the Certificateholders should not recognize income, gain or loss for Federal income tax purposes as a result of such assumption and release and should be subject to Federal income tax in the same amounts, in the same manner and at the same time as would have been the case if such assumption and release had not occurred and provides an indemnification in favor of the Certificateholders in form and substance reasonably satisfactory to the Pass Through Trustees, (b) causes to be delivered to the Loan Trustee an opinion of counsel reasonably satisfactory to the Loan Trustee that the Pass Through Trusts will not be subject to Federal income taxation as a result of such assumption and release and (c) obtains written confirmation from the Rating Agency that such transaction will not result in (i) a reduction of the rating for any Class of Certificates below the then current rating for such Class of Certificates or (ii) a withdrawal or suspension of the rating of any Class of Certificates. In addition, the Company agrees to otherwise comply with the provisions of Sections 1(c) and 2 hereof in connection with any Sale/Leaseback Transaction, or an assumption of the Equipment Notes, as the case may be. SECTION 2. Conditions Precedent. The obligation of the Pass Through Trustees to enter into, and to cause the Subordination Agent to enter into, any Participation Agreement as directed pursuant to a Delivery Notice and to perform its obligations thereunder is subject to satisfaction of the following conditions: 1. no Triggering Event shall have occurred; and 2. the Company shall have delivered a certificate to each such Pass Through Trustee and each Liquidity Provider stating that (i) such Participation Agreement and the other Financing Agreements to be entered into pursuant to such Participation Agreement do not vary 7 the Mandatory Economic Terms and contain the Mandatory Document Terms and (ii) any modification of such Financing Agreements from the forms thereof attached to this Agreement does not adversely affect the Certificateholders, and such certification shall be true and correct. Anything herein to the contrary notwithstanding, the obligation of each Pass Through Trustee to purchase Equipment Notes shall terminate on the Cut-off Date. SECTION 3. Representations and Warranties. (a) The Company and the Guarantor represent and warrant that: (i) each of the Company and Guarantor is duly incorporated, validly existing and in good standing under the laws of the State of Indiana and has the full corporate power, authority and legal right under the laws of the State of Indiana to execute and deliver this Agreement, the Delayed Funding Implementation Agreement and each Financing Agreement to which it will be a party and to carry out the obligations of the Company and Guarantor under this Agreement, the Delayed Funding Implementation Agreement and each Financing Agreement to which it will be a party; (ii) the execution and delivery by the Company and Guarantor of this Agreement and the Delayed Funding Implementation Agreement and the performance by each of the Company and Guarantor of its obligations under this Agreement and the Delayed Funding Implementation Agreement have been duly authorized by the Company and Guarantor and will not violate its Articles of Incorporation or by-laws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; (iii) each of this Agreement and the Delayed Funding Implementation Agreement constitutes the legal, valid and binding obligation of each of the Company and Guarantor, enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; and (iv) the Company is a "citizen of the United States" as defined in Section 40102 of the Act. (b) WTC represents and warrants that: (i) WTC is duly incorporated, validly existing and in good standing under the laws of the State of Delaware and is a "citizen of the United States" as defined in Section 40102 of the Act, and has the full corporate power, authority and legal right under the laws of the State of Delaware and the United States of 8 America pertaining to its banking, trust and fiduciary powers to execute and deliver this Agreement, the Delayed Funding Implementation Agreement and each Financing Agreement to which it will be a party and to carry out the obligations of WTC, in its capacity as Subordination Agent, Pass Through Trustee or Paying Agent, as the case may be, under this Agreement, the Delayed Funding Implementation Agreement and each Financing Agreement to which it will be a party; (ii) the execution and delivery by WTC, in its capacity as Subordination Agent, Pass Through Trustee or Paying Agent, as the case may be, of this Agreement and the Delayed Funding Implementation Agreement and the performance by WTC, in its capacity as Subordination Agent, Pass Through Trustee or Paying Agent, as the case may be, of its obligations under this Agreement and the Delayed Funding Implementation Agreement have been duly authorized by WTC, in its capacity as Subordination Agent, Pass Through Trustee or Paying Agent, as the case may be, and will not violate its articles of association or by-laws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; and (iii) each of this Agreement and the Delayed Funding Implementation Agreement constitutes the legal, valid and binding obligations of WTC, in its capacity as Subordination Agent, Pass Through Trustee or Paying Agent, as the case may be, enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity. (c) The Pass Through Trustee hereby confirms to each of the other parties hereto that its representations and warranties set forth in Section 7.14 of each Pass Through Trust Agreement are true and correct as of the date hereof. (d) The Subordination Agent represents and warrants that: (i) the Subordination Agent is duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has the full corporate power, authority and legal right under the laws of the State of Delaware and the United States of America pertaining to its banking, trust and fiduciary powers to execute and deliver this Agreement, the Delayed Funding Implementation Agreement and each Financing Agreement to which it is or will be a party and to perform its obligations under this Agreement, the Delayed Funding Implementation Agreement and each Financing Agreement to which it is or will be a party; 9 (ii) each of this Agreement and the Delayed Funding Implementation Agreement has been duly authorized, executed and delivered by the Subordination Agent; each of this Agreement and the Delayed Funding Implementation Agreement constitutes the legal, valid and binding obligations of the Subordination Agent enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; (iii) none of the execution, delivery and performance by the Subordination Agent of this Agreement or the Delayed Funding Implementation Agreement contravenes any law, rule or regulation of the State of Delaware or any United States of America governmental authority or agency regulating the Subordination Agent's banking, trust or fiduciary powers or any judgment or order applicable to or binding on the Subordination Agent and do not contravene the Subordination Agent's articles of association or by-laws or result in any breach of, or constitute a default under, any agreement or instrument to which the Subordination Agent is a party or by which it or any of its properties may be bound; (iv) neither the execution and delivery by the Subordination Agent of this Agreement or the Delayed Funding Implementation Agreement nor the consummation by the Subordination Agent of any of the transactions contemplated hereby or thereby requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action with respect to, any Delaware governmental authority or agency or any federal governmental authority or agency regulating the Subordination Agent's banking, trust or fiduciary powers; (v) there are no Taxes payable by the Subordination Agent imposed by the State of Delaware or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement or the Delayed Funding Implementation Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities), and there are no Taxes payable by the Subordination Agent imposed by the State of Delaware or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Equipment Notes (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities); and 10 (vi) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement or the Delayed Funding Implementation Agreement. (e) The Escrow Agent represents and warrants that: (i) the Escrow Agent is a national banking association duly incorporated, validly existing and in good standing under the laws of the United States of America and has the full corporate power, authority and legal right under the laws of the United States of America pertaining to its banking, trust and fiduciary powers to execute and deliver this Agreement, the Delayed Funding Implementation Agreement, each Deposit Agreement and each Escrow and Paying Agent Agreement (collectively, the "Escrow Agent Agreements") and to carry out the obligations of the Escrow Agent under each of the Escrow Agent Agreements; (ii) the execution and delivery by the Escrow Agent of each of the Escrow Agent Agreements and the performance by the Escrow Agent of its obligations hereunder and thereunder have been duly authorized by the Escrow Agent and will not violate its articles of association or by-laws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; and (iii) each of the Escrow Agent Agreements constitutes the legal, valid and binding obligations of the Escrow Agent enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity. (f) The Paying Agent represents and warrants that: (i) the Paying Agent is duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the full corporate power, authority and legal right under the laws of the United States of America pertaining to its banking, trust and fiduciary powers to execute and deliver this Agreement, the Delayed Funding Implementation Agreement and the Escrow and Paying Agent Agreement (collectively, the "Paying Agent Agreements") and to carry out the obligations of the Paying Agent under each of the Paying Agent Agreements; (ii) the execution and delivery by the Paying Agent of each of the Paying Agent Agreements and the performance by the Paying Agent of its 11 obligations hereunder and thereunder have been duly authorized by the Paying Agent and will not violate its articles of association or by-laws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; and (iii) each of the Paying Agent Agreements constitutes the legal, valid and binding obligations of the Paying Agent enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity. SECTION 4. Covenants. (a) The Company and the Guarantor each covenant with each of the other parties hereto as follows. (i) On the date that the Depositary is obligated to pay the amount of a Prepayment Withdrawal or the Final Withdrawal to the Paying Agent pursuant to a Deposit Agreement relating to any Trust, the Company shall pay to the Pass Through Trustee of such Trust no later than 12:30 p.m. (New York time) an amount equal to the Deposit Make-Whole Premium, if any, in respect of such Prepayment Withdrawal or Final Withdrawal amount. (ii) Subject to Section 4(a)(iv) of this Agreement, the Company shall at all times maintain its corporate existence and shall not wind-up, liquidate or dissolve or take any action, or fail to take any action, that would have the effect of any of the foregoing. (iii) The Company shall at all times remain a U.S. Air Carrier (as defined in the Financing Agreements) and shall at all times be otherwise certificated and registered to the extent necessary to entitle (i) in the case of Leased Aircraft, the Owner Trustee (and the Loan Trustee as assignee of the Owner Trustee's rights under each Lease) to the rights afforded to lessors of aircraft equipment under Section 1110 and (ii) in the case of Owned Aircraft, the Loan Trustee to the rights afforded to secured parties of aircraft equipment under Section 1110. (iv) Sections 5.01 and 5.02 of each Pass Through Trust Agreement are hereby incorporated by reference herein, mutatis mutandis. (v) The Company agrees to provide written notice to (i) each of the parties hereto of the occurrence of the Cut-off Date no later than one Business Day after the date thereof and (ii) each of the parties hereto and the Depositary of any adjustments in the interest rate applicable to the Equipment Notes and the Certificates pursuant to the Registration Rights Agreement. 12 (vi) The Company shall not issue or cause or permit to be issued Series C Equipment Notes pursuant to any Owned Aircraft Indenture or Leased Aircraft Indenture unless it shall have obtained written confirmation from the Rating Agency that the issuance of such Series C Equipment Notes will not result in (i) a reduction of the rating for any Class of Certificates below the then current rating for such Class of Certificates or (ii) a withdrawal or suspension of the rating of any Class of Certificates. If such conditions to the issuance of Series C Equipment Notes are satisfied, the parties hereto agree to enter into such amendments and modifications to the Intercreditor Agreement, each Pass Through Trust Agreement and the other Financing Agreements as shall be reasonably requested by the Company to facilitate the issuance of the same and any Series C Pass Through Certificates; provided that such amendments and modifications (including those described in the following sentence) are reasonably satisfactory to the Purchasers. The Company will (i) cause the Indenture under which any Series C Equipment Notes are issued to provide for the subordination of the Series C Equipment Notes to the Series B Equipment Notes, the Series A Equipment Notes and the Liquidity Obligations (as defined in the Intercreditor Agreement) in the same manner as the Series B Equipment Notes are subordinated to the Series A Equipment Notes and the Liquidity Obligations and (ii) if Series C Equipment Notes are initially issued to other than the pass through trustee for the Class C Certificates (as defined in the Intercreditor Agreement), (A) cause such Series C Equipment Notes to be subject to the provisions of the Intercreditor Agreement that allow for the "Controlling Party" (as defined in the Intercreditor Agreement), during the continuance of an "Indenture Default" (as defined in the Intercreditor Agreement), to direct the Loan Trustee in taking action under the applicable Indenture and (B) cause the Indenture under which such Series C Equipment Notes are issued to include, in substance, the provisions set forth in Exhibit D to this Agreement. (vii) On the Issuance Date, the Depositary's short term unsecured rating shall be A-1 from Standard & Poor's and P-1 from Moody's. If the Depositary's short term rating shall at any time fall below P-1 from Moody's or A-1 from Standard & Poor's, the Company shall, within 15 days of such occurrence, cause the Depositary to be replaced with a depositary bank (a "Replacement Depositary") on the following terms and conditions. (I) The Replacement Depositary must have a short-term unsecured rating of at least A-1 from Standard & Poor's and P-1 from Moody's and the Company shall have obtained and each Purchaser shall have received written confirmation from the Rating Agency that such replacement will not cause a reduction of any rating then in effect for any Class of Certificates by the Rating Agency (without regard to any downgrading of any rating of the Depositary being replaced). (II) The Company shall pay all fees, expenses and other amounts then owing to the replaced Depositary. 13 (III) The Company shall cause the Escrow Agent and the Replacement Depositary to enter into a Replacement Deposit Agreement for each Class of Certificates and shall cause the Replacement Depositary to deliver to the Company, the Rating Agency and the Purchaser of such Class, legal opinions and other closing documentation substantially similar in scope and substance as those that were delivered by the Depositary being replaced in connection with the execution and delivery of the Deposit Agreement being replaced. (IV) Upon satisfaction of the foregoing conditions, the Company shall instruct each Pass Through Trustee, and each Pass Through Trustee agrees, to execute and deliver to the Escrow Agent a duly completed Withdrawal Certificate together with a Notice of Replacement Withdrawal (as defined in the Escrow and Paying Agent Agreements). (V) Each of the parties hereto agrees, at the Company's request and expense, to enter into any amendments to this Agreement, the Escrow and Paying Agent Agreements and any other Operative Agreements as may be necessary or desirable to give effect to the replacement of the Depositary with the Replacement Depositary and the replacement of the Deposit Agreements with the Replacement Deposit Agreements. (VI) Upon the execution and delivery of the Replacement Deposit Agreements, the Replacement Depositary shall be deemed to be the Depositary with all of the rights and obligations of the Depositary hereunder and under the other Operative Agreements and the Replacement Deposit Agreements shall be deemed to be the Deposit Agreements hereunder and under the other Operative Agreements, except that the obligations of the replaced Depositary under the last two sentences of Section 2.2 of its Deposit Agreements or Section 2.2(a) of its Delayed Deposit Agreements shall remain in full force and effect notwithstanding the execution and delivery of the Replacement Deposit Agreements. (b) WTC, in its individual capacity, covenants with each of the other parties to this Agreement that it will, immediately upon obtaining knowledge of any facts that would cast doubt upon its continuing status as a "citizen of the United States" as defined in Section 40102 of the Act and promptly upon public disclosure of negotiations in respect of any transaction which would or might adversely affect such status, notify in writing all parties hereto of all relevant matters in connection therewith. Upon WTC giving any such notice, WTC shall, subject to Section 8.02 of any Indenture then entered into, resign as Loan Trustee in respect of such Indenture. SECTION 5. Notices. Unless otherwise specifically provided herein, all notices, requests, demands, authorizations, directions, consents, waivers and other communications required or permitted to be made, given, furnished or filed hereunder by the terms hereof shall be 14 in English and in writing, and any such communication shall become effective upon being delivered personally or, if promptly confirmed by mail, when received by facsimile or other written telecommunication unless received outside of the business hours, in which case on the following Business Day, addressed to such party hereto at its address or facsimile number set forth below the signature of such party on the signature pages of this Agreement (or such other address as notified by such party to the other parties hereto). SECTION 6. Expenses. (a) The Company and the Guarantor jointly and severally agree to pay to the Subordination Agent when due for application in accordance with the Intercreditor Agreement an amount or amounts equal to the fees payable to the relevant Liquidity Provider under Section 2.3 of each Liquidity Facility and the related Fee Letter (as defined in the Intercreditor Agreement) multiplied by a fraction the numerator of which shall be the then outstanding aggregate amount of the Deposits under the Deposit Agreements and the denominator of which shall be the sum of (x) the then outstanding aggregate principal amount of the Series A Equipment Notes and Series B Equipment Notes issued under all of the Indentures and (y) the then outstanding aggregate amount of the Deposits under the Deposit Agreements. (b) So long as no Equipment Notes have been issued in respect of any Aircraft relating to any Pass Through Trust Agreement, the Company and the Guarantor jointly and severally agree to pay (i) to the Subordination Agent when due (A) the amount equal to interest on any Downgrade Advance (other than any Applied Downgrade Advance) payable under Section 3.7 of the Liquidity Facility relating to such Pass Through Trust Agreement minus Investment Earnings while such Downgrade Advance shall be outstanding, (B) the amount equal to interest on any Non-Extension Advance (other than any Applied Non-Extension Advance) payable under Section 3.7 of each such Liquidity Facility minus Investment Earnings while such Non-Extension Advance shall be outstanding and (C) any other amounts owed to the Liquidity Provider by the Subordination Agent as borrower under each such Liquidity Facility (other than amounts due as repayment of advances thereunder or as interest on such advances, except to the extent payable pursuant to clause (A) or (B)), (ii) all compensation and reimbursement of reasonable expenses, disbursements and advances payable by the Company under each such Pass Through Trust Agreement, (iii) all compensation and reimbursement of reasonable expenses and disbursements payable to the Subordination Agent under the Intercreditor Agreement except with respect to any income or franchise taxes incurred by the Subordination Agent in connection with the transactions contemplated by the Intercreditor Agreement, and (iv) in the event the Company requests any amendment to any Operative Agreement, all reasonable fees and expenses (including, without limitation, fees and disbursements of counsel) of the Escrow Agent, the Paying Agent in connection therewith. For purposes of this Section 6(b), the terms "Applied Downgrade Advance", "Applied Non-Extension Advance", "Downgrade Advance", "Investment Earnings" and "Non-Extension Advance" shall have the meanings specified in each Liquidity Facility. SECTION 7. Further Assurances. Each party hereto shall duly execute, acknowledge and deliver, or shall cause to be executed, acknowledged and delivered, all such 15 further agreements, instruments, certificates or documents, and shall do and cause to be done such further acts and things, in any case, as any other party hereto shall reasonably request in connection with its administration of, or to carry out more effectually the purposes of, or to better assure and confirm unto it the rights and benefits to be provided under, this Agreement. SECTION 8. Miscellaneous. (a) Provided that the transactions contemplated hereby have been consummated, and except as otherwise provided for herein, the representations, warranties and agreements herein of the Company, the Subordination Agent, the Escrow Agent, the Paying Agent and the Pass Through Trustee, and the Company's, the Subordination Agent's, the Escrow Agent's, the Paying Agent's and the Pass Through Trustee's obligations under any and all thereof, shall survive the expiration or other termination of this Agreement and the other agreements referred to herein. (b) This Agreement may be executed in any number of counterparts (and each of the parties hereto shall not be required to execute the same counterpart). Each counterpart of this Agreement, including a signature page executed by each of the parties hereto, shall be an original counterpart of this Agreement, but all of such counterparts together shall constitute one instrument. Except as provided in Section 8(c) below, neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented, waived or modified orally, but only by an instrument in writing signed by the party against which the enforcement of the termination, amendment, supplement, waiver or modification is sought. The index preceding this Agreement and the headings of the various Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Company and its successors and permitted assigns, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional trustee appointed) under any of the Pass Through Trust Agreements, the Escrow Agent and its successors as Escrow Agent under the Escrow and Paying Agent Agreements, the Paying Agent and its successors as Paying Agent under the Escrow and Paying Agent Agreement and the Subordination Agent and its successors as Subordination Agent under the Intercreditor Agreement. (c) Notwithstanding any provision of this Agreement, upon and simultaneously with the issuance of the Additional Certificates (as defined in the Delayed Funding Implementation Agreement), this Agreement shall be forthwith amended as provided in the Delayed Funding Implementation Agreement, without any need for further action on the part of any party hereto and without any consent of any of the Certificateholders. (d) This Agreement is not intended to, and shall not, provide any person not a party hereto (other than the Purchasers and each of the beneficiaries of Section 6 hereof) with any rights of any nature whatsoever against any of the parties hereto, and no person not a party hereto (other than the Purchasers and each of the beneficiaries of Section 6 hereof) shall have any right, power or privilege in respect of, or have any benefit or interest arising out of, this Agreement. To the extent that this Agreement expressly confers upon, gives or grants any right, power, privilege, benefit, interest, remedy or claim to any of the beneficiaries of Section 6 hereof (including, but 16 not limited to rights, powers, privileges, benefits, interests, remedies and claims under Section 6), each such party is hereby recognized as a third party beneficiary hereunder and may enforce any such right, power, privilege, benefit, interest, remedy or claim. SECTION 9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK. SECTION 10. Subordination Agent's Liability. Notwithstanding anything contained herein to the contrary, it is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Wilmington Trust Company in connection with its role as Pass Through Trustee and Subordination Agent, not individually or personally but solely as Pass Through Trustee and Subordination Agent, in the exercise of the powers and authority conferred and vested in it under the Pass Through Trust Agreement and the Intercreditor Agreement (b) each of the representations, undertakings and agreements herein made on the part of the Pass Through Trustee or Subordination Agent is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose for binding only the Pass Through Trustee or Subordination Agent, as the case may be, and (c) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Pass Through Trustee or Subordination Agent, or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Pass Through Trustee or Subordination Agent under this Agreement or the other related documents. 17 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. AMERICAN TRANS AIR, INC. By --------------------------------- Name: Title: Address: 7337 West Washington Street Indianapolis, Indiana 46231 Attention: Treasurer Facsimile: (317) 240-7091 AMTRAN, INC., as Guarantor By --------------------------------- Name: Title: Address: 7337 West Washington Street Indianapolis, Indiana 46231 Attention: Treasurer Facsimile: (317) 240-7091 WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise provided herein, but solely as Pass Through Trustee By --------------------------------- Name: Title: Address: Rodney Square North 1100 North Market Street, Wilmington, Delaware 19890 Attention: Corporate Trust Admin. Facsimile: (302) 636-4140 WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise provided herein, but solely as Subordination Agent By --------------------------------- Name: Title: Address: Rodney Square North 1100 North Market Street, Wilmington, Delaware 19890 Attention: Corporate Trust Admin. Facsimile: (302) 636-4140 WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION as Escrow Agent By ----------------------------------------- Name: Title: Address: 79 South Main Street, 3rd Floor Salt Lake City, Utah 84111 Attention: Corporate Trust Department Facsimile: (801) 246-5053 WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise provided herein, but solely as Paying Agent By --------------------------------- Name: Title: Address: Rodney Square North 1100 North Market Street, Wilmington, Delaware 19890 Attention: Corporate Trust Admin. Facsimile: (302) 636-4140 SCHEDULE I-A to Note Purchase Agreement AIRCRAFT AND SCHEDULED DELIVERY MONTHS
Aircraft Manufacturer's Serial Scheduled Delivery ATA Aircraft/ Aircraft Type Tail Number Number Month GE Aircraft ------------- ----------- ------ ----- ----------- Boeing 737-800 N316TZ 32609 January 2002 ATA Aircraft Boeing 737-800 N320TZ 32610 April 2002 ATA Aircraft Boeing 737-800 N322TZ 32611 May 2002 ATA Aircraft Boeing 737-800 N324TZ 32882 June 2002 GE Aircraft Boeing 737-800 N325TZ 32884 July 2002 GE Aircraft
SCHEDULE I-B to Note Purchase Agreement AIRCRAFT AND SCHEDULED DELIVERY MONTHS
Aircraft Manufacturer's Serial Scheduled Delivery ATA Aircraft/ Aircraft Type Tail Number Number Month GE Aircraft ------------- ----------- ------ ----- ----------- Boeing 737-800 N316TZ 32609 January 2002 ATA Aircraft Boeing 737-800 N320TZ 32610 April 2002 ATA Aircraft Boeing 737-800 N322TZ 32611 May 2002 ATA Aircraft Boeing 737-800 N324TZ 32882 June 2002 GE Aircraft Boeing 737-800 N325TZ 32884 July 2002 GE Aircraft Boeing 737-800 N326TZ 32612 October 2002 ATA Aircraft Boeing 737-800 N327TZ 32613 November 2002 ATA Aircraft Boeing 737-800 N328TZ 32614 November 2002 ATA Aircraft Boeing 737-800 N329TZ 32615 December 2002 ATA Aircraft
SCHEDULE II to Note Purchase Agreement PASS THROUGH TRUST AGREEMENTS Pass Through Trust Agreement dated as of the Issuance Date among the Company, the Guarantor and the Pass Through Trustee in respect of American Trans Air 2002-1A Pass Through Trust. Pass Through Trust Agreement dated as of the Issuance Date among the Company, the Guarantor and the Pass Through Trustee in respect of American Trans Air 2002-1B Pass Through Trust. SCHEDULE III-A to Note Purchase Agreement DEPOSIT AGREEMENTS Deposit Agreement (Class A) dated as of the Issuance Date between the Depositary and the Escrow Agent. Deposit Agreement (Class B) dated as of the Issuance Date between the Depositary and the Escrow Agent. SCHEDULE III-B to Note Purchase Agreement DELAYED DEPOSIT AGREEMENTS Delayed Deposit Agreement (Class A) dated as of the Issuance Date between the Depositary and the Escrow Agent. Delayed Deposit Agreement (Class B) dated as of the Issuance Date between the Depositary and the Escrow Agent. SCHEDULE IV to Note Purchase Agreement ESCROW AND PAYING AGENT AGREEMENTS Escrow and Paying Agent Agreement (Class A) dated as of the Issuance Date among the Escrow Agent, the Purchaser named therein, the Pass Through Trustee and the Paying Agent. Escrow and Paying Agent Agreement (Class B) dated as of the Issuance Date among the Escrow Agent, the Purchaser named therein, the Pass Through Trustee and the Paying Agent. SCHEDULE V to Note Purchase Agreement MANDATORY DOCUMENT TERMS The terms "Trust Indenture Form", "Lease Form" and "Participation Agreement Form" shall have the respective meanings specified in Schedule VI to the Note Purchase Agreement. 1. May not modify in any material adverse respect the Granting Clause of the Trust Indenture Form so as to deprive the Note Holders of a first priority security interest in and mortgage lien on the Aircraft and the Lease or to eliminate any of the obligations secured thereby or otherwise modify in any material adverse respect as regards the interests of the Note Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee or the Loan Trustee, the provisions of (x) Article II or III or Section 4.02, 4.03, 4.04, 5.02, 5.06, 9.01(b), 10.04, 10.11 or 10.12 of the Leased Aircraft Trust Indenture Form, (y) Article II or III or IV, Section 5.01, 5.02, 6.02, 10.01(a), 11.04, 11.11 or 11.12 of the Owned Aircraft Trust Indenture Form or (z) the definition of "Make-Whole Amount" contained in Annex A to the Trust Indenture Form. 2. May not modify in any material adverse respect as regards the interests of the Note Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee, the provisions of Section 3.2.1(e), 3.3(c), 4.7, 7.1.1, 10.3.1(d)(2), 13.3, 16, 17.3, 18.3 or 18.7 of the Lease Form or otherwise modify the terms of the Lease Form so as to deprive the Indenture Trustee of rights expressly granted to the "Mortgagee" therein. 3. (a) May not modify in any material adverse respect as regards the interests of the Note Holders, the Subordination Agent, the Liquidity Providers or the Indenture Trustee, the provisions of Section 5.1.9, 5.1.10, 5.1.11, 5.1.12, 7.1.5, 7.5, 12, 15.8(a), 15.9 or 15.10 of the Leased Aircraft Participation Agreement Form, or the provisions of Section 5.1.2(u) or 10.1.1(a)(4) of the Leased Aircraft Participation Agreement so as to eliminate the requirement to deliver to the Loan Participant or the Indenture Trustee, as the case may be, the legal opinions to be provided to such Persons thereunder (recognizing that the lawyers rendering such opinions may be changed) or of the provisions of Section 7.6.11(a)(5) of the Leased Aircraft Participation Agreement Form as regards the rights of the Indenture Trustee thereunder or the provisions of Section 5.1.5 so as to deprive the Note Holders of a first priority security interest as provided therein and mortgage lien on the Aircraft and the Lease or otherwise modify the terms of the Leased Aircraft Participation Agreement Form to deprive the Trustees, the Subordination Agent, the Liquidity Providers or the Indenture Trustee of any indemnity or right of reimbursement in its favor for Expenses or Taxes. (b) May not modify in any material adverse respect as regards the interests of the Note Holders, the Subordination Agent, the Liquidity Providers or the Loan Trustee, the provisions of Section 3.1.8, 3.1.9, 3.1.10, 3.1.11, 5.1.5, 5.3, 9, 11.8(a),11.9 or 11.10 of the Owned Aircraft Participation Agreement Form or the provisions of 3.1.2(i) or 8.3 of the Owned Aircraft Participation Agreement Form so as to eliminate the requirement to deliver to the Loan Participant, the Loan Trustee or Certificateholders, as the case may be, the legal opinions to be provided to such Persons thereunder (recognizing that the lawyers rendering such opinions may be changed) or of the provisions of Section 5.4.5(a)(4) of the Owned Aircraft Participation Agreement Form as regards the rights of the Loan Trustee thereunder or the provisions of Section 3.1.3 so as to deprive the Noteholders of a first priority security interest as provided therein and mortgage lien on the Aircraft or otherwise modify the terms of the Owned Aircraft Participation Agreement Form to deprive the Trustees, the Subordination Agent, the Liquidity Providers or the Loan Trustee of any indemnity or right of reimbursement in its favor for Expenses or Taxes. 4. May not modify, in any material adverse respect as regards the interests of the Note Holders, the Subordination Agent, the Liquidity Providers, the Indenture Trustee or the Loan Trustee, the definition of "Deposit Make-Whole Premium" in Annex A to the Note Purchase Agreement. Notwithstanding the foregoing, any such Mandatory Document Term may be modified to correct or supplement any such provision which may be defective or to cure any ambiguity or correct any mistake, provided that any such action shall not materially adversely affect the interests of the Note Holders, the Subordination Agent, the Liquidity Providers, the Indenture Trustee or the Loan Trustee or the Certificateholders. SCHEDULE VI to Note Purchase Agreement MANDATORY ECONOMIC TERMS Equipment Notes Obligor: American Trans Air, Inc. or an Owner Trust Maximum Principal Amount: The aggregate original principal amount of all Equipment Notes for all Aircraft shall not exceed the aggregate face amount of all Certificates issued on the Issuance Date. The aggregate original principal amount of all Equipment Notes of any series shall not exceed the aggregate face amount of all Certificates of the related class issued on the Issuance Date. Initial loan to aircraft value (with the value of any Aircraft equal to the value for such Aircraft set forth in the Private Placement Memorandum in "Summary - The Offering - Secured Promissory Notes and the Aircraft" under the column "Appraised Base Value"): Series A: not in excess of 51% Series B: not in excess of 66% The loan to aircraft value for each series of Equipment Notes issued in respect of each Aircraft (computed (i) after aggregating the principal amount of all series of Equipment Notes that rank senior to the series of Equipment Notes for which loan to aircraft value is being calculated and (ii) as of the date of the issuance thereof on the basis of the Assumed Appraised Value of such Aircraft and the Depreciation Assumption (as defined in the Private Placement Memorandum in the Glossary) must not exceed as of any Regular Distribution Date thereafter (assuming no default in the payment of the Equipment Notes) the following amounts: Series A: not in excess of 51% Series B: not in excess of 66% Initial average life (in years) Series A: not extend beyond 8 years from the Issuance Date Series B: not extend beyond 5 years from the Issuance Date Average life (in years) As of the Delivery Period Termination Date (or if earlier, the date of the occurrence of a Triggering Event), the average life of the Class A Certificates and the Class B Certificates shall not exceed, respectively, 7.49 to 7.69 years from the Issuance Date, subject to final reoptimization, and 4 years from the Issuance Date (computed without regard to the acceleration of any Equipment Notes and after giving effect to any special distribution on the Certificates thereafter required in respect of unused Deposits). Amortization Schedule The amortization schedule for each Series of Equipment Notes, assuming the maximum amount thereof in respect of all of the Aircraft are purchased by the Pass Through Trusts and all Aircraft are delivered as currently scheduled shall be as set forth in Schedule VII of the Note Purchase Agreement. Final Maturity Date Series A: November 20, 2014 Series B: August 20, 2009 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) Series A: 8.328 % Series B: 0.699 % Payment Dates: February 20, May 20, August 20 and November 20 Make-Whole Premiums: as provided in Section 1.01 of the forms of Trust Indenture marked as Exhibit A-3 and C-2 of the Note Purchase Agreement (the "Trust Indenture Form") Redemption and Purchase: as provided in Article II of the Trust Indenture Form Lease Term: The Base Lease Term shall expire by its terms on or after final maturity date of the related Series A Equipment Notes Lease Payment Dates: February 20, May 20, August 20 and November 20 Minimum Rent: Basic Rent due and payable on each Payment Date shall be at least sufficient to pay in full, as of such Payment Date (assuming timely payment of the related Equipment Notes prior to such Date), the aggregate principal amount of scheduled installments due on the related Equipment Notes outstanding on such Payment Date together with accrued and unpaid interest thereon Supplemental Rent: Sufficient to cover the sums described in clauses (1) through (6) of such term as defined in Section 1 of the forms of Leases (the "Lease Form") marked as Exhibits A-2-1 and A-2-2 of the Note Purchase Agreement Stipulated Loss Value: At all times equal to or greater than the then outstanding principal amount of the related Equipment Notes plus, for any date other than a Lease Payment Date, accrued interest thereon EBO Price: Equal to or greater than the then-current Stipulated Loss Value Termination Value: At all times equal to or greater than the then outstanding principal amount of the related Equipment Notes plus, for any date other than a Lease Payment Date, accrued interest thereon All-risk hull insurance: not less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Section 11 of the Lease Form Minimum Liability Insurance Amount: as set forth in Schedule I of the Lease Form Past Due Rate: as set forth in Schedule 1 of the Lease Form Participation Agreement Loan Trustee, Subordination Agent, Liquidity Providers, Pass Through Trustees, Escrow Agents and Note Holders indemnified against Expenses and Taxes to the extent set forth in Section 9 of the form of the Participation Agreement (the "Leased Aircraft Participation Form") marked as Exhibit A-1 to the Note Purchase Agreement and Section 7 of the form of the Participation Agreement (the "Owned Aircraft Participation Form") marked as Exhibit C-1 of the Note Purchase Agreement. NYDOCS01/804539.17 SCHEDULE VII to Note Purchase Agreement AGGREGATE AMORTIZATION SCHEDULE
Class A Class A Class B Class B Secured Promissory Trust Secured Promissory Trust Notes Scheduled Expected Notes Scheduled Expected Payments Pool Payments Pool Dates of Principal Factor of Principal Factor - -------------------- --------------------------- -------------------- ---------------------------- ------------------- 20-Feb-03 $797,262.60 0.9928635 $249,290.61 0.9919922 20-May-03 813,861.61 0.9855784 255,958.51 0.9837702 20-Aug-03 144,563.13 0.9842844 336,071.96 0.9729748 20-Nov-03 0.00 0.9842844 492,633.99 0.9571503 20-Feb-04 3,419,206.66 0.9536781 6,125,149.72 0.7603962 20-Feb-05 3,419,397.00 0.9230702 7,237,877.00 0.5278988 20-Feb-06 3,419,397.00 0.8924622 8,389,428.19 0.2584109 20-Feb-07 5,735,134.56 0.8411255 7,305,552.92 0.0237396 20-Feb-08 13,528,939.00 0.7200243 739,037.10 0.0000000 20-Feb-09 15,540,047.35 0.5809212 0.00 0.0000000 20-Feb-10 16,742,757.16 0.4310523 0.00 0.0000000 20-May-10 55,528.86 0.4305552 0.00 0.0000000 20-Aug-10 56,684.98 0.4300478 0.00 0.0000000 20-Nov-10 57,865.16 0.4295298 0.00 0.0000000 20-Feb-11 17,094,882.41 0.2765089 0.00 0.0000000 20-May-11 414,985.36 0.2727943 0.00 0.0000000 20-Aug-11 423,625.36 0.2690023 0.00 0.0000000 20-Nov-11 432,445.23 0.2651314 0.00 0.0000000 20-Feb-12 17,477,261.25 0.1086877 0.00 0.0000000 20-May-12 805,325.33 0.1014790 0.00 0.0000000 20-Aug-12 822,092.20 0.0941202 0.00 0.0000000 20-Nov-12 839,208.17 0.0866083 0.00 0.0000000 20-Feb-13 9,675,529.62 0.0000000 0.00 0.0000000
ANNEX A to Note Purchase Agreement DEFINITIONS "Act" means 49 U.S.C. (ss.ss.) 40101-46507. "Affiliate" means, with respect to any person, any other person directly or indirectly controlling, controlled by or under common control with such person. For purposes of this definition, "control" means the power, directly or indirectly, to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or by contract or otherwise and "controlling," "controlled by" and "under common control with" have correlative meanings. "Aircraft" means, prior to the Delayed Funding Date, the Boeing 737-800 aircraft listed in Schedule I-A hereto and, on and after the Delayed Funding Date, the Boeing 737-800 aircraft listed in Schedule I-B hereto (in each case, together with any Substitute Aircraft substituted therefor in accordance with Section 1(g). "Aircraft Purchase Agreement" means either the ATA Aircraft Purchase Agreement or the GE Aircraft Purchase Agreement. "Assumed Amortization Schedule" means Schedule VII to the Note Purchase Agreement, as such schedule may be amended from time to time in accordance with the Note Purchase Agreement. "ATA Aircraft" means any Aircraft to be delivered under the ATA Aircraft Purchase Agreement. "ATA Aircraft Purchase Agreement" means the Purchase Agreement No. 2262 dated June 30, 2000, between the Company and the Manufacturer, as amended (including all exhibits thereto, together with all letter agreements entered into that by their terms constitute part of any such Purchase Agreement). "Average Life Date" means, for any Equipment Note, the date which follows the time of determination by a period equal to the Remaining Weighted Average Life of such Equipment Note. "Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C. (Section) 101 et seq. "Business Day" means any day, other than a Saturday, Sunday or other day on which commercial banks are authorized or required by law to close in New York, New York, Indianapolis, Indiana, Wilmington, Delaware or Salt Lake City, Utah. "Certificate" has the meaning set forth in the third recital to the Note Purchase Agreement. "Certificateholder" means the Person in whose name a Certificate is registered in the Register. "Class" means the class of Certificates issued by each Pass Through Trust. "Class A Certificates" has the meaning specified in the Intercreditor Agreement. "Class B Certificates" has the meaning specified in the Intercreditor Agreement. "Company" means American Trans Air, Inc., an Indiana corporation. "Corporate Trust Office" with respect to any Pass Through Trustee or any Loan Trustee, means the office of such trustee in the city at which at any particular time its corporate trust business shall be principally administered. "Cut-off Date" means the earlier of (a) the day after the Delivery Period Termination Date and (b) the date on which a Triggering Event occurs. "Delayed Deposit Agreements" means the Delayed Deposit Agreements set forth as Schedule III-B hereto, as amended, supplemented or otherwise modified from time to time in accordance with their respective terms and, from and after the transfer of the Deposits to a Replacement Depositary, shall refer to the corresponding Replacement Deposit Agreements between the Escrow Agent and the Replacement Depositary. "Delayed Funding Date" has the meaning set forth in the Delayed Funding Implementation Agreement. "Delayed Funding Implementation Agreement" has the meaning set forth in the fifth recital to the Note Purchase Agreement. "Delivery Date" means the Business Day on which an Aircraft is delivered to and accepted by the Company or the Owner Trustee, as the case may be. "Delivery Period Termination Date" means the earlier of (a) September 29, 2002 and (b) the date on which Equipment Notes with respect to all Aircraft (or Substitute Aircraft in lieu thereof) have been purchased by the Trusts in accordance with the Note Purchase Agreement. "Deposit" has the meaning set forth in the respective Deposit Agreement. "Deposit Agreements" means (i) prior to the Delayed Funding Date (as defined in the Delayed Funding Implementation Agreement), the Deposit Agreements set forth on Schedule III-A hereto, as amended, supplemented or otherwise modified from time to time in accordance with its respective terms, and, from and after the transfer of the Deposits to a Replacement Depositary, shall refer to the corresponding Replacement Deposit Agreements between the Escrow Agent and the Replacement Depositary, and (ii) on and after the Delayed Funding Date, the Deposit Agreements set forth on Schedule III-A hereto (to the extent of any payment to be made by the Depositary thereunder on or after the Delayed Funding Date) and the Delayed Deposit Agreements. "Deposit Make-Whole Premium" means, with respect to the distribution of unused Deposits to holders of any Class of Certificates, as of any date of determination, (i) in the case of the Final Withdrawal of such unused Deposits, subject to the proviso of this definition, an amount equal to the excess, if any, of (a) the present value of the excess of (A) the scheduled payment of principal and interest to maturity of the related series of Equipment Notes, assuming the maximum principal amount thereof (the "Maximum Amount") minus any Non-Premium Amount applicable to such Class of Certificates and such Class of Certificates' Pro Rata Share of the Par Redemption Amount were issued, on each remaining Regular Distribution Date for such Class under the Assumed Amortization Schedule (assuming for purposes of giving effect to the subtraction above, if such Class of Certificates' Pro Rata Share is greater than zero, that each scheduled payment of principal on such Schedule is reduced in an amount equal to such scheduled payment multiplied by a fraction, the numerator of which shall be the Pro Rata Share and the denominator of which shall be the Maximum Amount) over (B) the scheduled payment of principal and interest to maturity of the Equipment Notes actually acquired by the Pass Through Trustee for such Class on each such Regular Distribution Date, such present value computed by discounting such excess on a quarterly basis on each Regular Distribution Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield plus 3.105% in the case of the Class A Certificates and 6.402% in the case of the Class B Certificates over (b) the amount of such unused Deposits to be distributed to the holders of such Certificates minus any Non-Premium Amount applicable to such Class of Certificates and such Class of Certificates' Pro Rata Share of the Par Redemption Amount (the remainder of such subtraction, the "Net Deposits") plus accrued and unpaid interest on the Net Deposits to but excluding such date of determination from and including the preceding Regular Distribution Date (or if such date of determination precedes the first Regular Distribution Date, the Issuance Date), and (ii) in the case of a Prepayment Withdrawal of such unused Deposits, an amount equal to the excess, if any, of (a) the present value of the scheduled payment of principal and interest to maturity of the related series of Equipment Notes in the principal amount equal to the amount of such unused Deposits on each remaining Regular Distribution Date for such Class under the Assumed Amortization Schedule (such present value being computed by discounting such principal and interest payments on a quarterly basis on each Regular Distribution Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield) over (b) the amount of such unused Deposits to be distributed to the holders of such Certificates plus accrued and unpaid interest on such Deposits to but excluding such date of determination from and including the preceding Regular Distribution Date (or if such date of determination precedes the first Regular Distribution Date, the Issuance Date); provided that the amount of Deposit Make-Whole Premium payable with respect to a portion of any unused Deposits to be distributed as the Final Withdrawal shall be calculated in accordance with clause (ii) above as if the distribution of such portion of unused Deposits constituted a Prepayment Withdrawal, if the conditions specified in Section 2.02(b) of the Pass Through Trust Agreements are satisfied with respect to such portion of unused Deposits and the Company could have distributed such portion of unused Deposits as a Prepayment Withdrawal . "Depositary" IntesaBCI, S.p.A, New York Branch, and, from and after the transfer of the Deposits to a Replacement Depositary, shall mean such Replacement Depositary. "Equipment Notes" means and includes any equipment notes issued under any Indenture in the form specified in Section 2.01 thereof (as such form may be varied pursuant to the terms of such Indenture) and any Equipment Note issued under any Indenture in exchange for or replacement of any other Equipment Note. "Escrow Agent" has the meaning set forth in the first paragraph of the Note Purchase Agreement. "Escrow and Paying Agent Agreement" has the meaning set forth in the fifth recital to the Note Purchase Agreement. "FAA" means the Federal Aviation Administration of the United States of America. "Final Withdrawal" with respect to each Escrow and Paying Agent Agreement, has the meaning set forth in Section 1.02 thereof. "Financing Agreements" means, collectively, the Lease Financing Agreements and the Owner Financing Agreements. "Funding Date" has the meaning set forth in Section 1(b) (ii) of the Note Purchase Agreement. "GE Aircraft" means any Aircraft to be delivered under the GE Aircraft Purchase Agreement. "GE Aircraft Purchase Agreement" means the Purchase Agreement No. 1905 dated April 25, 1996 between GECC and the Manufacturer, as amended (including all exhibits thereto, together with all letter agreements entered into that by the terms constitute part of any such Purchase Agreement). "GECC" means General Electric Capital Corporation, a Delaware corporation. "Government Entity" means (a) any federal, state, provincial or similar government, and any body, board, department, commission, court, tribunal, authority, agency or other instrumentality of any such government or otherwise exercising any executive, legislative, judicial, administrative or regulatory functions of such government or (b) any other government entity having jurisdiction over any matter contemplated by the Operative Agreements or relating to the observance or performance of the obligations of any of the parties to the Operative Agreements. "Guarantor" has the meaning set forth in the first paragraph of the Note Purchase Agreement. "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. "Indentures" means, collectively, the Leased Aircraft Indentures and the Owned Aircraft Indentures. "Intercreditor Agreement" has the meaning set forth in the tenth recital to the Note Purchase Agreement. "Issuance Date" means March 28, 2002. "Law" means (a) any constitution, treaty, statute, law, decree, regulation, order, rule or directive of any Government Entity, and (b) any judicial or administrative interpretation or application of, or decision under, any of the foregoing. "Lease" means a Lease Agreement substantially in the form of Exhibit A-2-1 or A-2-2 to the Note Purchase Agreement. "Lease Financing Agreements" means, collectively, the applicable Purchase Agreement Assignment, the Leased Aircraft Participation Agreement, the applicable Lease, the Leased Aircraft Indenture, the Leased Aircraft Guarantee, the Equipment Notes issued thereunder and the Trust Agreement relating to the financing of a Leased Aircraft. "Leased Aircraft" means an Aircraft subject to a Lease. "Leased Aircraft Guarantee" means a guarantee substantially in the form of Exhibit A-6 of the Note Purchase Agreement. "Leased Aircraft Indenture" means a Trust Indenture and Mortgage substantially in the form of Exhibit A-3 to the Note Purchase Agreement. "Leased Aircraft Participation Agreement" means a Participation Agreement substantially in the form of Exhibit A-1 to the Note Purchase Agreement. "Liquidity Facility" has the meaning set forth in the ninth recital to the Note Purchase Agreement. "Liquidity Provider" has the meaning set forth in the fourth recital to the Note Purchase Agreement. "Loan Trustee" means (i) in the case of the Lease Financing Agreements, the "Mortgagee" as defined therein, and (ii) in the case of the Owner Financing Agreements, the "Mortgagee" as defined therein. "Mandatory Document Terms" means the terms set forth on Schedule V to the Note Purchase Agreement. "Mandatory Economic Terms" means the terms set forth on Schedule VI to the Note Purchase Agreement. "Manufacturer" means The Boeing Company, a Delaware corporation, solely in its capacity as manufacturer or seller of Aircraft. "Material Adverse Change" means, with respect to any Person, any event, condition or circumstance that materially and adversely affects such Person 's business or consolidated financial condition or its ability to observe or perform its obligations, liabilities and agreements under the Operative Agreements. "Non Premium Amount" means the amount equal to unused Deposits to be distributed due to the failure of an Aircraft to be delivered from the Manufacturer prior to the Delivery Period Termination Date due to any reason not occasioned by ATA's fault or negligence (it being understood that failure to arrange financing shall be considered the Company's "fault" for purposes hereof). Deposits comprising Non Premium Amounts will not be treated as unused Deposits in determining whether the unused Deposits exceed the Par Redemption Amount. "Note Purchase Agreement" means the Note Purchase Agreement to which this Annex A is attached. "Notice of Purchase Withdrawal" with respect to each Deposit Agreement, has the meaning set forth in Section 2.3 thereof. "Operative Agreements" means, collectively, the Pass Through Trust Agreements, the Escrow and Paying Agent Agreements, the Deposit Agreements, the Liquidity Facilities, the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Certificates and the Financing Agreements. "Owned Aircraft" means an Aircraft subject to an Owned Aircraft Indenture "Owned Aircraft Guarantee" means a guarantee substantially in the form of Exhibit C-3 to the Note Purchase Agreement. "Owned Aircraft Indenture" means a Trust Indenture and Mortgage substantially in the form of Exhibit C-2 to the Note Purchase Agreement. "Owned Aircraft Participation Agreement" means a Participation Agreement substantially in the form of Exhibit C-1 to the Note Purchase Agreement. "Owner Financing Agreements" means, collectively, the Owned Aircraft Participation Agreement, the Owned Aircraft Indenture, the Owned Aircraft Guarantee and the Equipment Notes issued thereunder. "Owner Participant" means, with respect to any Leased Aircraft, the Person named as the Owner Participant in the Participation Agreement with respect to such Leased Aircraft. "Owner Trust" means with respect to any Leased Aircraft, the trust created by the "Trust Agreement" referred to in the Leased Aircraft Indenture related thereto. "Owner Trustee" means with respect to any Leased Aircraft, the "Owner Trustee" party to the "Trust Agreement" referred to in the Leased Aircraft Indenture related thereto. "Par Redemption Amount" means $3 million. "Participation Agreements" means, collectively, the Leased Aircraft Participation Agreements and the Owned Aircraft Participation Agreements. "Pass Through Trust" has the meaning set forth in the third recital to the Note Purchase Agreement. "Pass Through Trust Agreements" has the meaning set forth in the third recital to the Note Purchase Agreement. "Pass Through Trustee" has the meaning set forth in the first paragraph of the Note Purchase Agreement. "Paying Agent" has the meaning set forth in the first paragraph of the Note Purchase Agreement. "Person" means any individual, firm, partnership, joint venture, trust, trustee, Government Entity, organization, association, corporation, limited liability company, government agency, committee, department, authority and other body, corporate or incorporate, whether having distinct legal status or not, or any member of any of the same. "Prepayment Withdrawal" with respect to each Escrow and Paying Agent Agreement, has the meaning set forth in Section 1.02 thereof. "Pro Rata Share" means, with respect to any Class of Certificates, the Par Redemption Amount multiplied by a fraction, the numerator of which shall be the amount of unused Deposits to be distributed to holders of such Class of Certificates in connection with the Final Withdrawal and the denominator of which shall be the amount of unused Deposits to be distributed to holders of all Classes of Certificates in connection with the Final Withdrawal. "Purchase Agreement Assignment" means either (i) the Purchase Agreement Assignment in the form of Exhibit A-4-1 to the Note Purchase Agreement, in the case of an ATA Aircraft or (ii) the Purchase Agreement Assignment in the form of Exhibit A-4-2 to the Note Purchase Agreement, in the case of a GE Aircraft. "Purchasers" means collectively, Nyala Funding LLC, as purchaser under the Certificates Purchase Agreement dated as of March 26, 2002 with the Guarantor and the Company relating to the American Trans Air 2002-1A Pass Through Trust, and PK AirFinance US, Inc., as purchaser under the Certificates Purchase Agreement dated as of March 26, 2002 with the Guarantor and the Company relating to the American Trans Air 2002-1B Pass Through Trust. "Qualified Owner Participant" means any bank, trust company, insurance company, financial institution, limited liability company or corporation (other than, without the Company's consent, a commercial air carrier, a commercial aircraft operator, a freight forwarder or Affiliate of any of the foregoing), in each case with a combined capital and surplus or net worth of at least $50,000,000. "Rating Agency" means, at any time, a nationally recognized rating agency which shall have been requested to rate the Certificates and which shall then be rating the Certificates. The initial Rating Agency will be Moody's Investors Service, Inc. "Rating Agency Confirmation" means, with respect to any Financing Agreement that has been modified in any material respect from the forms thereof attached to the Note Purchase Agreement or with respect to Substitute Aircraft, a written confirmation from the Rating Agency that the use of such Financing Agreement with such modifications or the substituting of such Substitute Aircraft for an Aircraft, whichever of the foregoing shall in a particular case require Rating Agency Confirmation, would not result in (i) a reduction of the rating for any Class of Certificates below the then current rating for such Class of Certificates or (ii) a withdrawal or suspension of the rating of any Class of Certificates. "Register" means the register maintained pursuant to Sections 3.04 and 7.12 of each Pass Through Trust Agreement. "Registration Rights Agreement" means the Registration Rights Agreement dated as of March 26, 2002, among the Investors (as defined therein), the Pass Through Trustee, the Guarantor and the Company, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Regular Distribution Dates" shall mean February 20, May 20, August 20 and November 20 of each year, commencing May 20, 2002. "Remaining Weighted Average Life" means, on a given date with respect to any Equipment Note, the number of days equal to the quotient obtained by dividing (a) the sum of each of the products obtained by multiplying (i) the amount of each then remaining scheduled payment of principal of such Equipment Note by (ii) the number of days from and including such determination date to but excluding the date on which such payment of principal is scheduled to be made, by (b) the then outstanding principal amount of such Equipment Note. "Replacement Deposit Agreement" means a deposit agreement with a Replacement Depositary in substantially the form of the Deposit Agreement or Delayed Deposit Agreement being replaced or in such other form as shall permit the Rating Agency to issue its written confirmation required by Section 4(a)(vii)(B)(I) of the Note Purchase Agreement. "Replacement Depositary" has the meaning set forth in Section 4(a)(vii) of the Note Purchase Agreement. "Scheduled Delivery Date" has the meaning set forth in Section 1(b) hereof. "Section 1110" means 11 U.S.C. (ss.) 1110 of the Bankruptcy Code or any successor or analogous Section of the federal bankruptcy Law in effect from time to time. "Series A Equipment Notes" means Equipment Notes issued under an Indenture and designated as "Series A" thereunder. "Series B Equipment Notes" means Equipment Notes issued under an Indenture and designated as "Series B" thereunder. "Series C Equipment Notes" means Equipment Notes issued under an Owned Aircraft Indenture or Leased Aircraft Indenture and designated as "Series C" thereunder, if any. "Subordination Agent" has the meaning set forth in the first paragraph of the Note Purchase Agreement. "Substitute Aircraft" has the meaning set forth in Section 1(g) of the Note Purchase Agreement. "Taxes" means all license, recording, documentary, registration and other similar fees and all taxes, levies, imposts, duties, charges, assessments or withholdings of any nature whatsoever imposed by any Taxing Authority, together with any penalties, additions to tax, fines or interest thereon or additions thereto. "Taxing Authority" means any federal, state or local government or other taxing authority in the United States of America, any foreign government or any political subdivision or taxing authority thereof, any international taxing authority or any territory or possession of the United States of America or any taxing authority thereof. "Treasury Yield" means, as of any date of determination, with respect to any Equipment Note (utilizing the Assumed Amortization Schedule applicable thereto), the interest rate (expressed as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date (of such Equipment Note) and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in the public securities markets, (A) one maturing as close as possible to, but earlier than, the Average Life Date (of such Equipment Note) and (B) the other maturing as close as possible to, but later than, the Average Life Date (of such Equipment Note), in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date (of such Equipment Note) is reported on the most recent H.15(519), such weekly average yield to maturity as published in such H.15(519). "Triggering Event" has the meaning assigned to such term in the Intercreditor Agreement. "Trust Agreement" means a Trust Agreement substantially in the form of Exhibit A-5 to the Note Purchase Agreement. "WTC" has the meaning set forth in the first paragraph of the Note Purchase Agreement. EXHIBIT A-1 to Note Purchase Agreement FORM OF LEASED AIRCRAFT PARTICIPATION AGREEMENT EXHIBIT A-2-1 to Note Purchase Agreement FORM OF 467 LEASE EXHIBIT A-2-2 to Note Purchase Agreement FORM OF NON-467 LEASE EXHIBIT A-3 to Note Purchase Agreement FORM OF LEASED AIRCRAFT INDENTURE EXHIBIT A-4-1 to Note Purchase Agreement FORM OF PURCHASE AGREEMENT ASSIGNMENT (ATA Aircraft) EXHIBIT A-4-2 to Note Purchase Agreement FORM OF PURCHASE AGREEMENT ASSIGNMENT (GE Aircraft) EXHIBIT A-5 to Note Purchase Agreement FORM OF LEASED AIRCRAFT TRUST AGREEMENT EXHIBIT A-6 to Note Purchase Agreement FORM OF LEASED AIRCRAFT GUARANTEE EXHIBIT B to Note Purchase Agreement FORM OF DELIVERY NOTICE Dated as of __________ __, ____ To each of the addressees listed in Schedule A hereto Re: Delivery Notice in accordance with Note Purchase Agreement referred to below Ladies and Gentlemen: Reference is made to the Note Purchase Agreement among American Trans Air, Inc. (the "Company"), Amtran, Inc., Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements (as defined therein) (the "Pass Through Trustee"), Wilmington Trust Company, as Subordination Agent (the "Subordination Agent"), Wells Fargo Bank Northwest, National Association, as Escrow Agent (the "Escrow Agent") and Wilmington Trust Company, as Paying Agent (the "Paying Agent") (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Note Purchase Agreement"). Unless otherwise defined herein, capitalized terms used herein shall have the meanings set forth in the Note Purchase Agreement or, to the extent not defined therein, the Intercreditor Agreement. Pursuant to Section 1(b) of the Note Purchase Agreement, the undersigned hereby notifies you, in respect of the Boeing 737-800 aircraft with manufacturer's serial number _______ (the "Aircraft"), of the following: (1) The Aircraft is [an ATA Aircraft] [a GE Aircraft]; the Company has elected to treat the Aircraft as a [Leased](1)/[Owned](2) Aircraft; [and the Lease is to be in the form of Exhibit [A-2-1] [A-2-2] to the Note Purchase Agreement, subject to changes permitted under Section 1(c)]; (2) The [Scheduled Delivery Date] [Funding Date] of the Aircraft is __________ __, ______; and - --------------------- (1) To be inserted in the case of a Leased Aircraft. (2) To be inserted in the case of an Owned Aircraft. (3) The aggregate amount of each series of Equipment Notes to be issued, and purchased by the respective Pass Through Trustees, on the [Scheduled Delivery Date],[Funding Date] in connection with the financing of such Aircraft is as follows: (a) the Class A Trustee shall purchase Series A Equipment Notes in the amount of __________. (b) the Class B Trustee shall purchase Series B Equipment Notes in the amount of $__________. The Company hereby instructs the Class A Trustee to (i) execute a Withdrawal Certificate in the form of Annex A hereto dated _______________, [a date which is no later than one Business Day prior to the [Scheduled Delivery Date][Funding Date]] and attach thereto a Notice of Purchase Withdrawal dated such date completed as set forth on Exhibit A hereto and (ii) deliver such Withdrawal Certificate and Notice of Purchase Withdrawal to the applicable Escrow Agent. The Company hereby instructs the Class B Trustee to (i) execute a Withdrawal Certificate in the form of Annex A hereto dated ______________ [a date which is no later than one Business Day prior to the [Scheduled Delivery Date] [Funding Date]] and attach thereto a Notice of Purchase Withdrawal dated such date completed as set forth on Exhibit B hereto and (ii) deliver such Withdrawal Certificate and Notice of Purchase Withdrawal to the applicable Escrow Agent. The Company hereby instructs each Pass Through Trustee to (i) purchase Equipment Notes of a series and in an amount set forth opposite such Pass Through Trustee in clause (3) above with a portion of the proceeds of the withdrawals of Deposits referred to in the applicable Notice of Purchase Withdrawal referred to above and (ii) re-deposit with the Depositary the excess, if any, of the amount so withdrawn over the purchase price of such Equipment Notes. The Company hereby instructs each Pass Through Trustee to (a) enter into the Participation Agreement dated as of _______________ among the Company, as [Lessee](3)/[Owner](4), the Subordination Agent, the Pass Through Trustee, Wilmington Trust Company, as Mortgagee [and Loan Participant, Wells Fargo Bank Northwest, National Association, as Owner Trustee and _________, as Owner Participant](5), (b) perform its obligations thereunder and (c) deliver such certificates, documents and legal opinions relating to such Pass Through Trustee as required thereby. - ---------------------- (3) To be inserted in the case of a Leased Aircraft. (4) To be inserted in the case of an Owned Aircraft. (5) To be inserted in the case of a Leased Aircraft. [The Company hereby certifies that the Owner Participant with respect to the Aircraft is (a) not an Affiliate of the Company and (b) based on representation(s) of the Owner Participant, a [Qualified Owner Participant/person whose obligations under the Owner Participant Agreements (as defined in the Participation Agreement) are guaranteed by a Qualified Owner Participant].](6) Yours faithfully, AMERICAN TRANS AIR, INC. By: -------------------------------- Name: Title: - ------------------ (6) To be inserted in the case of a Leased Aircraft. SCHEDULE A to Exhibit B to Note Purchase Agreement Wilmington Trust Company, as Pass Through Trustee, Subordination Agent and Paying Agent Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Facsimile: (302) 636-4140 Wells Fargo Bank Northwest, National Association, as Escrow Agent 79 South Main Street, 3rd Floor Salt Lake City, Utah 84111 Attention: Corporate Trust Department Facsimile: (801) 246-5053 Moody's Investors Service, Inc. 99 Church Street New York, New York 10007 Attention: Bob Jankowitz Facsimile: (212) 553-4600 ANNEX A to Form of Delivery Notice WITHDRAWAL CERTIFICATE (Class __)* Wells Fargo Bank Northwest, National Association, as Escrow Agent Dear Sirs: Reference is made to the Escrow and Paying Agent Agreement, dated as of March 28, 2002 (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Agreement"). We hereby certify to you that the conditions to the obligations of the undersigned to execute a Participation Agreement pursuant to the Note Purchase Agreement have been satisfied. Pursuant to Section 1.02(c) of the Agreement, please execute the attached Notice of Withdrawal and immediately transmit by facsimile to the Depositary, at (___) ________. Very truly yours, WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Pass Through Trustee By: ----------------------------------- Name: Title: Dated: _________, ____ - ------------------------- * Insert letter of appropriate class of Certificates. EXHIBIT A to Form of Delivery Notice NOTICE OF PURCHASE WITHDRAWAL - ------------------ [Address] Attention: Telecopier: Ladies and Gentlemen: Reference is made to the Deposit Agreement relating to the Class A Certificates. In accordance with Section 2.3(a) of such Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of the Deposit, $_______, Account No. ____________. The undersigned hereby directs the Depositary to pay the proceeds of the Deposit to [________________, Account No. _____, Reference: _________] on _________ __, ____, upon the telephonic request of a representative of the Pass Through Trustee. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Note Purchase Agreement referred to in the Delivery Notice to which this Notice is attached. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------------ Name: Title: Dated: __________, ____ EXHIBIT B to Form of Delivery Notice NOTICE OF PURCHASE WITHDRAWAL - ------------------ [Address] Attention: Telecopier: Ladies and Gentlemen: Reference is made to the Deposit Agreement relating to the Class B Certificates. In accordance with Section 2.3(a) of such Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of the Deposit, $_______, Account No. ____________. The undersigned hereby directs the Depositary to pay the proceeds of the Deposit to [________________, Account No. _____, Reference: _________] on _________ __, ____, upon the telephonic request of a representative of the Pass Through Trustee. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Note Purchase Agreement referred to in the Delivery Notice to which this Notice is attached. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------------- Name: Title: Dated: _________, ____ EXHIBIT C-1 to Note Purchase Agreement FORM OF OWNED AIRCRAFT PARTICIPATION AGREEMENT EXHIBIT C-2 to Note Purchase Agreement FORM OF OWNED AIRCRAFT INDENTURE EXHIBIT C-3 to Note Purchase Agreement FORM OF OWNED AIRCRAFT GUARANTEE EXHIBIT D to Note Purchase Agreement ADDITIONAL SUBORDINATION PROVISION FOR SERIES C EQUIPMENT NOTES Subordination. (a) As between the Note Holders, this Trust Indenture shall be a subordination agreement for purposes of Section 510 of the United States Bankruptcy Code, as amended, from time to time. (b) If any Note Holder receives any payment in respect of any obligations owing hereunder, which is subsequently invalidated, declared preferential, set aside and/or required to be repaid to a trustee, receiver or other party, then, to the extent of such payment, such obligations intended to be satisfied shall be revived and continue in full force and effect as if such payment had not been received. (c) Each of the Note Holders may take any of the following actions without impairing its rights under this Trust Indenture: (i) obtain a Lien on any property to secure any amounts owing to it hereunder, (ii) obtain the primary or secondary obligation of any other obligor with respect to any amounts owing to it hereunder, (iii) renew, extend, alter or exchange any amounts owing to it hereunder, or release or compromise any obligation of any obligor with respect thereto, (iv) refrain from exercising any right or remedy, or delay in exercising such right or remedy, which it may have, or (v) take any other action which might discharge a subordinated party or a surety under applicable law; provided, however, that the taking of any such actions by any of the Note Holders shall not prejudice the rights or adversely affect the obligations of any other party under this Trust Indenture. EX-4.15(A) 16 file015.txt NOTE PURCHASE AGREEMENT - AMENDMENT NO. 1 EXECUTION VERSION NOTE PURCHASE AGREEMENT AMENDMENT NO. 1 [ATA EETC 2002-1] DATED AS OF OCTOBER 15, 2002 AMONG AMERICAN TRANS AIR, INC., ATA HOLDINGS CORP. (F/K/A AMTRAN, INC.) AS GUARANTOR, WILMINGTON TRUST COMPANY, AS PASS THROUGH TRUSTEE UNDER EACH OF THE PASS THROUGH TRUST AGREEMENTS, WILMINGTON TRUST COMPANY, AS SUBORDINATION AGENT, WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, AS ESCROW AGENT AND WILMINGTON TRUST COMPANY, AS PAYING AGENT NOTE PURCHASE AGREEMENT AMENDMENT NO. 1 (ATA EETC 2002-1) RECITALS: A. Each of American Trans Air, Inc., an Indiana corporation (the "Company"), ATA Holdings Corp., formerly known as Amtran, Inc., an Indiana corporation (the "Guarantor"), Wilmington Trust Company, a Delaware banking corporation ("WTC"), not in its individual capacity except as otherwise expressly provided in the Note Purchase Agreement (as such term is defined below), but solely as trustee (in such capacity together with its successors in such capacity, the "Pass Through Trustee") under each of the two separate Pass Through Trust Agreements, WTC, not in its individual capacity except as otherwise expressly provided in the Note Purchase Agreement, but solely as subordination agent and trustee (in such capacity together with its successors in such capacity, the "Subordination Agent") under the Intercreditor Agreement, Wells Fargo Bank Northwest, National Association, a national banking association, as escrow agent (in such capacity together with its successors in such capacity, the "Escrow Agent"), under each of the Escrow and Paying Agent Agreements (as defined below), and WTC, not in its individual capacity except as otherwise expressly provided herein, but solely as Paying Agent (in such capacity together with its successors in such capacity, the "Paying Agent") under each of the Escrow and Paying Agent Agreements, entered into a Note Purchase Agreement dated as of March 28, 2002 (the "Note Purchase Agreement"). All capitalized terms in this Amendment that are not defined herein will have the same meaning as provided in the Note Purchase Agreement. All references to "Sections" or "Exhibits" refer to Sections and Exhibits of the Note Purchase Agreement, unless otherwise noted herein. The Company, Guarantor, WTC, Pass Through Trustee, Subordination Agent, Escrow Agent, and Paying Agent are collectively referred to in this Amendment as the "Parties." B. The Parties have noted certain errata in the Note Purchase Agreement. C. The Parties wish to correct such errata, and thus amend and revise the Note Purchase Agreement as provided below. Therefore, for good and valuable consideration, the Parties hereby agree, effective as of the 15th day of October, 2002, to amend and revise the Note Purchase Agreement as follows: 1. Except as specifically modified in this Amendment, the terms of the Note Purchase Agreement will remain in full force and effect. In the event that the terms of this Amendment conflict in any way with the terms of the Note Purchase Agreement, the terms of this Amendment will control. Note Purchase Agreement Amendment No. 1 - Page 1 2. Schedule VI to the Note Purchase Agreement (entitled Mandatory Economic Terms) will be deleted in its entirety, and replaced with the attached Revised Schedule VI to the Note Purchase Agreement. To clarify, the intended effects of such replacement are: a. to revise the first paragraph of that portion of Schedule VI captioned "Maximum Principal Amount" to delete the language indicated by strike-out text below, to replace such deleted text with the language indicated by double-underlined text below, and to retain the language indicated by italicized text below: The aggregate original principal amount of all Equipment Notes for an Aircraft shall not exceed the maximum principal amount of the Equipment Notes indicated for such Aircraft as set forth in the Private Placement Memorandum under "Summary -- Secured Promissory Notes and the Aircraft" under the column "Maximum Principal Amount." The aggregate original principal amount of all Equipment Notes of any series shall not exceed the aggregate face amount of all Certificates of the related class. b. to revise that portion of Schedule VI captioned "Average Life (in years)" to delete the language indicated by strike-out text below, to replace such deleted text with the language indicated by double-underlined text below, and to retain the language indicated by italicized text below: Average life (in years) As of the Delivery Period Termination Date (or if earlier, the date of the occurrence of a Triggering Event), the average life of the Class A Certificates and the Class B Certificates (x) with respect to the Class A Certificates shall be between, (i) prior to the funding contemplated by the Delayed Funding Implementation Agreement 7.49 to and 7.69 years from the Issuance Date , and (ii) subsequent to the funding contemplated by the Delayed Funding Implementation Agreement 7.14 and 7.34 years from the Issuance Date, subject to final reoptimization, and (y) with respect to the Class B Certificates shall not exceed 4 years from the Issuance Date (computed without regard to the acceleration of any Equipment Notes and after giving effect to any special distribution on the Certificates thereafter required in respect of unused Deposits). Note Purchase Agreement Amendment No. 1 - Page 2 c. to delete that portion of Schedule VI captioned "Amortization Schedule", including the text below such caption, as indicated by strike-out text below: d. to revise that portion of Schedule VI captioned "Final Maturity Date" to delete the language indicated by strike-out text below, to replace such deleted text with the language indicated by double-underlined text below, and to retain the language indicated by italicized text below: Final Maturity Dates Equipment Notes Series A: not to extend beyond February 20, 2013. Series B: not to extend beyond February 20, 2008. Certificates Class A: August 20, 2014 Class B: August 20, 2009 e. to revise the first paragraph of that portion of Schedule VI captioned "Lease Payment Dates" to add the language indicated by double-underlined text below, while retaining the language indicated by italicized text below Lease Payment Dates: February 20, May 20, August 20 and November 20, and may include additional Lease Payment Dates (i) January 20, 2003, March 20, 2003, April 20, 2003, and June 20, 2003, and (ii) the twentieth anniversary of the Delivery Date under the applicable Lease. f. no other change to Schedule VI is intended to be effected by this Amendment. [Remainder of Page Intentionally Left Blank] Note Purchase Agreement Amendment No. 1 - Page 3 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. AMERICAN TRANS AIR, INC. By ---------------------------------------------------- Name: Title: Address: 7337 West Washington Street Indianapolis, Indiana 46231 Attention: Treasurer Facsimile: (317) 240-7091 ATA HOLDINGS CORP. (f/k/a AMTRAN, INC.), as Guarantor By ---------------------------------------------------- Name: Title: Address: 7337 West Washington Street Indianapolis, Indiana 46231 Attention: Treasurer Facsimile: (317) 240-7091 Note Purchase Agreement Amendment No. 1 - Signature Page 1 WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise provided herein, but solely as Pass Through Trustee By ---------------------------------------------------- Name: Title: Address: Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Facsimile: (302) 636-6140 WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise provided herein, but solely as Subordination Agent By ---------------------------------------------------- Name: Title: Address: Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Facsimile: (302) 636-6140 Note Purchase Agreement Amendment No. 1 - Signature Page 2 WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By ---------------------------------------------------- Name: Title: Address: 79 South Main Street 3rd Floor Salt Lake City, Utah 84111 Attention: Corporate Trust Department Facsimile: (801) 246-5053 WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise provided herein, but solely as Paying Agent By ---------------------------------------------------- Name: Title: Address: Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Facsimile: (302) 636-6140 Note Purchase Agreement Amendment No. 1 - Signature Page 3 Revised SCHEDULE VI to Note Purchase Agreement MANDATORY ECONOMIC TERMS Equipment Notes Obligor: American Trans Air, Inc., or an Owner Trust Maximum Principal Amount: The aggregate original principal amount of all Equipment Notes for an Aircraft shall not exceed the maximum principal amount of the Equipment Notes indicated for such Aircraft as set forth in the Private Placement Memorandum under "Summary -- Secured Promissory Notes and the Aircraft" under the column "Maximum Principal Amount." The aggregate original principal amount of all Equipment Notes of any series shall not exceed the aggregate face amount of all Certificates of the related class. Initial loan to aircraft value (with the value of any Aircraft equal to the value for such Aircraft set forth in the Private Placement Memorandum in "Summary - The Offering - Secured Promissory Notes and the Aircraft" under the column "Appraised Base Value"): Series A: not in excess of 51% Series B: not in excess of 66% The loan to aircraft value for each series of Equipment Notes issued in respect of each Aircraft (computed (i) after aggregating the principal amount of all series of Equipment Notes that rank senior to the series of Equipment Notes for which loan to aircraft value is being calculated and (ii) as of the date of the issuance thereof on the basis of the Assumed Appraised Value of such Aircraft and the Depreciation Assumption (as defined in the Private Placement Memorandum in the Glossary)) must not exceed as of any Regular Distribution Date thereafter (assuming no default in the payment of the Equipment Notes) the following amounts: Series A: not in excess of 51% Series B: not in excess of 66% Initial average life (in years) Series A: not extend beyond 8 years from the Issuance Date Series B: not extend beyond 5 years from the Issuance Date Average life (in years) Note Purchase Agreement Amendment No. 1 (Revised Schedule VI to Note Purch. Agrmt.) - Page 1 As of the Delivery Period Termination Date (or if earlier, the date of the occurrence of a Triggering Event), the average life of the Class A Certificates and the Class B Certificates shall be (x) with respect to the Class A Certificates between (i) prior to the funding contemplated by the Delayed Funding Implementation Agreement 7.49 and 7.69 years from the Issuance Date, and (ii) subsequent to the funding contemplated by the Delayed Funding Agreement Letter 7.14 and 7.34 years from the Issuance Date, subject to final reoptimization, and (y) with respect to the Class B Certificates shall not exceed 4 years from the Issuance Date (computed without regard to the acceleration of any Equipment Notes and after giving effect to any special distribution on the Certificates thereafter required in respect of unused Deposits). Final Maturity Dates Equipment Notes: Series A: not to extend beyond February 20, 2013 Series B: not to extend beyond February 20, 2008 Certificates: Class A: August 20, 2014 Class B: August 20, 2009 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) Series A: 8.328% Series B: 10.699% Payment Dates: February 20, May 20, August 20 and November 20 Make-Whole Premiums: as provided in Section 1.01 of the forms of Trust Indenture marked as Exhibit A-3 and C-2 of the Note Purchase Agreement (the "Trust Indenture Form") Redemption and Purchase: as provided in Article II of the Trust Indenture Form Lease Term: The Base Lease Term shall expire by its terms on or after final maturity date of the related Series A Equipment Notes Note Purchase Agreement Amendment No. 1 (Revised Schedule VI to Note Purch. Agrmt.) - Page 2 Lease Payment Dates: February 20, May 20, August 20 and November 20, and may include additional Lease Payment Dates (i) January 20, 2003, March 20, 2003, April 20, 2003, and June 20, 2003, and (ii) the twentieth anniversary of the Delivery Date under the applicable Lease. Minimum Rent: Basic Rent due and payable on each Payment Date shall be at least sufficient to pay in full, as of such Payment Date (assuming timely payment of the related Equipment Notes prior to such Date), the aggregate principal amount of scheduled installments due on the related Equipment Notes outstanding on such Payment Date together with accrued and unpaid interest thereon. Supplemental Rent: Sufficient to cover the sums described in clauses (1) through (6) of such term as defined in Section 1 of the forms of Leases (the "Lease Form") marked as Exhibits A-2-1 and A-2-2 of the Note Purchase Agreement. Stipulated Loss Value: At all times equal to or greater than the then outstanding principal amount of the related Equipment Notes plus, for any date other than a Lease Payment Date, accrued interest thereon EBO Price: Equal to or greater than the then-current Stipulated Loss Value Termination Value: At all times equal to or greater than the then outstanding principal amount of the related Equipment Notes plus, for any date other than a Lease Payment Date, accrued interest thereon All-risk hull insurance: not less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Section 11 of the Lease Form Minimum Liability Insurance Amount: as set forth in Schedule I of the Lease Form Past Due Rate: as set forth in Schedule I of the Lease Form Note Purchase Agreement Amendment No. 1 (Revised Schedule VI to Note Purch. Agrmt.) - Page 3 Participation Agreement Loan Trustee, Subordination Agent, Liquidity Providers, Pass Through Trustees, Escrow Agents and Note Holders indemnified against Expenses and Taxes to the extent set forth in Section 9 of the form of the Participation Agreement (the "Leased Aircraft Participation Form") marked as Exhibit A-1 to the Note Purchase Agreement and Section 7 of the form of the Participation Agreement (the "Owned Aircraft Participation Form") marked as Exhibit C-1 of the Note Purchase Agreement. Note Purchase Agreement Amendment No. 1 (Revised Schedule VI to Note Purch. Agrmt.) - Page 4 EX-4.16 17 file016.txt INDEMNITY AGREEMENT VPKK DRAFT 3/27/02 ================================================================================ INDEMNITY AGREEMENT DATED AS OF MARCH 28, 2002 BETWEEN INTESABCI S.P.A., NEW YORK BRANCH as Depositary AMERICAN TRANS AIR, INC. AND AMTRAN, INC. ================================================================================ TABLE OF CONTENTS
PAGE ---- SECTION 1. INDEMNITY PAYMENTS.........................................................................1 1.01 Indemnity Payments.........................................................................1 1.02 Overdue Amounts............................................................................2 1.03 Reduction of Notional Amounts..............................................................2 1.04 Subsequent Index Period....................................................................3 1.05 Replacement Drawing........................................................................3 1.06 Prepayment Drawing.........................................................................3 SECTION 2. CASH COLLATERAL............................................................................3 SECTION 3. COLLATERAL ACCOUNT AND INVESTMENTS.........................................................4 3.01 Collateral Account.........................................................................4 3.02 Investment of Balance in Collateral Account................................................4 3.03 Pledge.....................................................................................4 3.04 Application and Termination................................................................4 3.05 No Duplication.............................................................................4 SECTION 4. REPRESENTATIONS AND WARRANTIES.............................................................5 SECTION 5. PAYMENTS, NO SETOFF........................................................................6 SECTION 6. FEES.......................................................................................6 SECTION 7. INCREASED COSTS............................................................................6 SECTION 8. CAPITAL ADEQUACY...........................................................................7 SECTION 9. GUARANTEE..................................................................................7 SECTION 10. BREAKAGE...................................................................................9 SECTION 11. EXPENSES; INDEMNITY........................................................................9 SECTION 12. REMEDIES..................................................................................10 SECTION 13. AMENDMENT, ETC............................................................................10 SECTION 14. NOTICES...................................................................................10 SECTION 15. ENTIRE AGREEMENT..........................................................................10 SECTION 16. GOVERNING LAW.............................................................................11 SECTION 17. WAIVER OF JURY TRIAL RIGHT................................................................11 SECTION 18. COUNTERPARTS..............................................................................11
i TABLE OF CONTENTS (continued)
PAGE ---- SECTION 19. NO THIRD-PARTY BENEFICIARIES..............................................................11
ii INDEMNITY AGREEMENT INDEMNITY AGREEMENT, dated as of March 28, 2002 (this "Agreement") between INTESABCI S.P.A., New York Branch ("IntesaBci," and in its capacity as depositary bank under the Deposit Agreements referred to below, the "Depositary"), AMERICAN TRANS AIR, INC. ("ATA") and AMTRAN, INC. (the "Guarantor" or "Amtran"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, in connection with the financing of up to four aircraft to be operated by ATA, Wells Fargo Bank Northwest, N.A., as escrow agent (the "Escrow Agent"), and the Depositary are entering into (a) the Deposit Agreement (Class A), dated as of March 28, 2002 (the "Class A Deposit Agreement"), and (b) the Deposit Agreement (Class B) dated as of March 28, 2002 (the "Class B Deposit Agreement") (the Class A Deposit Agreement and the Class B Deposit Agreement, collectively, the "Deposit Agreements"), pursuant to which, among other things, (i) the Depositary will establish accounts into and from which the Escrow Agent shall make deposits, requests, withdrawals and re-deposits and (ii) the Depositary will pay the Escrow Agent a fixed rate of interest on each Deposit; WHEREAS, on the date hereof, the Escrow Agent shall deposit (i) $__________ with the Depositary under the Class A Deposit Agreement and (ii) $_________ with the Depositary under the Class B Deposit Agreement; WHEREAS, on the date hereof, ATA shall deposit $______________ (the "Specified Amount") with IntesaBci as cash collateral securing the Secured Obligations; and WHEREAS, it is a condition precedent to the obligation of the Depositary to enter into the Deposit Agreements that ATA and the Guarantor enter into this Indemnity Agreement. NOW, THEREFORE, in consideration of the Depositary entering into the Deposit Agreements and the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows (capitalized terms not defined herein shall have the meanings set forth in Annex A hereto or if not therein defined, as defined in the Deposit Agreements): SECTION 1. Indemnity Payments. 1.01 Indemnity Payments. ATA agrees to pay (each such payment, an "Indemnity Payment"), to IntesaBci no later than 11:00 a.m. (New York City time) on each February 20, May 20, August 20 and November 20 on which interest is due under Section 2.2 of each Deposit Agreement and on the Final Withdrawal Date (each such date, an "Indemnity Payment Date"): (a) in the case of each Interest Payment Date occurring prior to the Final Withdrawal Date, an amount equal to the excess, if any, of (i) the aggregate amount of interest accrued on the Deposits in accordance with each Deposit Agreement during the Relevant Period for, and due and payable on, such Interest Payment Date over (ii) the sum of the Notional Earnings for each Notional Amount during such Relevant Period; (b) in the case of a Final Withdrawal Date which is not an Interest Payment Date, an amount equal to the excess, if any, of (i) the aggregate amount of interest accrued on the Deposits in accordance with each Deposit Agreement during the Relevant Period for, and due and payable on, the Final Withdrawal Date over (ii) the sum of the Notional Earnings on the amount of each Notional Amount outstanding on the Final Withdrawal Date (prior to giving effect to the Final Withdrawals under and as defined in each Deposit Agreement) during such Relevant Period; and (c) in the case of each Interest Payment Date occurring after the Final Withdrawal Date or a Final Withdrawal Date occurring on an Interest Payment Date, an amount equal to the excess, if any, of (i) the amount of interest accrued on the Deposits in accordance with each Deposit Agreement during the Relevant Period for, and due and payable on, such Interest Payment Date over (ii) the sum of (x) the sum of the Notional Earnings for each Notional Amount during such Relevant Period minus (y) unless the Final Withdrawal Date is an Interest Payment Date, the amount, if any, described in clause (b)(ii) above. Not later than three (3) Business Days prior to each Indemnity Payment Date, IntesaBci shall provide to ATA an estimate of the Indemnity Payment payable on such Indemnity Payment Date in accordance with the immediately preceding sentence. Not later than one Business Day prior to each Indemnity Payment Date, IntesaBci shall provide ATA with an invoice specifying the Indemnity Payment payable on such Indemnity Payment Date, which invoice shall be prima facie evidence of ATA's obligation to pay such Indemnity Payment. For avoidance of doubt, ATA shall not be obligated to pay any Indemnity Payment to the extent IntesaBci, as Depositary, has not paid interest on the Deposits or any other amount payable by it in accordance with the terms of the Deposit Agreements. 1.02 Overdue Amounts. (a) ATA agrees to pay to IntesaBci interest on any amount that shall not be paid by ATA when due under this Agreement (an "Overdue Amount") at the Base Rate plus 2%. Such interest shall be payable on demand and accrue on the portion of such overdue amount remaining unpaid from time to time, from (and, including) the date that such amount is not paid when due to (but excluding) the date when such overdue amount is paid in full, and shall be payable upon demand from time to time by IntesaBci. (b) Without limiting the generality of the foregoing, overdue interest accrued under Section 1.02(a) because amounts are on deposit in the Collateral Account which IntesaBci would be entitled to withdraw and apply in accordance with Section 3.03 hereof, but which IntesaBci cannot so withdraw and apply due to the operation of the "automatic stay" provisions of the United States Bankruptcy Code, shall be deemed Overdue Amounts from and including the date as of which such provisions are in effect to but excluding the date on which IntesaBci is permitted to apply and withdraw them. 1.03 Reduction of Notional Amounts. If one or more Deposits are withdrawn on any day in accordance with the Deposit Agreements, the Notional Amounts shall be deemed to be reduced by an amount equal to the excess of (i) the aggregate amount of the Deposits withdrawn on such day over (ii) the aggregate amount redeposited with the Depositary on such day under each Deposit Agreement; provided that the Notional Amounts shall be deemed to be increased by the aggregate amount redeposited with the Depositary under such Deposit Agreement. Such 2 reduction shall be applied to the Notional Amounts in the same order that the Index Period for each Notional Amount terminates (i.e., the reduction shall be applied first to the Notional Amount which shall then have an Index Period ending on or closest to the applicable day of withdrawal); provided that if the last day of the Index Period for two or more Notional Amounts shall be the same, then the reduction applied to such Notional Amounts shall be applied in inverse order to the Notional Amounts deemed reduced as a result of the relevant Deposit or Deposits withdrawal (pro rata as appropriate). 1.04 Subsequent Index Period. No later than one (1) Business Day prior to the end of the Initial Index Period, and each Subsequent Index Period, or during any Floating Index Period, for any Notional Amount, ATA may, by written notice to IntesaBci, select an additional period (each, a "Subsequent Index Period") for such Notional Amount not to extend beyond October 14, 2002 in each instance; provided that if ATA shall not select a Subsequent Index Period for such Notional Amount by 2:00 p.m. (New York City time) on such Business Day, ATA shall have deemed to have selected a Subsequent Index Period for such Notional Amount from and including the last day of the Initial Index Period or the immediately preceding Subsequent Index Period (as the case may be) to but excluding the next Business Day thereafter. Upon the selection (or deemed selection) of a Subsequent Index Period for a Notional Amount, IntesaBci shall promptly determine and then provide written notice to ATA of the Index Rate for such Subsequent Index Period for such Notional Amount. The Index Rate for any one day Subsequent Index Period shall be the Federal Funds Index Rate for such day (as determined by IntesaBci). The Index Rate for any Subsequent Index Period (other than for one day) shall be an interest rate per annum determined by IntesaBci in the same manner as the indicative interest rates per annum of Initial Period (other than for one day) heretofore provided to ATA by IntesaBci were determined, which determination shall be prima facie evidence of the amount thereof. 1.05 Replacement Drawing. In the event of a Replacement Drawing, ATA shall pay to the Depositary no later than 11:00 a.m. (New York City time) on: (a) if accrued interest on the drawn Deposits is payable on the date of the Replacement Drawing (the "Replacement Drawing Date") or, otherwise, the succeeding Interest Payment Date the excess, if any, of (x) the aggregate amount of interest accrued on the Deposits in accordance with each Deposit Agreement during the Relevant Period for, and required to be paid on the Replacement Drawing Date or such Interest Payment Date over (y) the sum of the Notional Earnings on the amount of each Notional Amount outstanding on the Replacement Drawing Date (prior to giving effect to the Replacement Drawing effected on such date) during such Relevant Period; and (b) the Replacement Drawing Date, subject to the last sentence of Section 11 hereof, any breakage costs described in Section 10 hereof. 1.06 Prepayment Drawing. In the event of a Prepayment Drawing is respect of any Deposit, ATA shall pay to the Depositary no later than 11:00 a.m. (New York City time) on the date of such drawing: 3 (a) the excess, if any, of (x) the aggregate amount of interest accrued on such Deposit in accordance with each Deposit Agreement during the Relevant Period for, and required to be paid on the such date over (y) the sum of the Notional Earnings on the amount of each Notional Amount outstanding in respect of such Deposit accrued through such date (prior to giving effect to the Prepayment Drawing effected on such date) during such Relevant Period; and (b) subject to the last sentence of Section 11 hereof, any breakage costs described in Section 10 hereof. SECTION 2. Cash Collateral. Concurrently with the execution and delivery hereof, ATA shall deposit into the Collateral Account (as defined herein) an amount equal to the Specified Amount. The Specified Amount deposited into the Collateral Amount pursuant to this Section shall satisfy ATA's obligations to deposit the "Specified Amount" under the Delayed Indemnity Agreement. SECTION 3. Collateral Account and Investments. 3.01 Collateral Account. There is hereby established with IntesaBci a collateral account (the "Collateral Account") in the name and under the control of IntesaBci into which ATA shall deposit cash from time to time in accordance with the provisions of Section 2 hereof. The balance from time to time in the Collateral Account shall be subject to withdrawal only as provided herein. 3.02 Investment of Balance in Collateral Account. Amounts on deposit in the Collateral Account shall be invested from time to time in Permitted Investments. Such Permitted Investments shall be held in the name and be under the control of IntesaBci. All Investment Earnings in respect of investments of amounts in the Collateral Account shall be credited to the Collateral Account and constitute a portion of the Pledged Security. IntesaBci agrees that the Permitted Investments shall earn interest from time to time at the LIBID Rate. 3.03 Pledge. As collateral security for the prompt payment in full when due of ATA's obligations under this Agreement and the Delayed Indemnity Agreement (the "Secured Obligations"), ATA hereby pledges and grants to IntesaBci a security interest in all of ATA's right, title and interest in and to the Collateral Account, the Specified Amount, all Permitted Investments made with amounts standing to the credit of the Collateral Account, all Investment Earnings thereon and all other monies, earnings and investments standing to the credit thereof (collectively, the "Pledge Security"). If at any time ATA shall fail to pay any Secured Obligation when due, IntesaBci may (in its sole discretion) (i) liquidate any investments made in respect of amounts deposited in the Collateral Account and (ii) apply or cause to be applied the balance from time to time outstanding to the credit of the Collateral Account to the payment of such Secured Obligation. 3.04 Application and Termination. (a) On each Indemnity Payment Date, an amount in the Collateral Account equal to the Indemnity Payment payable on such date shall be applied to ATA's obligations, if any, to make such Indemnity Payment on such Indemnity Payment Date. 4 (b) Upon the later of (i) the later of (x) the date on which all of the Deposits shall have been withdrawn and paid (or shall be required to be withdrawn and paid) as provided in the Deposit Agreements without any redeposit and (y) the date on which all accrued and unpaid interest on the Deposits shall have been paid (or shall have become due and payable) as provided in the Deposit Agreements (the later of clauses (x) and (y) being referred to as the "Deposit Agreement Termination Date") and (ii) the payment in full of all Secured Obligations in respect of obligations owing under this Agreement due and payable on or prior to the Deposit Agreement Termination Date (the "Termination Date"), the Pledge Security shall serve as collateral security exclusively for the "Secured Obligations" owing under the Delayed Deposit Agreement. 3.05 No Duplication. The obligations of ATA under Section 3.01 hereof and the obligations of IntesaBci under Section 3.02 shall be without duplication of their respective commensurate obligations under the Delayed Indemnity Agreement. SECTION 4. Representations and Warranties. (a) ATA represents and warrants to IntesaBci that: (i) ATA is duly incorporated, validly existing and in good standing under the laws of the State of Indiana and has the full corporate power, authority and legal right under the laws of the State of Indiana to execute and deliver this Agreement and to carry out the obligations of ATA under this Agreement; (ii) the execution and delivery by ATA of this Agreement and the performance by ATA of its obligations under this Agreement have been duly authorized by ATA and will not violate its Articles of Incorporation or by-laws, any law, rule or regulation binding on ATA or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; and (iii) this Agreement constitutes the legal, valid and binding obligation of ATA, enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity. (b) Amtran represents and warrants to IntesaBci that: (i) Amtran is duly incorporated, validly existing and in good standing under the laws of the State of Indiana and has the full corporate power, authority and legal right under the laws of the State of Indiana to execute and deliver this Agreement and to carry out the obligations of Amtran under this Agreement; (ii) the execution and delivery by Amtran of this Agreement and the performance by Amtran of its obligations under this Agreement have been duly authorized by Amtran and will not violate its Articles of Incorporation or by-laws, any law, rule or regulation binding on Amtran or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; 5 (iii) this Agreement constitutes the legal, valid and binding obligation of Amtran, enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; (iv) except as set forth in Amtran's most recent Annual Report on Form 10-K as amended, filed by Amtran with the SEC on or prior to the date hereof, or in any Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by Amtran with the SEC subsequent to such Form 10-K and on or prior to the date hereof, no action, claim or proceeding is now pending or, to the Actual Knowledge of Amtran, threatened, against Amtran, before any court, governmental body, arbitration board, tribunal or administrative agency, which is reasonably likely to be determined adversely to Amtran and if determined adversely to Amtran would result in a Material Adverse Change; and (v) the audited consolidated balance sheet of Amtran with respect to Amtran's most recent fiscal year included in Amtran's most recent Annual Report on Form 10-K, as amended, filed by Amtran with the SEC, and the related consolidated statements of operations and cash flows for the period then ended have been prepared in accordance with GAAP and fairly present in all material respects the financial condition of Amtran and its consolidated subsidiaries as of such date and the results of its operations and cash flows for such period, and since the date of such balance sheet there has been no material adverse change in such financial condition or operations of Amtran, except for matters disclosed in (a) the financial statements or Annual Report on Form 10-K referred to above or (b) any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by Amtran with the SEC on or prior to the date hereof. SECTION 5. Payments, No Setoff. All amounts (including, without limitation, those payments made in respect of Taxes (as defined and provided for below)) payable by ATA to IntesaBci hereunder shall be paid in U.S. Dollars in immediately available funds, to the account of IntesaBci at: IntesaBci S.p.A., New York Branch, One Williams Street, ABA#026005319, Account No. _________, Reference: ATA Pass Through Trust 2002-l Deposit Indemnity or as IntesaBci may direct from time to time in writing to ATA. All amounts payable hereunder shall be made free and clear of, and without reduction for, or on account of, any and all taxes, levies or other impositions or charges ("Taxes"), other than taxes based on or measured by gross or net income, gross or net receipts, net worth, capital, franchise taxes or similar doing business taxes. SECTION 6. Fees. In consideration of the Depositary entering into this Agreement and the Deposit Agreement, ATA agrees to pay IntesaBci a nonrefundable fee equal to $50,000 on the date hereof. SECTION 7. Increased Costs. In the event that any change in law or governmental rule, regulation or order, or in the interpretation, administration or application thereof (including the adoption of any new law or governmental rule, regulation or order), or any determination of a court or by any central bank or Government Entity, in each case that becomes effective after the date hereof, or compliance by IntesaBci (at its applicable lending office) with any guideline, 6 request or directive issued or made after the date hereof by any such central bank or Government Entity (whether or not having the force of law): (i) subjects IntesaBci (or its applicable lending office) to any additional Tax (other than taxes excluded under Section 5 above) with respect to its obligations, commitments or extensions of credit hereunder, or under any of the Deposit Agreements or any payments to IntesaBci (or its applicable lending office) of any Indemnity Payment, interest, fees or any other amount payable under or in respect to this Agreement or any of the Deposit Agreements; or (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits in or for the account of, or advances or loans by, or other credit extended by, IntesaBci; and the result of any of the foregoing is that IntesaBci shall incur increased costs which are attributable to this Agreement or the Deposit Agreements or to reduce any amount received or receivable by IntesaBci (or its applicable lending office) with respect to this Agreement; then, in any such case, ATA shall pay to IntesaBci, within five Business Days after receipt of the statement referred to in the next sentence, such additional amount or amounts as may be necessary to compensate IntesaBci for any such increased cost or reduction in amounts received or receivable hereunder. IntesaBci, promptly after the occurrence of such event, shall deliver to ATA a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to IntesaBci under this Section 7, which statement shall be prima facie evidence of ATA's obligation to pay such additional amounts. SECTION 8. Capital Adequacy. If the adoption after the date hereof of any applicable law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change after the date hereof in any existing interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or the promulgation after the date hereof of any guidelines, request or directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of IntesaBci or any corporation controlling IntesaBci as a consequence of IntesaBci's commitments, obligations or extensions of credit hereunder or under the Deposit Agreements to a level below that which IntesaBci or such controlling corporation could have achieved but for such adoption, change or promulgation (taking into consideration the policies of IntesaBci or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by ATA from IntesaBci of the statement referred to in the next sentence, ATA shall pay to IntesaBci such additional amount or amounts as will compensate IntesaBci or such controlling corporation on an after-tax basis for such reduction. IntesaBci shall deliver to ATA a written statement, setting forth in reasonable detail the basis of the calculation of such additional amounts, which statement shall be prima facie evidence of ATA's obligation to pay such additional amounts. 7 SECTION 9. Guarantee. (a) (a) The Guarantor hereby guarantees to the Depositary the prompt payment in full when due of all amounts payable by ATA hereunder strictly in accordance with the terms hereof (such obligations being herein collectively called the "Obligations"). This is a guarantee of payment, not of collection. Accordingly, the Guarantor hereby further agrees that if ATA shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Obligations, the Guarantor will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. (b) The obligations of the Guarantor under Section 9(a) are irrevocable, absolute and unconditional irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of ATA under this Agreement or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 9(b) that the obligations of the Guarantor hereunder shall be irrevocable, absolute and unconditional under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantor hereunder, which shall remain irrevocable, absolute and unconditional as described above: (i) at any time or from time to time, without notice to the Guarantor, the time for any performance of or compliance with any of the Obligations shall be extended, or such performance or compliance shall be waived, or such Obligations shall be increased; (ii) any of the acts mentioned in any of the provisions of this Agreement or any other agreement or instrument referred to herein or therein shall be done or omitted; (iii) the maturity of any of the Obligations shall be accelerated, or any of the Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement or any other agreement or instrument referred to herein or therein shall be waived or any other guarantee of any of the Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; (iv) the dissolution, merger, consolidation, sale of all or substantially all of the assets or other corporate reorganization of ATA; or (v) any lien or security interest granted to, or in favor of, the Depositary as security for any of the Obligations shall be released or fail to be perfected. (c) The Guarantor hereby expressly waives diligence, presentment, demand of payment, notice of acceptance hereof, notice of the incurrence of any Obligation, protest and all notices whatsoever, and any requirement that the Depositary pursue or exhaust any right, power or remedy or otherwise proceed against ATA under this Agreement or any other agreement or 8 instrument referred to herein or therein, or against any other Person under any other guarantee of, or security for, any of the Obligations. (d) The obligations of the Guarantor under this Section 9 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of ATA in respect of the Obligations is rescinded or must be otherwise restored by any holder of any of the Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise and the Guarantor agrees that it will indemnify the Depositary on demand for all reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Depositary prior to payment in full of their respective claims by the Guarantor in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any applicable law. (e) ATA hereby acknowledges and confirms that it has an unqualified obligation to reimburse the Guarantor for the full amount of the Obligations hereby guaranteed by the Guarantor and paid or otherwise satisfied by the Guarantor. The Guarantor hereby agrees that until the payment and satisfaction in full of all Obligations, the Depositary shall be entitled to prove against the estate of ATA in connection with any bankruptcy, insolvency, reorganization, rearrangement or winding up proceedings in respect of the whole of the Obligations (including any amount on account thereof theretofore paid by the Guarantor pursuant to the aforesaid guarantee), and the Guarantor shall have no right to be subrogated to Depositary in respect of such proof until the Depositary shall have received from such estate payment in full of their respective claims with interest; nor shall the Guarantor purport to exercise any right or remedy arising by reason of any performance by it of its obligation in 8(a) whether by subrogation or otherwise, against ATA or any other guarantor of any of the Obligations or any security for any of the Obligations until the Depositary shall have received payment in full of their respective claims with interest. (f) The Guarantor agrees that, as between it and the Depositary, its obligations under this Section 9 may be declared to be forthwith due and payable as provided in Section 2 for purposes of Section 9(a) notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against ATA and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by the Guarantor for purposes of Section 9(a). (g) The obligations in this Section 9 are continuing, and shall apply to all Obligations whenever arising. SECTION 10. Breakage. If (x) any Notional Amount is reduced or increased other than during a Floating Index Period therefor or on the last day of the Index Period therefor (including by virtue of a Replacement Drawing or a Prepayment Drawing), (y) any withdrawal is cancelled with respect to which a notice has been delivered to the Depositary pursuant to Section 2.3(a) of any Deposit Agreement less than one Business Day prior to the scheduled date of such withdrawal (unless the Index Rate for such date is the Federal Funds Index Rate) or (z) any 9 investment of amounts in the Collateral Account is liquidated prior to the maturity date therefor (each, a "Breakage Event"), then ATA shall compensate IntesaBci for any loss, cost or expense (including, without limitation, any cost of funding or loss incurred as a result of terminating, liquidating, obtaining or re-establishing any hedge or related trading position) incurred by IntesaBci in connection with such Breakage Event. A certificate of IntesaBci setting forth in reasonable detail any amount or amounts that IntesaBci is entitled to receive pursuant to this Section 10 shall be delivered to ATA and shall be prima facie evidence of ATA's obligation to pay such amount or amounts. ATA shall pay IntesaBci the amount shown as due on any such certificate within five Business Days after receipt thereof. SECTION 11. Expenses; Indemnity. (a) ATA shall pay all reasonable out-of-pocket expenses incurred by IntesaBci, including the reasonable fees, charges and disbursements of special New York and Italian counsel for IntesaBci, in connection with the preparation of this Agreement, the Deposit Agreements or any amendments, modifications or waivers of the provisions hereof or thereof. (b) The provisions of Section 9.1 of the Leased Aircraft Participation Agreement attached as Exhibit A-l to the Note Purchase Agreement, together with related definitions and ancillary provisions, are hereby incorporated herein by reference, as if set forth herein in full, mutatis mutandis; provided that as incorporated herein, (i) each reference therein to "this Agreement" shall be deemed to be a reference to this Agreement, (ii) each reference therein to "Indemnitee" shall be deemed to be a reference to IntesaBci (in its capacity as Depositary) together with its affiliates, directors, officers, employees, agents, successors and assigns, (iii) each reference therein to "Lessee" shall be deemed to be reference to ATA, (iv) each reference therein to "Section 9.1", or any subsection of "Section 9.1", shall be deemed to be a reference to this Section 11(b) or applicable subsection, (v) each reference therein to "Operative Agreements" shall be deemed to be a reference to the "Operative Agreements" under each of the Participation Agreements, (vi) each reference therein to "Aircraft" shall be deemed to be a reference to the "Aircraft" under each of the Participation Agreements and (vii) the term "Pass Through Agreements" shall be deemed to include this Agreement. (c) All amounts due under this Section 11 shall be paid no later than five Business Days after written demand therefor. SECTION 12. Remedies. Upon the breach by ATA of any of its obligations under this Agreement, IntesaBci may exercise any right or remedy that may be available to it under applicable law. ATA agrees to indemnify and hold harmless IntesaBci for any reasonable cost or expense incurred by it in connection with, or arising out of, the enforcement by IntesaBci of this Agreement against ATA. SECTION 13. Amendment, Etc. This Agreement may not be amended, waived or otherwise modified except by an instrument in writing signed by the party against whom the amendment, waiver or other modification is sought to be enforced. SECTION 14. Notices. Unless otherwise expressly provided herein, any notice or other communication under this Agreement shall be in writing (including by facsimile) and shall be 10 deemed to be given and effective upon receipt thereof. All notices shall be sent to (x) in the case of IntesaBci, IntesaBci S.p.A. , New York Branch, One Williams Street, New York, New York 10004, Attention: Transportation Finance Group (Telecopier: (212) 607-3966), (y) in the case of ATA, American Trans Air, Inc., 7337 West Washington Street, Indianapolis, IN 46321-0609, Attention: Kenneth K. Wolff (Telecopier: (317)240-7091) or (z) in the case of Amtran, Amtran, Inc., 7337 West Washington Street, Indianapolis, IN 46321-0609 , Attention: Kenneth K. Wolff (Telecopier: (317)240-7091) (or at such other address as a party may specify from time to time in a written notice to the other parties). On or prior to the execution of this Agreement, ATA has delivered to IntesaBci a certificate containing specimen signatures of the representatives of ATA who are authorized to give notices and instructions with respect to this Agreement. IntesaBci may conclusively rely on such certificate until IntesaBci receives written notice from ATA to the contrary. SECTION 15. Entire Agreement. This Agreement (including all attachments hereto) sets forth all of the promises, covenants, agreements, conditions and understandings between IntesaBci and ATA with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and undertakings, inducements and conditions, express or implied, oral or written. SECTION 16. Governing Law. THIS AGREEMENT, AND THE RIGHTS AND OBLIGATIONS OF INTESABCI AND ATA HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 17. Waiver Of Jury Trial Right. EACH OF INTESABCI AND ATA ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY. SECTION 18. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. SECTION 19. No Third-Party Beneficiaries. This Agreement is not intended to, and shall not, provide any person not a party hereto with any rights of any nature whatsoever against any of the parties hereto and no person not a party hereto shall have any right, power or privilege in respect of any party hereto, or have any benefit or interest, arising out of this Agreement. 11 IN WITNESS WHEREOF, IntesaBci, Amtran and ATA have caused this Indemnity Agreement to be duly executed as of the day and year first above written. INTESABCI S.P.A., NEW YORK BRANCH as Depositary By: ----------------------------- Name: Title: By: ----------------------------- Name: Title: AMERICAN TRANS AIR, INC. By: ----------------------------- Name: Title: AMTRAN, INC. By: ----------------------------- Name: Title: 12 SCHEDULE I
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SCHEDULE II
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ANNEX A DEFINITIONS "Actual Knowledge" means as it applies to ATA, actual knowledge of a Vice President or more senior officer of ATA having responsibility for the transactions contemplated by the Indemnity Agreement; provided that ATA shall be deemed to have "Actual Knowledge" of any matter as to which it has received notice from IntesaBci, such notice having been given pursuant to Section 14. "Aircraft" means each of the aircraft listed on Schedule I hereto. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of (i) (a) the Federal Funds Effective Rate, plus (b) one-half of one percent (1/2 of 1%) (calculated on the basis of a 360 day year) and (ii) the floating commercial loan rate per annum of IntesaBci (which rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer by IntesaBci) announced from time to time as its prime rate or equivalent for dollar loans in the USA, changing as and when said rate changes (calculated on the basis of a 365/366 day year). "Breakage Event" shall have the meaning set forth in Section 10. "Business Day" means any day, other than a Saturday or a Sunday, on which (x) commercial banks settle payments in New York and, (y) for the purpose of determining any Index Period, U.S. Dollar transactions are affected in London, England. "Collateral Account" shall have the meaning set forth in Section 3.01. "Delayed Indemnity Agreement" means the Delayed Indemnity Agreement dated as of the date hereof among the parties hereto. "Deposit Agreement Termination Date" shall have the meaning set forth in Section 3.04(b). "Equipment Notes" has the meaning attributable thereto in the Note Purchase Agreement. "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next l/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next l/100 of 1%) of the quotations for such day for such transactions received by IntesaBci from three Federal funds brokers of recognized standing selected by IntesaBci. "Federal Funds Index Rate" shall mean, for any day of determination, the Federal Funds Effective Rate for such day minus 1/8% per annum. "Final Withdrawal Date" means the date on which all of the Deposits are withdrawn and no redeposits are made under the Deposit Agreement. "Floating Index Period" means, with respect to any Notional Amount, the period from and including the last day of the Initial Index Period therefor to but excluding the earlier of (x) the date such Notional Amount is withdrawn pursuant to the Deposit Agreements and (y) the first day of any Subsequent Index Period therefor. "Government Entity" means (a) any federal, state, provincial or similar government, and any body, board, department, commission, court, tribunal, authority, agency or other instrumentality of any such government or otherwise exercising any executive, legislative, judicial, administrative or regulatory functions of such government or (b) any other government entity having jurisdiction over any matter contemplated by this Agreement or relating to the observance or performance of the obligations of any of the parties to this Agreement. "Indemnity Payment" shall have the meaning set forth in Section 1.01. "Indemnity Payment Date" shall have the meaning set forth in Section 1.01. "Index Period" means, with respect to any Notional Amount, the Initial Index Period, the Floating Index Period and each Subsequent Index Period therefor. "Index Rate" means, with respect to any Notional Amount, (i) during the Initial Index Period therefor, the rate per annum set forth opposite such Notional Amount under the heading "Initial Index Rate" on Schedule II during the Floating Index Period therefor, a rate per annum equal to the Federal Funds Index Rate, and (ii) during each Subsequent Index Period therefor, the rate per annum for such Subsequent Index Period determined in accordance with Section 1.04 hereof. "Initial Index Period" means, with respect to each Notional Amount, the period set forth opposite such Notional Amount under the heading "Initial Index Period" on Schedule II hereto; provided that if the last day of such period is stated to fall on a day that is not a Business Day, the last day of such period shall be extended to fall on the next subsequent day that is a Business Day. "Interest Payment Date" shall have the meaning given such term in the Deposit Agreements. "Investment Earnings" on any amount, means investment earnings on such amount net of losses and investment expenses reasonably incurred by IntesaBci in making or liquidating such investments. "Law" means (a) any constitution, treaty, statute, law, decree, regulation, order, rule or directive of any Government Entity and (b) any judicial or administrative interpretation or application of, or decision under, any of the foregoing. "Leased Aircraft Participation Agreement" shall have the meaning set forth in the Note Purchase Agreement. 2 "LIBID Rate" means, for any period between Interest Payment Dates (or, in the case of the first such period, commencing on the date of this Agreement), a rate per annum (calculated on the basis of a 360-day year and actual days elapsed) equal to (x) the rate determined by reference to Telerate Page 3750 as of 11:00 A.M. (London time), on the date two London business days prior to the first day of such period (or, in the case of the first such period, the rate determined by IntesaBci as the London interbank offered rate available to it in respect of such period) minus (y) 12.5 basis points. "Material Adverse Change" means, with respect to any Person, any event, condition or circumstance that materially and adversely affects such person's business or consolidated financial condition, or its ability to observe or perform its obligations, liabilities and agreements under this Agreement. "Note Purchase Agreement" means the Note Purchase Agreement dated as of the date hereof among ATA, Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements referred to therein, Wilmington Trust Company, as Subordination Agent, Wells Fargo Bank Northwest, N.A., as Escrow Agent, and Wilmington Trust Company, as Paying Agent. "Notice of Final Withdrawal" shall have the meaning set forth in the Deposit Agreements. "Notice of Purchase Withdrawal" shall have the meaning set forth in the Deposit Agreements. "Notional Amounts" means each of the amounts set forth under the heading "Notional Amounts" on Schedule II hereto as the same may be reduced from time to time in accordance with Section 1.03. "Notional Earnings" means, with respect to any Relevant Period and each Notional Amount, the sum of the Index Rate per annum on such Notional Amount for each day during such Relevant Period. The Notional Earnings shall be calculated on the basis of a year of 360 days and actual days elapsed. "Participation Agreement" means each Participation Agreement entered into in connection with the financing of each Aircraft (or a Substitute Aircraft in respect thereof). "Permitted Investments" means London interbank U.S. Dollar deposits with London banks (or London branches of banks, including IntesaBci's London branch) selected by IntesaBci maturing on or about each Interest Payment Date. "Prepayment Drawing" means a withdrawal of one or more deposits pursuant to a Prepayment Withdrawal. "Prepayment Drawing Date" means the date of the Prepayment Drawing. "Relevant Date" means (i) in the case of the first Interest Payment Date, a Final Withdrawal Date, a Prepayment Drawing Date or a Replacement Drawing Date occurring prior 3 to the first Interest Payment Date, the date of the Indemnity Agreement and (ii) in the case of any other Interest Payment Date, Final Withdrawal Date, Prepayment Drawing Date or Replacement Drawing Date, the Interest Payment Date immediately preceding such Interest Payment Date, Final Withdrawal Date, Prepayment Drawing Date or Replacement Drawing Date (as the case may be). "Relevant Period" means, with respect to any Interest Payment Date, Final Withdrawal Date, Prepayment Drawing Date or Replacement Drawing Date, the period from and including the Relevant Date for such Interest Payment Date, Final Withdrawal Date, Prepayment Drawing Date or Replacement Drawing Date, as the case may be, up to but excluding such Interest Payment Date, Final Withdrawal Date, Prepayment Drawing Date or Replacement Drawing Date (as the case may be). "Replacement Drawing" means a withdrawal of the Deposits pursuant to a Replacement Withdrawal. "Replacement Drawing Date" shall have the meaning set forth in Section 1.05(a). "SEC" means the Securities and Exchange Commission of the United States, or any Government Entity succeeding to its functions. "Secured Obligations" shall have the meaning set forth in Section 3.03. "Specified Amount" shall have the meaning set forth in the third WHEREAS clause. "Subsequent Index Period" with respect to each Notional Amount, shall have the meaning set forth in Section 1.04. "Substitute Aircraft" means any aircraft substituted for an Aircraft (or any other Aircraft with respect to such Aircraft) in accordance with (i) the Aircraft Purchase Agreement (as defined in the Note Purchase Agreement) upon a total loss of such Aircraft prior to the delivery thereof or (ii) Section 1(g) of the Note Purchase Agreement. 4 EX-4.17 18 file017.txt DELAYED FUNDING IMPLEMENTATION AGREEMENT EXECUTION COPY - -------------------------------------------------------------------------------- DELAYED FUNDING IMPLEMENTATION AGREEMENT Dated as of March 28, 2002 among AMERICAN TRANS AIR, INC., Company AMTRAN, INC., Guarantor WILMINGTON TRUST COMPANY, as Pass Through Trustee under each of the Pass Through Trust Agreements WILMINGTON TRUST COMPANY, as Subordination Agent WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent WILMINGTON TRUST COMPANY, as Paying Agent AIG MATCHED FUNDING CORP., as Class A Liquidity Provider and Class B Liquidity Provider NYALA FUNDING LLC as Initial Purchaser of Class A Certificates PK AIRFINANCE US, INC. as Initial Purchaser of Class B Certificates - -------------------------------------------------------------------------------- DELAYED FUNDING IMPLEMENTATION AGREEMENT This DELAYED FUNDING IMPLEMENTATION AGREEMENT, dated as of March 28, 2002, among (i) AMERICAN TRANS AIR, INC., an Indiana corporation (the "Company"), (ii) AMTRAN, INC., an Indiana corporation ("Amtran"), (iii) WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity, but solely as trustee (in such capacity together with its successors in such capacity, the "Trustee") under each of the two separate Pass Through Trust Agreements (as defined below), (iv) WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity, but solely as subordination agent and trustee (in such capacity together with its successors in such capacity, the "Subordination Agent") under the Intercreditor Agreement (as defined below), (v) WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking association, as escrow agent (in such capacity together with its successors in such capacity, the "Escrow Agent"), under each of the Escrow and Paying Agent Agreements (as defined below), (vi) WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual capacity, but solely as Paying Agent (in such capacity together with its successors in such capacity, the "Paying Agent") under each of the Escrow and Paying Agent Agreements, (vii) AIG MATCHED FUNDING CORP., not in its individual capacity except as otherwise expressly provided herein, but solely as Class A Liquidity Provider and Class B Liquidity Provider (in such capacity together with its successors in such capacity, the "Liquidity Provider") under each of the Revolving Credit Agreements (as defined below), (viii) NYALA FUNDING LLC, as initial purchaser (the "Class A Purchaser"), under the Class A Certificate Purchase Agreement (as defined below) and (ix) PK AIRFINANCE US, INC., as initial purchase (the "Class B Purchaser") under the Class B Certificate Purchase Agreement (as defined below). W I T N E S S E T H: - - - - - - - - - - WHEREAS, capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Operative Agreements (as defined below); WHEREAS, the Company, Amtran and the Trustee have contemporaneously herewith entered into two separate Pass Through Trust Agreements dated as of March 28, 2002 relating to, respectively, American Trans Air 2002-1A Pass Through Trust and American Trans Air 2002-1B Pass Through Trust (the "Pass Through Trusts") (such Agreements, as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pass Through Trust Agreements") pursuant to which the American Trans Air Pass Through Trust, Series 2002-1A Certificates (the "Class A Certificates") and American Trans Air 2002-1B Pass Through Trust Certificates (the "Class B Certificates", and together with the Class A Certificates, the "Certificates") are being issued, respectively; WHEREAS, the Escrow Agent, the Trustee and the Paying Agent have contemporaneously herewith entered into two separate Escrow and Paying Agent Agreements with the Class A Purchaser and the Class B Purchaser, respectively (the "Escrow and Paying Agent Agreements"); WHEREAS, the Escrow Agent has contemporaneously herewith entered into two separate deposit agreements with the INTESABCI S.p.A, acting through its New York Branch, (the "Depositary") for each Pass Through Trust (the "Deposit Agreements"), for the benefit of the Certificateholder of each Pass Through Trust; WHEREAS, the Company, Amtran, the Investors (as defined in the Registration Rights Agreement) and the Trustee have contemporaneously herewith entered into a registration rights agreement (the "Registration Rights Agreement") for the benefit of the Certificateholders of each Pass Through Trust; WHEREAS, (i) the Liquidity Provider has contemporaneously herewith entered into two separate revolving credit agreements (the "Revolving Credit Agreements"), one each for the benefit of the Certificateholders of each Pass Through Trust, with the Subordination Agent, as agent for the Trustee on behalf of each such Pass Through Trust and (ii) the Trustee, the Liquidity Provider and the Subordination Agent have entered into the Intercreditor Agreement, dated as of the date hereof (the "Intercreditor Agreement"); WHEREAS, contemporaneously herewith American International Group, Inc. has executed two guarantee agreements, each guaranteeing the payment obligations of the initial Liquidity Provider under the related Liquidity Facility; WHEREAS, the Company and Amtran have contemporaneously herewith entered into two separate Certificate Purchase Agreements with (i) the Class A Purchaser of $111,716,000 principal amount of the Class A Certificates (the "Class A Certificate Purchase Agreement") and (ii) with the Class B Purchaser, as initial purchaser of $31,131,000 principal amount of the Class B Certificates (the "Class B Certificate Purchase Agreement"); WHEREAS, the Company and Amtran have contemporaneously herewith entered into two separate letter agreements (i) one with the Class A Purchaser and AIG Financial Products Corp. providing for the purchase of an additional $91,896,000 principal amount of the Class A Certificates (the "Additional Class A Certificates") and (ii) one with the Class B Purchaser providing for the purchase of an additional $26,904,000 principal amount of the Class B Certificates (the "Additional Class B Certificates", and together with the Additional Class A Certificates, the "Additional Certificates"), in each case on October 15, 2002 or such other date mutually agreed to by the Company, Amtran, the Class A Purchaser and the Class B Purchaser (such date, the "Delayed Funding Date"); WHEREAS, the parties hereto agree that simultaneously with the issuance of the Additional Certificates, the Operative Agreements (which term as used in this Agreement, shall mean the Pass Through Trust Agreements, the Note Purchase Agreement, the Revolving Credit Agreements, the Escrow and Paying Agent Agreements, and the Intercreditor Agreement) will be amended as provided in this Agreement without any further action on the part of any party hereto and without the consent of any holder of any of the Certificates or Escrow Receipts; NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy 2 of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I AMENDMENTS SECTION 1.01 Amendments to the Note Purchase Agreement. Simultaneously with the issuance of the Additional Certificates, the Note Purchase Agreement shall be amended as provided below. (a) The definition of the term "Delivery Period Termination Date" contained in Annex A of the Note Purchase Agreement shall be amended by replacing "September 29, 2002" appearing therein with "February 28, 2003". (b) Section 1(a) of the Note Purchase Agreement shall be amended by replacing "Schedule I-A" appearing therein with "Schedule I-B". (c) Section 1(g)(i) of the Note Purchase Agreement shall be amended by replacing "Schedule I-A" appearing therein with "Schedule I-B"; and Section 1(g)(ii) of the Note Purchase Agreement shall be amended by replacing "September 29, 2002" appearing therein with "February 28, 2003". (d) Schedule VI to the Note Purchase Agreement shall be amended by substituting therefor the Schedule VI attached to this Agreement as Exhibit A. (e) Schedule VII to the Note Purchase Agreement shall be amended by substituting therefor the Schedule VII attached to this Agreement as Exhibit B. SECTION 1.02 Amendments to Revolving Credit Agreements. (a) Simultaneously with the issuance of the Additional Certificates, the Revolving Credit Agreement relating to the Class A Certificates (the "Class A Revolving Credit Agreement" ) shall be amended as provided below. (i) The definition of the term "Maximum Commitment" contained in Section 1.1 of the Class A Revolving Credit Agreement shall be amended by (x) replacing "$14,793,433" appearing therein with "$26,828,366" and (y) deleting the proviso therein. (ii) Section 2.4(a) of the Class A Revolving Credit Agreement shall be amended by substituting therefor the following: Automatic Adjustments. Promptly following each date on which the Required Amount is (i) reduced as a result of a reduction in the Pool Balance of the Class A Certificates or otherwise, (ii) increased as a result of an increase in the Stated Interest Rate, (iii) subsequent to an increase described in clause (ii), reduced pursuant to the definition of "Stated Interest Rate", or (iv) increased as a result of an increase in the Pool 3 Balance of the Class A Certificates resulting from the issuance of the Additional Class A Certificates (as defined in the Delayed Funding Implementation Agreement), the Maximum Commitment shall automatically be reduced or increased, as the case may be, to an amount equal to the Required Amount (as calculated by the Borrower). The Borrower shall give notice of any such automatic adjustment of the Maximum Commitment to the Liquidity Provider (with a copy to Amtran) within two Business Days thereof. The failure by the Borrower to furnish any such notice shall not affect such automatic reduction or increase of the Maximum Commitment. (b) Simultaneously with the issuance of the Additional Certificates, the Revolving Credit Agreement relating to the Class B Certificates (the "Class B Revolving Credit Agreement") shall be amended as provided below. (i) The definition of the term "Maximum Commitment" contained in Section 1.1 of the Class B Revolving Credit Agreement shall be amended by (x) replacing "$5,229,541" appearing therein with "$9,662,940" and (y) deleting the proviso therein. (ii) The Section 2.4(a) of the Class B Revolving Credit Agreement shall be amended by substituting therefor the following: Automatic Adjustments. Promptly following each date on which the Required Amount is (i) reduced as a result of a reduction in the Pool Balance of the Class B Certificates or otherwise, (ii) increased as a result of an increase in the Stated Interest Rate, (iii) subsequent to an increase described in clause (ii), reduced pursuant to the definition of "Stated Interest Rate", or (iv) increased as a result of an increase in the Pool Balance of the Class B Certificates resulting from the issuance of the Additional Class B Certificates (as defined in the Delayed Funding Implementation Agreement), the Maximum Commitment shall automatically be reduced or increased, as the case may be, to an amount equal to the Required Amount (as calculated by the Borrower). The Borrower shall give notice of any such automatic adjustment of the Maximum Commitment to the Liquidity Provider (with a copy to Amtran) within two Business Days thereof. The failure by the Borrower to furnish any such notice shall not affect such automatic reduction or increase of the Maximum Commitment. SECTION 1.03 Amendments to the Escrow and Paying Agent Agreements. (a) Simultaneously with the issuance of the Additional Certificates, the Escrow and Paying Agent Agreement relating to the Class A Certificates (the "Class A Escrow Agreement") shall be amended as provided below. (i) Section 1.02 of the Class A Escrow Agreement shall be amended by (A) replacing "September 29, 2002" appearing in clause (g)(i) and the last sentence thereof with "February 28, 2003" and (B) replacing "October 14, 2002" appearing in the last sentence of Section 1.02 with "March 17, 2003". 4 (ii) Section 1.03 of the Class A Escrow Agreement shall be amended by adding a second paragraph to such Section to read as follows: The Escrow Agent hereby directs the Purchaser to, and the Purchaser hereby acknowledges that on the Delayed Funding Date (as defined in the Delayed Funding Implementation Agreement) it shall, irrevocably deliver by wire transfer to the Depositary on behalf of the Escrow Agent an amount in Dollars and immediately available funds equal to $68,969,100 for deposit on behalf of the Escrow Agent with the Depositary in accordance with Section 2.1 of the Deposit Agreement. The Purchaser hereby instructs the Escrow Agent, upon receipt of such sum from the Purchaser, to confirm such receipt by executing and delivering to the Pass Through Trustee an Escrow Receipt (a) to be affixed by the Pass Through Trustee to each Additional Class A Certificate (as defined in the Delayed Funding Implementation Agreement) being issued on the Delayed Funding Date and (b) to evidence the same percentage interest (the "Escrow Interest") in the Account Amounts (as defined in Section 1.04) as the Fractional Undivided Interest in the Pass Through Trust evidenced by the Additional Class A Certificate to which it is to be affixed. (b) Simultaneously with the issuance of the Additional Certificates, the Escrow and Paying Agent Agreement relating to the Class B Certificates (the "Class B Escrow Agreement") shall be amended as provided below. (i) Section 1.02 of the Class B Escrow Agreement shall be amended by (A) replacing "September 29, 2002" appearing in clause (g)(i) and the last sentence thereof with "February 28, 2003" and (B) replacing "October 14, 2002" appearing in the last sentence of Section 1.02 with "March 17, 2003". (c) Section 1.03 of the Class B Escrow Agreement shall be amended by adding a second paragraph to such Section to read as follows: The Escrow Agent hereby directs the Purchaser to, and the Purchaser hereby acknowledges that on the Delayed Funding Date (as defined in the Delayed Funding Implementation Agreement) it shall, irrevocably deliver by wire transfer to the Depositary on behalf of the Escrow Agent an amount in Dollars and immediately available funds equal to $20,130,900 for deposit on behalf of the Escrow Agent with the Depositary in accordance with Section 2.1 of the Deposit Agreement. The Purchaser hereby instructs the Escrow Agent, upon receipt of such sum from the Purchaser, to confirm such receipt by executing and delivering to the Pass Through Trustee an Escrow Receipt (a) to be affixed by the Pass Through Trustee to each Additional Class B Certificate (as defined in the Delayed Funding Implementation Agreement) being issued on the Delayed Funding Date and (b) to evidence the same percentage interest (the "Escrow Interest") in the Account Amounts (as defined in Section 1.04) as the Fractional Undivided Interest in the Pass Through Trust evidenced by the Additional Class B Certificate to which it is to be affixed. SECTION 1.04 Amendment to the Intercreditor Agreement. Simultaneously with the issuance of the Additional Certificates, the following definitions contained in Article I of the Intercreditor Agreement shall be amended as provided below: 5 (a) The definition of the term "Delivery Period Expiry Date" shall be amended by replacing "September 29, 2002" appearing therein with "February 28, 2003". (b) The definitions of the terms "Adjusted Expected Distributions" and "Expected Distributions" shall be amended by adding the following sentence at the end thereof: For the purpose of calculating the amount specified in clause (x) above, interest on a portion of the Certificates of such Trust corresponding to the Certificates of such Trust issued on the Delayed Funding Date shall begin accruing from (and including) the Delayed Funding Date. (c) The definition of the term "Pool Balance" shall be amended by substituting therefor the following: "Pool Balance" means, with respect to each Trust or the Certificates issued by any Trust, as of any date, (i) the sum of the original face amount of the Certificates of such Trust issued on the Closing Date and on the Delayed Funding Date less (ii) the aggregate amount of all payments made in respect of the Certificates of such Trust or in respect of Deposits relating to such Trust, other than payments made in respect of interest or premium thereon or reimbursement of any costs and expenses in connection therewith. The Pool Balance for each Trust or for the Certificates issued by any Trust as of any Distribution Date shall be computed after giving effect to any special distribution with respect to unused Deposits, any payment of principal of the Equipment Notes or payment with respect to other Trust Property held in such Trust and the distribution thereof to be made on that date. SECTION 1.05 Amendments to the Pass Through Trust Agreements and the Certificates. (a) Simultaneously with the issuance of the Additional Certificates, the Pass Through Trust Agreement relating to the Class A Certificates (the "Class A Pass Through Trust Agreement") and the Class A Certificates shall be amended as provided below. (i) Section 2.01(a) of the Class A Pass Through Trust Agreement shall be amended by substituting therefor the following: The Trustee is hereby directed to (i) execute and deliver the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement and the Note Purchase Agreement on or prior to the Issuance Date, each in the form delivered to the Trustee by the Company and (ii) subject to the respective terms thereof, to perform its obligations thereunder. Upon the request of the Company and the satisfaction or waiver of the closing conditions specified in the Certificate Purchase Agreement, the Trustee shall execute, deliver, authenticate, issue and sell Certificates in authorized denominations equaling in the aggregate the amount set forth in Schedule A to the Certificate Purchase Agreement. Upon the request of the Company, the Trustee shall execute, deliver, authenticate, issue and sell the Additional Class A Certificates (as defined in the Delayed Funding Implementation Agreement) in authorized denominations equaling in the aggregate the 6 amount set forth in the Delayed Funding Implementation Agreement, which amount, together with the amount of Certificates issued pursuant to the immediately preceding sentence, shall evidence the entire ownership interest in the Trust and shall equal the maximum aggregate principal amount of Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. Except as provided in Sections 3.04, 3.05, 3.06, 3.07 and 3.10 hereof, the Trustee shall not execute, authenticate or deliver Certificates in excess of the aggregate amount specified in this paragraph. The Additional Class A Certificates shall be identical to the Certificates issued on the Issuance Date. (ii) Section 3.03(a) of the Class A Pass Through Trust Agreement shall be amended by substituting therefor the following: The Trustee shall duly execute, authenticate and deliver (i) on the Issuance Date Certificates in authorized denominations in the aggregate amount of $111,716,000, and (ii) on the Delayed Funding Date, Additional Class A Certificates in authorized denominations equaling in the aggregate the amount set forth in the Delayed Funding Implementation Agreement, which aggregate amount of Certificates and Additional Class A Certificates shall evidence the entire ownership interest in the Trust and shall equal the maximum aggregate principal amount of Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. (iii) The Private Placement Legend (as defined in the Class A Pass Through Trust Agreement) set forth in Section 3.02(a) and Exhibit A of the Class A Pass Through Trust Agreement and in the Class A Certificates issued on the Issuance Date (as defined in the Class A Pass Through Trust Agreement) shall be amended by: (x) inserting after each reference to "(OR ANY SUCCESSOR PROVISION)" therein "(ASSUMING SUCH PERIOD WILL COMMENCE ON THE DELAYED FUNDING DATE (AS DEFINED IN THE DELAYED FUNDING IMPLEMENTATION AGREEMENT)"; and (y) inserting after "(IF AVAILABLE)" therein "(ASSUMING THAT THE TIME PERIOD REFERRED TO IN RULE 144(K) (OR ANY SUCCESSOR PROVISION) WILL COMMENCE ON THE DELAYED FUNDING DATE (AS DEFINED IN THE DELAYED FUNDING IMPLEMENTATION AGREEMENT)". (iv) The percentage ownership interest represented by $1,000 of Reference Principal Amount (as defined in the Class A Pass Through Trust Agreement) set forth in Exhibit A to the Class A Pass Through Trust Agreement and the Class A Certificates shall be changed from 0.00089513% to 0.00049113%. (b) Simultaneously with the issuance of the Additional Certificates, the Pass Through Trust Agreement relating to the Class B Certificates (the "Class B Pass Through Trust Agreement") shall be amended as provided below. 7 (i) Section 2.01(a) of the Class B Pass Through Trust Agreement shall be amended by substituting therefor the following: The Trustee is hereby (i) authorized and directed to execute and deliver the Intercreditor Agreement, the Registration Rights Agreement, the Delayed Funding Implementation Agreement, the Escrow Agreement and the Note Purchase Agreement on or prior to the Issuance Date, each in the form delivered to the Trustee by the Company and (ii) authorized, subject to the respective terms thereof, to perform its obligations thereunder. Upon the request of the Company and the satisfaction or waiver of the closing conditions specified in the Certificate Purchase Agreement, the Trustee shall execute, deliver, authenticate, issue and sell Certificates in authorized denominations equaling in the aggregate the amount set forth in Schedule A to the Certificate Purchase Agreement. Upon the request of the Company, the Trustee shall execute, deliver, authenticate, issue and sell the Additional Class B Certificates (as defined in the Delayed Funding Implementation Agreement) in authorized denominations equaling in the aggregate the amount set forth in the Delayed Funding Implementation Agreement, which amount, together with the amount of Certificates issued pursuant to the immediately preceding sentence, shall evidence the entire ownership interest in the Trust and shall equal the maximum aggregate principal amount of Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. Except as provided in Sections 3.04, 3.05, 3.06, 3.07 and 3.10 hereof, the Trustee shall not execute, authenticate or deliver Certificates in excess of the aggregate amount specified in this paragraph. The Additional Class B Certificates shall be identical to the Certificates issued on the Issuance Date. (ii) Section 3.03(a) of the Class B Pass Through Trust Agreement shall be amended by substituting therefor the following: The Trustee shall duly execute, authenticate and deliver (i) on the Issuance Date Certificates in authorized denominations in the aggregate amount of $31,131,000, and (ii) on the Delayed Funding Date, Additional Class B Certificates in authorized denominations equaling in the aggregate the amount set forth in the Delayed Funding Implementation Agreement, which aggregate amount of Certificates and Additional Class B Certificates shall evidence the entire ownership interest in the Trust and shall equal the maximum aggregate principal amount of Equipment Notes which may be purchased by the Trustee pursuant to the Note Purchase Agreement. (iii) The Private Placement Legend (as defined in the Class B Pass Through Trust Agreement) set forth in Section 3.02(a) and Exhibit A of the Class B Pass Through Trust Agreement and in the Class B Certificates issued on the Issuance Date (as defined in the Class B Pass Through Trust Agreement) shall be amended by: (x) inserting after each reference to "(OR ANY SUCCESSOR PROVISION)" therein "(ASSUMING SUCH PERIOD WILL COMMENCE ON THE DELAYED FUNDING DATE (AS DEFINED IN THE DELAYED FUNDING IMPLEMENTATION AGREEMENT)"; and (y) inserting after "(IF AVAILABLE)" therein "(ASSUMING THAT 8 THE TIME PERIOD REFERRED TO IN RULE 144(K) (OR ANY SUCCESSOR PROVISION) WILL COMMENCE ON THE DELAYED FUNDING DATE (AS DEFINED IN THE DELAYED FUNDING IMPLEMENTATION AGREEMENT)". (iv) The percentage ownership interest represented by $1,000 of Reference Principal Amount (as defined in the Class B Pass Through Trust Agreement) set forth in Exhibit A to the Class B Pass Through Trust Agreement and the Class B Certificates shall be changed from 0.00321223% to 0.00172310%. ARTICLE II MISCELLANEOUS SECTION 2.01 Ratification Agreement. Each party hereto agrees and acknowledges that effective as of the Delayed Funding Date, simultaneously with the issuance of the Additional Certificates: (a) (i) the Pool Balance of the Class A Certificates shall be increased by $91,896,000 and (ii) the Pool Balance of the Class B Certificates shall be increased by $26,904,000; (b) (i) the Required Amount under the Class A Liquidity Facility shall be increased by $12,034,933 and (ii) the Required Amount under the Class B Liquidity Facility shall be increased by $4,433,399 and (c) (i) the Deposits held by the Depositary in respect of the Class A Certificates under the Delayed Deposit Agreement for such Class shall be $68,969,100 and (ii) the Deposits held by the Depositary in respect of the Class B Certificates under the Delayed Deposit Agreement for such Class shall be $20,130,900. SECTION 2.02 Non-Occurrence of Delayed Funding Date. If for any reason the Delayed Funding Date does not occur prior to November 20, 2002, the amendments to the Operative Agreements contemplated by this Agreement shall not become effective and no party to this Agreement shall have any right or claim against any other party hereto with respect to this Agreement. SECTION 2.03 Further Assurances. Each party hereto agrees to effect such other amendments to the Operative Agreements as may be necessary in order to effectuate the purposes of this Agreement. 9 SECTION 2.04 Non-Petition. Each of the parties hereto hereby agrees that it will not institute against, or join any other person in instituting against, the Class A Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any Federal or state bankruptcy or similar law, for one year and a day after the latest maturing note issued by the Class A Purchaser is paid in full. The provisions of this Section 2.04 shall survive the termination of this Agreement. SECTION 2.05 Limited Recourse. Notwithstanding anything to the contrary contained in this Agreement, the obligations of the Class A Purchaser under this Agreement are solely the corporate obligations of the Class A Purchaser and shall be payable by the Class A Purchaser solely as provided in this Section 2.05. Each of the parties hereto agrees that the Class A Purchaser shall only be required to pay (a) any fees or liabilities that it may incur hereunder only to the extent the Class A Purchaser has Excess Funds (as defined below) and (b) any expenses, indemnities or other liabilities that it may incur hereunder only to the extent the Class A Purchaser has Excess Funds. In addition, no amount owing by the Class A Purchaser hereunder in excess of the liabilities that the Class A Purchaser is required to pay in accordance with the preceding sentence shall constitute a claim (as defined in Section 101 to Title 11 of the United States Code) against the Class A Purchaser. No recourse shall be had for the payment of any amount owing hereunder or for the payment of any fee hereunder or any other obligation of, or claim against, the Class A Purchaser arising out of or based upon this Agreement, against any stockholder, employee, officer, director, incorporator or manager of the Class A Purchaser or affiliate thereof except as otherwise provided in this Section; provided, however, that the foregoing shall not relieve any such person or entity of any liability they might otherwise have as a result of fraudulent actions or omissions taken by them. Any and all claims against the Class A Purchaser shall be subordinate to the claims of the holders of the notes issued by the Class A Purchaser. The obligations of the parties hereto under this Section shall survive the termination of this Agreement. For purposes of this Section 2.05, "Excess Funds" shall mean, as of any date of determination, all funds not required, after giving effect to all amounts on deposit in the commercial paper account of the Class A Purchaser or the issuer account of the Class A Purchaser or expected to be on deposit in the commercial paper account of the Class A Purchaser, to pay or provide for the payment of any outstanding notes issued by the Class A Purchaser when due. SECTION 2.06 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. SECTION 2.07 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. SECTION 2.08 Notwithstanding anything contained herein to the contrary, it is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Wilmington Trust Company, not individually or personally but solely as Pass 10 Through Trustee, Paying Agent and Subordination Agent, in the exercise of the powers and authority conferred and vested in it under the Operative Agreements, (b) each of the representations, undertakings and agreements herein made on the part of the Pass Through Trustee, Paying Agent and Subordination Agent is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose for binding only the Pass Through Trusts and (c) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Pass Through Trustee, Paying Agent and Subordination Agent or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Pass Through Trustee, Paying Agent and Subordination Agent under this Agreement or the other related documents. 11 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. AMERICAN TRANS AIR, INC. By __________________________________________ Name: Title: Address: 7337 West Washington Street Indianapolis, Indiana 46231 Attention: Facsimile: AMTRAN, INC., as Guarantor By ___________________________________________ Name: Title: Address: 7337 West Washington Street Indianapolis, Indiana 46231 Attention: Facsimile: WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Pass Through Trustee By ___________________________________________ Name: Title: Address: Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Facsimile: (302) 636-4140 WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Subordination Agent By _________________________________________ Name: Title: Address: Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Facsimile: (302) 636-4140 WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By __________________________________________ Name: Title: Address: 79 South Main Street, 3rd Floor Salt Lake City, Utah 84111 Attention: Corporate Trust Department Facsimile: (801) 246-5053 WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Paying Agent By ____________________________________________ Name: Title: Address: Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Facsimile: (302) 636-4140 AIG MATCHED FUNDING CORP., as Class A Liquidity Provider and Class B Liquidity Provider By _____________________________________________ Name: Title: Address: prior to April 7, 2002: 100 Nyala Farm Westport, CT 06880 on or after April 7, 2002 50 Danbury Road Wilton, CT 06897-4444 Attention: Chief Financial Officer Facsimile: (203) 222 4780 NYALA FUNDING LLC By ______________________________________________ Name: Title: Address: c/o Global Securitization Services, LLC 114 West 47th Street, Suite 1715 New York, New York 10036 Attention: Frank B. Bilotta Facsimile: (212) 302-8767 PK AIRFINANCE US, INC. By ______________________________________________ Name: Title: Address: Attention: Facsimile: EXHIBIT A --------- SCHEDULE VI to Note Purchase Agreement ----------------------- MANDATORY ECONOMIC TERMS Equipment Notes - --------------- Obligor: American Trans Air, Inc. or an Owner Trust Maximum Principal Amount: The aggregate original principal amount of all Equipment Notes for all Aircraft shall not exceed the aggregate face amount of all Certificates issued on March 28, 2002 (the "Initial Issuance Date") and the Delayed Funding Date. The aggregate original principal amount of all Equipment Notes of any series shall not exceed the aggregate face amount of all Certificates of the related class issued on the Initial Issuance Date and the Delayed Funding Date. Initial loan to aircraft value (with the value of any Aircraft equal to the value for such Aircraft set forth in the Private Placement Memorandum in "Appendix IV - Secured Promissory Notes and the Aircraft" under the column "Appraised Base Value"): Series A: not in excess of 51% Series B: not in excess of 66% The loan to aircraft value for each series of Equipment Notes issued in respect of each Aircraft (computed (i) after aggregating the principal amount of all series of Equipment Notes that rank senior to the series of Equipment Notes for which loan to aircraft value is being calculated and (ii) as of the date of the issuance thereof on the basis of the Assumed Appraised Value of such Aircraft and the Depreciation Assumption (as defined in the Private Placement Memorandum in the Glossary) must not exceed as of any Regular Distribution Date thereafter (assuming no default in the payment of the Equipment Notes) the following amounts: Series A: not in excess of 51% Series B: not in excess of 66% Initial average life (in years) Series A: not extend beyond 8 years from the Initial Issuance Date Series B: not extend beyond 5 years from the Initial Issuance Date Average life (in years) As of the Delivery Period Termination Date (or if earlier, the date of the occurrence of a Triggering Event), the average life of the Class A Certificates and the Class B Certificates shall not exceed, respectively, 7.14 to 7.34 years from the Initial Issuance Date, subject to final reoptimization, and 4 years from the Initial Issuance Date (computed without regard to the acceleration of any Equipment Notes and after giving effect to any special distribution on the Certificates thereafter required in respect of unused Deposits). Amortization Schedule The amortization schedule for each Series of Equipment Notes, assuming the maximum amount thereof in respect of all of the Aircraft are purchased by the Pass Through Trusts and all Aircraft are delivered as currently scheduled shall be as set forth in Schedule VII of the Note Purchase Agreement. Final Maturity Date Series A: November 20, 2014 Series B: August 20, 2009 Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day months, payable semi-annually in arrears) Series A: 8.328% Series B: 10.699% Payment Dates: February 20, May 20, August 20 and November 20 Make-Whole Premiums: As provided in Section 1.01 of the forms of Trust Indenture marked as Exhibit A-3 and C-2 of the Note Purchase Agreement (the "Trust Indenture Form") Redemption and Purchase: As provided in Article II of the Trust Indenture Form Lease - ----- Term: The Base Lease Term shall expire by its terms on or after final maturity date of the related Series A Equipment Notes Lease Payment Dates: February 20, May 20, August 20 and November 20 Minimum Rent: Basic Rent due and payable on each Payment Date shall be at least sufficient to pay in full, as of such Payment Date (assuming timely payment of the related Equipment Notes prior to such Date), the aggregate principal amount of scheduled installments due on the related Equipment Notes outstanding on such Payment Date together with accrued and unpaid interest thereon Supplemental Rent: Sufficient to cover the sums described in clauses (1) through (6) of such term as defined in Section 1 of the forms of Leases (the "Lease Form") marked as Exhibits A-2-1 and A-2-2 of the Note Purchase Agreement Stipulated Loss Value: At all times equal to or greater than the then outstanding principal amount of the related Equipment Notes plus, for any date other than a Lease Payment Date, accrued interest thereon EBO Price: Equal to or greater than the then-current Stipulated Loss Value Termination Value: At all times equal to or greater than the then outstanding principal amount of the related Equipment Notes plus, for any date other than a Lease Payment Date, accrued interest thereon All-risk hull insurance: Not less than Stipulated Loss Value, subject to Lessee's right to self-insure on terms no more favorable to Lessee in any material respect than those set forth in Section 11 of the Lease Form. Minimum Liability Insurance Amount: As set forth in Schedule I of the Lease Form Past Due Rate: As set forth in Schedule 1 of the Lease Form Participation Agreement Loan Trustee, Subordination Agent, Liquidity Providers, Pass Through Trustees, Escrow Agents and Note Holders indemnified against Expenses and Taxes to the extent set forth in Section 9 of the form of the Participation Agreement (the "Leased Aircraft Participation Form") marked as Exhibit A-1 to the Note Purchase Agreement and Section 7 of the form of the Participation Agreement (the "Owned Aircraft Participation Form") marked as Exhibit C-1 of the Note Purchase Agreement. EXHIBIT B --------- SCHEDULE VII to Note Purchase Agreement ----------------------- AGGREGATE AMORTIZATION SCHEDULE
CLASS A CLASS A CLASS B CLASS B SECURED TRUST SECURED TRUST PROMISSORY NOTES EXPECTED PROMISSORY NOTES EXPECTED SCHEDULED PAYMENTS POOL SCHEDULED PAYMENTS POOL DATES OF PRINCIPAL FACTOR OF PRINCIPAL FACTOR - ---------------------------------------------------------------------------------------------------------------------- 20-FEB-03 $1,011,441.35 0.9950325 $512,362.56 0.9911715 20-MAY-03 1,112,539.67 0.9895685 255,958.51 0.9867611 20-AUG-03 232,918.44 0.9884246 3,341,893.50 0.9291770 20-NOV-03 2,169,776.87 0.9777681 1,499,271.74 0.9033430 20-FEB-04 6,190,495.66 0.9473647 12,355,547.31 0.6904448 20-FEB-05 6,190,686.00 0.9169604 14,443,948.29 0.4415614 20-FEB-06 8,493,573.59 0.8752459 14,337,256.17 0.1945164 20-FEB-07 16,904,834.73 0.7922212 8,191,327.43 0.0533718 20-FEB-08 24,347,214.91 0.6726446 3,097,434.49 0.0000000 20-FEB-09 29,865,568.59 0.5259658 0.00 0.0000000 20-MAY-09 11,413.96 0.5259098 0.00 0.0000000 20-AUG-09 11,651.60 0.5258525 0.00 0.0000000 20-NOV-09 11,894.18 0.5257941 0.00 0.0000000 20-FEB-10 31,396,990.14 0.3715940 0.00 0.0000000 20-MAY-10 362,862.97 0.3698119 0.00 0.0000000 20-AUG-10 370,417.79 0.3679927 0.00 0.0000000 20-NOV-10 378,129.88 0.3661355 0.00 0.0000000 20-FEB-11 32,073,815.04 0.2086114 0.00 0.0000000 20-MAY-11 1,053,779.38 0.2034359 0.00 0.0000000 20-AUG-11 1,075,719.07 0.1981527 0.00 0.0000000 20-NOV-11 1,098,115.53 0.1927596 0.00 0.0000000 20-FEB-12 27,106,005.33 0.0596338 0.00 0.0000000 20-MAY-12 805,325.33 0.0556786 0.00 0.0000000 20-AUG-12 822,092.20 0.0516411 0.00 0.0000000 20-NOV-12 839,208.17 0.0475194 0.00 0.0000000 20-FEB-13 9,675,529.62 0.0000000 0.00 0.0000000
EX-4.17(A) 19 file018.txt DELAYED FUNDING IMPLEMENTATION - AMENDMENT NO. 1 EXECUTION VERSION DELAYED FUNDING IMPLEMENTATION AGREEMENT AMENDMENT NO. 1 [ATA EETC 2002-1] DATED AS OF OCTOBER 15, 2002 AMONG AMERICAN TRANS AIR, INC., ATA HOLDINGS CORP. (F/K/A AMTRAN, INC.) AS GUARANTOR, WILMINGTON TRUST COMPANY, AS PASS THROUGH TRUSTEE UNDER EACH OF THE PASS THROUGH TRUST AGREEMENTS, WILMINGTON TRUST COMPANY, AS SUBORDINATION AGENT, WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, AS ESCROW AGENT, WILMINGTON TRUST COMPANY, AS PAYING AGENT, AIG MATCHED FUNDING CORP., AS CLASS A LIQUIDITY PROVIDER AND CLASS B LIQUIDITY PROVIDER, NYALA FUNDING LLC, AS INITIAL PURCHASER OF CLASS A CERTIFICATES, AND PK AIRFINANCE US, INC. AS INITIAL PURCHASER OF CLASS B CERTIFICATES DELAYED FUNDING IMPLEMENTATION AGREEMENT AMENDMENT NO. 1 (ATA EETC 2002-1) RECITALS: A. Each of (i)American Trans Air, Inc., an Indiana corporation (the "Company"), (ii) ATA Holdings Corp., formerly known as Amtran, Inc., an Indiana corporation (the "Guarantor"), (iii) Wilmington Trust Company, a Delaware banking corporation ("WTC"), not in its individual capacity, but solely as trustee (in such capacity together with its successors in such capacity, the "Pass Through Trustee") under each of the two separate Pass Through Trust Agreements, (iv) WTC, not in its individual capacity, but solely as subordination agent and trustee (in such capacity together with its successors in such capacity, the "Subordination Agent") under the Intercreditor Agreement, (v)Wells Fargo Bank Northwest, National Association, a national banking association, as escrow agent (in such capacity together with its successors in such capacity, the "Escrow Agent"), under each of the Escrow and Paying Agent Agreements, (vi) WTC, not in its individual capacity, but solely as Paying Agent (in such capacity together with its successors in such capacity, the "Paying Agent") under each of the Escrow and Paying Agent Agreements, (vii) AIG Matched Funding Corp., not in its individual capacity except as otherwise expressly provided herein, but solely as Class A Liquidity Provider and Class B Liquidity Provider (in such capacity together with its successors in such capacity, the "Liquidity Provider") under each of the Revolving Credit Agreements, (viii) Nyala Funding LLC, as initial purchaser (the "Class A Purchaser"), under the Class A Certificate Purchase Agreement, and (ix) PK Airfinance US, Inc., as initial purchaser (the "Class B Purchaser") under the Class B Certificate Purchase Agreement entered into a Delayed Funding Implementation Agreement dated as of March 28, 2002 (the "Delayed Funding Implementation Agreement"). All capitalized terms in this Amendment that are not defined herein will have the same meaning as provided in the Delayed Funding Implementation Agreement. All references to "Sections" or "Exhibits" refer to Sections and Exhibits of the Delayed Funding Implementation Agreement, unless otherwise noted herein. The Company, Guarantor, WTC, Pass Through Trustee, Subordination Agent, Escrow Agent, and Paying Agent, Liquidity Provider, Class A Purchaser, and Class B Purchaser are collectively referred to in this Amendment as the "Parties." B. The Parties wish to amend and revise the Delayed Funding Implementation Agreement as provided below. Therefore, for good and valuable consideration, the Parties hereby agree to amend and revise the Delayed Funding Implementation Agreement as follows: Delayed Funding Implementation Agreement - Amendment No. 1 - Page 1 1. Except as specifically modified in this Amendment, the terms of the Delayed Funding Implementation Agreement will remain in full force and effect. In the event that the terms of this Amendment conflict in any way with the terms of the Delayed Funding Implementation Agreement, the terms of this Amendment will control. 2. The ninth recital paragraph beginning "WHEREAS" of the Delayed Funding Implementation Agreement will be revised to delete the text indicated by strike-out text below, to replace such deleted text with the language indicated by double-underlined text below, and to retain the language indicated by italicized text below: WHEREAS, the Company and Amtran have contemporaneously herewith entered into two separate letter agreements (i) one with the Class A Purchaser and AIG Financial Products Corp. providing for the purchase of an additional $91,896,000 principal amount of the Class A Certificates (the "Additional Class A Certificates") and (ii) one with the Class B Purchaser providing for the purchase of an additional $25,149,000 principal amount of the Class B Certificates (the "Additional Class B Certificates", and together with the Additional Class A Certificates, the "Additional Certificates"), in each case on October 15, 2002 or such other date mutually agreed to by the Company, Amtran, the Class A Purchaser and the Class B Purchaser (such date, the "Delayed Funding Date"); 3. Sections 1.02(a)(i) and (b)(i) will be revised to delete the language indicated by strike-out text below, to replace such deleted text with the language indicated by double-underlined text below, and to retain the language indicated by italicized text below: (a)(i) The definition of the term "Maximum Commitment" contained in Section 1.1 of the Class A Revolving Credit Agreement shall be amended by (x) replacing "$14,793,433" appearing therein with $26,914,884.47. (b)(i) The definition of the term "Maximum Commitment contained in Section 1.1 of the Class B Revolving Credit Agreement shall be amended by (x) replacing "$5,229,541" appearing therein with $9,366,127.99. 4. Section 1.03(c) will be revised to delete the language indicated by strike-out text below, to replace such deleted text with the language indicated by double-underlined text below, and to retain the language indicated by italicized text below: (i) Section 1.03 of the Class B Escrow Agreement shall be amended by adding a second paragraph to such Section to read as follows: The Escrow Agent hereby directs the Purchaser to, and the Purchaser hereby acknowledges that on the Delayed Funding Date (as defined in the Delayed Funding Implementation Agreement) it shall, irrevocably deliver by wire transfer to the Depositary on behalf of the Escrow Agent an amount in Dollars and immediately available funds equal to $18,814,650 for deposit on behalf of the Escrow Agent with the Depositary in accordance with Section 2.1 of the Deposit Agreement. The Purchaser hereby instructs the Escrow Agent, upon receipt of such sum from the Purchaser, to confirm such receipt by executing and delivering to the Pass Through Trustee an Escrow Receipt (a) to be affixed by the Pass Through Trustee to each Additional Class B Certificate (as defined in the Delayed Funding Implementation Agreement) being issued on the Delayed Funding Date and (b) to evidence the same percentage interest (the "Escrow Interest") in the Account Amounts (as defined in Section 1.04) as the Fractional Undivided Interest in the Pass Through Trust evidenced by the Additional Class B Certificate to which it is to be affixed. 5. Section 1.05(b)(iv) will be revised to delete the language indicated by strike-out text below, to replace such deleted text with the language indicated by double-underlined text below, and to retain the language indicated by italicized text below: (iv) The percentage ownership interest represented by $1,000 of Reference Principal Amount (as defined in the Class B Pass Through Trust Agreement) set forth in Exhibit A to the Class B Pass Through Trust Agreement and the Class B Certificates shall be changed from 0.00321223% to 0.00177683%. 6. Section 2.01 will be revised to delete the language indicated by strike-out text below, to replace such deleted text with the language indicated by double-underlined text below, and to retain the language indicated by italicized text below: Section 2.01 Ratification Agreement. Each party hereto agrees and acknowledges that effective as of the Delayed Funding Date, simultaneously with the issuance of the Additional Certificates: Delayed Funding Implementation Agreement - Amendment No. 1 - Page 2 (a) (i) the Pool Balance of the Class A Certificates shall be increased by $91,896,000 and (ii) the Pool Balance of the Class B Certificates shall be increased by $25,149,000; (b) (i) the Required Amount under the Class A Liquidity Facility shall be increased by $12,168,868.32 and (ii) the Required Amount under the Class B Liquidity Facility shall be increased by $4,224,654.77; and (c) (i) the Deposits held by the Depositary in respect of the Class A Certificates under the Delayed Deposit Agreement for such Class shall be $68,969,100 and (ii) the Deposits held by the Depositary in respect of the Class B Certificates under the Delayed Deposit Agreement for such Class shall be $18,814,650. 7. No other change to the Delayed Funding Implementation Agreement is intended to be effected by this Amendment. [Remainder of Page Intentionally Left Blank] Delayed Funding Implementation Agreement - Amendment No. 1 - Page 3 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. AMERICAN TRANS AIR, INC. By ------------------------------------------- Name: Title: Address: 7337 West Washington Street Indianapolis, Indiana 46231 Attention: Facsimile: ATA HOLDINGS CORP. (f\k\a AMTRAN, INC.), as Guarantor By ------------------------------------------- Name: Title: Address: 7337 West Washington Street Indianapolis, Indiana 46231 Attention: Facsimile: Delayed Funding Implementation Agreement - Amendment No. 1 - Signature Page 1 WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Pass Through Trustee By ------------------------------------------- Name: Title: Address: Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Facsimile: (302) 636-4140 WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Subordination Agent By ------------------------------------------- Name: Title: Address: Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Facsimile: (302) 636-4140 Delayed Funding Implementation Agreement - Amendment No. 1 - Signature Page 2 WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------------------------- Name: Title: Address: 299 South Main Street, 12th Floor MAC: U1228-120 Salt Lake City, Utah 84111 Attention: Corporate Trust Department Facsimile: (801) 246-5053 WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Paying Agent By ------------------------------------------- Name: Title: Address: Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Facsimile: (302) 636-4140 Delayed Funding Implementation Agreement - Amendment No. 1 - Signature Page 1 AIG MATCHED FUNDING CORP., as Class A Liquidity Provider and Class B Liquidity Provider By ------------------------------------------- Name: Title: Address: 50 Danbury Road Wilton, CT 06897-4444 Attention: Chief Financial Officer Facsimile: (203) 222 4780 NYALA FUNDING LLC By ------------------------------------------- Name: Title: Address: c/o Global Securitization Services, LLC 114 West 47th Street, Suite 1715 New York, New York 10036 Attention: Frank B. Bilotta Facsimile: (212) 302-8767 Delayed Funding Implementation Agreement - Amendment No. 1 - Signature Page 2 PK AIRFINANCE US, INC. By ------------------------------------------- Name: Title: Address: Attention: Facsimile: Delayed Funding Implementation Agreement - Amendment No. 1 - Signature Page 3 EX-4.18 20 file019.txt DELAYED DEPOSIT AGREEMENT CLASS A EXECUTION COPY - -------------------------------------------------------------------------------- DELAYED DEPOSIT AGREEMENT (Class A) Dated as of March 28, 2002 between WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION as Escrow Agent and INTESABCI S.P.A., acting through its NEW YORK BRANCH, as Depositary - -------------------------------------------------------------------------------- DELAYED DEPOSIT AGREEMENT (Class A) dated as of March 28, 2002 (as amended, modified or supplemented from time to time, this "Agreement") between WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking association, as Escrow Agent under the Escrow and Paying Agent Agreement referred to below (in such capacity, together with its successors in such capacity, the "Escrow Agent"), and INTESABCI S.P.A, acting through its NEW YORK BRANCH, as depositary bank hereunder (the "Depositary"). W I T N E S S E T H - - - - - - - - - - WHEREAS, American Trans Air, Inc. ("ATA"), Amtran, Inc ("Amtran") and Wilmington Trust Company have entered into a Pass Through Trust Agreement dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pass Through Trust Agreement") relating to American Trans Air 2002-1A Pass Through Trust pursuant to which the American Trans Air Pass Through Trust, Series 2002-1A Certificates (the "Class A Certificates") are being issued; WHEREAS, ATA has entered into a Certificate Purchase Agreement dated as of March 26, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Certificate Purchase Agreement") with Amtran and Nyala Funding LLC (the "Purchaser", and together with its transferees and assigns as owners of the Class A Certificates, the "Investors") which provides for the purchase of the Class A Certificates; WHEREAS, ATA and Amtran have entered into a separate letter agreement with the Purchaser and AIG Financial Products Corp. providing for the purchase of an additional $91,896,000 principal amount of the Class A Certificates (the "Additional Class A Certificates") on October 15, 2002 or such other date mutually agreed to by ATA, Amtran and the Purchaser (such date, the "Delayed Funding Date"); WHEREAS, (i) ATA, Amtran, the Pass Through Trustee and certain other persons concurrently herewith are entering into the Note Purchase Agreement, dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Note Purchase Agreement") and (ii) pursuant to the Note Purchase Agreement (as amended by the Delayed Funding Implementation Agreement (as defined below) as of the Delayed Funding Date) the Pass Through Trustee, utilizing a portion of the proceeds from the sale of the Additional Class A Certificates (the "Net Proceeds") is expected to acquire from time to time on or prior to February 28, 2003 equipment notes (the "Equipment Notes") issued to finance or refinance the acquisition of certain aircraft by ATA, as lessee or as owner; WHEREAS, the Escrow Agent, the Purchaser, the Pass Through Trustee and Wilmington Trust Company, as paying agent for the Escrow Agent (in such capacity, together with its successors in such capacity, the "Paying Agent") concurrently herewith are entering into 2 an Escrow and Paying Agent Agreement (Class A), dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Escrow and Paying Agent Agreement"); WHEREAS, the ATA, Amtran, Wilmington Trust Company as the Trustee and Subordination Agent, the Escrow Agent, the Paying Agent, the Purchaser and certain other parties concurrently herewith are entering into a Delayed Funding Implementation Agreement, dated as of the date hereof (the "Delayed Funding Implementation Agreement"), pursuant to which the parties thereto agree, as of the Delayed Funding Date, to supplement and modify the Operative Agreements (as defined in the Intercreditor Agreement); and WHEREAS, the Purchaser and the Pass Through Trustee intend that, the Net Proceeds be held in escrow by the Escrow Agent on behalf of the Investors pursuant to the Escrow and Paying Agent Agreement (as amended by the Delayed Funding Implementation Agreement as of the Delayed Funding Date), subject to withdrawal upon request of and proper certification by the Pass Through Trustee for the purpose of purchasing Equipment Notes, and that pending such withdrawal the Net Proceeds be deposited by the Escrow Agent with the Depositary pursuant to this Agreement, which provides for the Depositary to pay interest for distribution to the Investors and to establish accounts from which the Escrow Agent shall requisition or demand withdrawals upon request of and proper certification by the Pass Through Trustee. NOW, THEREFORE, in consideration of the obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1.1. Acceptance of Depositary. The Depositary hereby agrees to act as depositary bank as provided herein and in connection therewith to accept all amounts to be delivered to or held by the Depositary pursuant to the terms of this Agreement. The Depositary further agrees to hold, maintain and safeguard the Deposits and the Accounts (as defined below) during the term of this Agreement in accordance with the provisions of this Agreement. The Depositary shall neither be responsible for or under, nor chargeable with knowledge of, the terms and conditions of any other agreement, instrument or document to which it is not a party, other than the Registration Rights Agreement (as defined in the Pass Through Trust Agreement) and Section 4(a)(vii) of the Note Purchase Agreement. This Agreement sets forth all of the obligations of the Depositary, and no additional obligations shall be implied from the terms of this Agreement or any other agreement, instrument or document. The Escrow Agent shall not have any right to withdraw, assign or otherwise transfer moneys held in the Accounts except as permitted by this Agreement. SECTION 1.2. Establishment of Accounts. The Escrow Agent (or ATA acting on its behalf) shall provide to the Depositary at least three Business Days' notice of the Delayed 3 Funding Date. The Escrow Agent hereby instructs the Depositary, and the Depositary agrees, to establish on the Delayed Funding Date (i) the separate deposit accounts listed on Schedule I hereto required in connection with the deposits contemplated by Section 2.1 hereof (each, an "Account" and collectively, the "Accounts"), and (ii) such additional separate deposit accounts as may be required in connection with the deposits contemplated by Section 2.4 hereof (each, also an "Account") in each case, in the name of the Escrow Agent and all on the terms and conditions set forth in this Agreement. SECTION 2.1. Deposits. The Escrow Agent shall direct the Purchaser to deposit with the Depositary on the Delayed Funding Date (the "Deposit Date") in immediately available funds by wire transfer to the Depositary at One William Street, New York, NY 10004, ABA #026005319, Attention: Paul Florcruz, Reference: American Trans Air 2002-1A, and the Depositary shall accept from the Purchaser, on behalf of the Escrow Agent, the Net Proceeds in the amount of US$68,969,100. Upon acceptance of such amount, the Depositary shall (i) establish each of the deposits specified in Schedule I hereto maturing on the date set forth in Schedule I hereto, (including any deposit made pursuant to Section 2.4 hereof, individually, a "Deposit" and, collectively, the "Deposits") and (ii) credit each Deposit to the related Account as set forth therein. No amount shall be deposited in any Account other than the related Deposit. SECTION 2.2. Interest. (a) Each Deposit shall bear interest from and including the date of deposit to but excluding the date of withdrawal at the rate of 8.328% (calculated on the basis of a year of twelve 30-day months) per annum payable to the Paying Agent on behalf of the Escrow Agent quarterly in arrears on each February 20, May 20, August 20 and November 20 (each, an "Interest Payment Date") and on the date of the Final Withdrawal (as defined below), commencing on the first Interest Payment Date occurring after the Delayed Funding Date, all in accordance with the terms of this Agreement (whether or not any such Deposit is withdrawn on an Interest Payment Date). Interest accrued on any Deposit that is withdrawn pursuant to a Notice of Purchase Withdrawal (as defined below) shall be paid on the next Interest Payment Date, notwithstanding any intervening Final Withdrawal (as defined below). In addition, interest accrued on any Deposit that is withdrawn pursuant to a Notice of Replacement Withdrawal (as defined below) but not paid on the date of the Replacement Withdrawal shall be paid on the next Interest Payment Date. (b) The parties hereto further acknowledge and agree that upon any increase in the rate of interest on the Class A Certificates (such increase referred to as a "Rate Increase") pursuant to the terms of the Registration Rights Agreement, the rate of interest borne by each Deposit in accordance with Section 2.2 (a) above shall increase by the amount of such Rate Increase, and upon any subsequent decrease in the rate of interest of the Equipment Notes (such decrease referred to as a "Rate Decrease") pursuant to the terms of the Registration Rights Agreement, the rate of interest borne by such Deposit shall decrease by the amount of such Rate Decrease. Pursuant to the Pass Through Trust Agreement, ATA has agreed to notify the 4 Depositary of each Rate Increase and Rate Decrease, provided that failure by the Depositary to receive any such notice shall not effect the interest rate borne by each Deposit. SECTION 2.3. Withdrawals. (a) On and after the date seven days after the establishment of any Deposit, the Escrow Agent may, by providing at least one Business Day's prior notice of withdrawal to the Depositary in the form of Exhibit A hereto (a "Notice of Purchase Withdrawal"), request withdrawal of the entire balance of such Deposit, except that at any time prior to the actual withdrawal of such Deposit, the Escrow Agent or the Pass Through Trustee may, by notice to the Depositary, cancel such withdrawal (including on the scheduled date therefor), and thereafter such Deposit shall continue to be maintained by the Depositary in accordance with the original terms thereof. Following such withdrawal the balance in the related Account shall be zero and the Depositary shall close such Account. As used herein, "Business Day" means any day, other than a Saturday, Sunday or other day on which commercial banks are authorized or required by law to close in New York, New York, Indianapolis, Indiana, Wilmington, Delaware or Salt Lake City, Utah. (b) (i) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit B hereto (a "Notice of Final Withdrawal"), request withdrawal of the entire amount of all of the remaining Deposits together with the payment by the Depositary of all accrued and unpaid interest earned on such Deposits to but excluding the specified date of withdrawal (a "Final Withdrawal"), on such date as shall be specified in such Notice of Final Withdrawal. If a Notice of Final Withdrawal has not been given to the Depositary on or before February 28, 2003 and there are unwithdrawn Deposits on such date, the Depositary shall pay the amount of the Final Withdrawal to the Paying Agent on March 17, 2003. (ii) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit C hereto (a "Notice of Replacement Withdrawal"), request withdrawal of the entire amount of all Deposits then held by the Depositary together with, if the Replacement Withdrawal occurs on an Interest Payment Date, the payment by the Depositary of all accrued and unpaid interest on such Deposits to but excluding the specified date of withdrawal (a "Replacement Withdrawal"), on such date as shall be specified in such Notice of Replacement Withdrawal. (c) If the Depositary receives a duly completed Notice of Purchase Withdrawal, Notice of Final Withdrawal or Notice of Replacement Withdrawal (each, a "Withdrawal Notice") complying on its face with the provisions of this Agreement, it shall make the payments specified therein in accordance with the provisions of this Agreement. If such complying Withdrawal Notice is received by the Depositary no later than 3:00 p.m. (New York City time) on a Business Day, the Depositary shall make the payments requested in such Withdrawal Notice no later than 11:00 a.m. (New York City time) on the next 5 succeeding Business Day or such later day specified in such Withdrawal Notice, and if such complying Withdrawal Notice is received by the Depositary after 3:00 p.m. (New York City time) on a Business Day, the Depositary shall make the payments requested in such Withdrawal Notice no later than 11:00 a.m. (New York time) on the second Business Day next following such Business Day or such later date specified in such Withdrawal Notice. SECTION 2.4. Other Accounts. On the date of withdrawal of any Deposit (pursuant to a Notice of Purchase Withdrawal), the Escrow Agent, or the Pass Through Trustee on behalf of the Escrow Agent, shall be entitled to re-deposit (or cause to be re-deposited) with the Depositary any portion thereof and the Depositary shall accept the same for deposit hereunder. Any sums so received for deposit shall be established as a new Deposit and credited to a new Account, all as more fully provided in Section 2.1 hereof, and thereafter the provisions of this Agreement shall apply thereto as fully and with the same force and effect as if such Deposit had been established on the Deposit Date except that (i) such Deposit may not be withdrawn prior to the date seven days after the establishment thereof and (ii) such Deposit shall mature on the date set forth in Schedule I hereto, and bear interest as provided in Section 2.2. The Depositary shall promptly give notice to the Escrow Agent of receipt of each such re-deposit and the Account number assigned thereto. SECTION 3. Termination. (a) This Agreement shall terminate on the fifth Business Day after the later of the date on which (i) all of the Deposits shall have been withdrawn and paid as provided herein without any re-deposit of any portion thereof being made and (ii) all accrued and unpaid interest earned on the Deposits shall have been paid as provided herein, but in no event prior to the date on which the Depositary shall have performed in full its obligations hereunder. (b) For the avoidance of doubt, the obligations of the Depositary under the last two sentences of Section 2.2(a) hereof shall remain in full force and effect notwithstanding the execution and delivery of a Replacement Deposit Agreement in accordance with Section 4(a)(vii) of the Note Purchase Agreement. SECTION 4. Payments. All payments (including, without limitation, those payments made in respect of Taxes (as defined and provided for below)) made by the Depositary hereunder shall be paid in United States Dollars and in immediately available funds by wire transfer (i) in the case of accrued interest on the Deposits payable under Section 2.2 hereof or any Final Withdrawal, directly to the Paying Agent at Wilmington Trust Company, Wilmington, DE, ABA # 031-100-092, Account No. 57830-0, Attention: Jeanne Oller, Reference: American Trans Air 2002-1A, or to such other account as the Paying Agent may direct from time to time in writing to the Depositary and the Escrow Agent and, (ii) in the case of any withdrawal of one or more Deposits pursuant to a Notice of Purchase Withdrawal or Notice of Replacement Withdrawal, directly to or as directed by the Pass Through Trustee as specified and in the manner 6 provided in such Notice of Purchase Withdrawal or Notice of Replacement Withdrawal. The Depositary hereby waives any and all rights of set-off, combination of accounts, right of retention or any similar right (whether arising under applicable law, contract or otherwise) it may have against the Deposits howsoever arising. Except as provided below, all payments on or in respect of each Deposit shall be made by the Depositary free and clear of and without reduction for or on account of any and all taxes, levies or other impositions or charges (collectively, "Taxes"). However, if the Depositary or the Paying Agent (pursuant to Section 2.04 of the Escrow and Paying Agent Agreement) shall be required by law to deduct or withhold any Taxes from or in respect of any sum payable hereunder, the Depositary shall (i) make such deductions or withholding, (ii) pay the full amount deducted or withheld (including in respect of such additional amounts) to the relevant taxation authority and (iii) if the Taxes required to be deducted or withheld are imposed by the Republic of Italy or any political subdivision thereof, pay such additional amounts as may be necessary in order that the actual amount received by the designated recipient of such sum under this Agreement or the Escrow and Paying Agent Agreement after such deduction or withholding equals the sum it would have received had no such deduction or withholding been required. If the date on which any payment due on any Deposit would otherwise fall on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day, and no additional interest shall accrue in respect of such extension. SECTION 5. Representation and Warranties. The Depositary hereby represents and warrants to ATA, the Escrow Agent, the Pass Through Trustee, the Investors and the Paying Agent that: (a) it is a banking corporation duly organized and existing under the laws of the Republic of Italy, acting through its New York branch; (b) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement; (c) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of it and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and this Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof; and (d) no authorization, consent or approval of or other action by, and, except for administrative and ministerial filings which the Depositary is obligated to make in the ordinary course of its business, no notice to or filing with, any Italian or United States 7 federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement. SECTION 6. Transfer. Neither party hereto shall be entitled to assign or otherwise transfer this Agreement (or any interest herein) other than (in the case of the Escrow Agent) to a successor escrow agent under the Escrow and Paying Agent Agreement, and any purported assignment in violation thereof shall be void. This Agreement shall be binding upon the parties hereto and their respective successors and (in the case of the Escrow Agent) permitted assigns. SECTION 7. Amendment, Etc. This Agreement may not be amended, waived or otherwise modified except by an instrument in writing signed by the parties hereto. SECTION 8. Notices. (a) Unless otherwise expressly provided herein, any notice, instruction or other communication under this Agreement shall be in writing (including by facsimile) and shall be deemed to be given and effective upon receipt thereof. All notices shall be sent to (x) in the case of the Depositary, IntesaBci S.p.A., New York Branch, Attention: Transportation Finance Group (Telecopier: 212-607-3966) and with a copy to IntesaBci S.p.A. New York Branch, One William Street, New York, NY 10004, Attention: Paul Florcruz, Dealing Room (Telecopier: 212-422-6235) or (y) in the case of the Escrow Agent, Wells Fargo Bank Northwest, National Association, 79 South Main Street, 3rd Floor, Salt Lake City, UT 84111, Attention: Corporate Trust Services (Telecopier: (801) 246-5053), in each case, with a copy to the Pass Through Trustee, Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, DE 19890, Attention: Corporate Trust Administration (Telecopier: (302) 636-4140), to ATA, 7337 West Washington Street, Attention: Kenneth K. Wolff, Chief Financial Officer (Telecopier: (317) 240-7091) and to the Purchaser, c/o Global Securitization Services, LLC, 114 West 47th Street, Suite 1715, New York, NY 10036, Attention: Frank B. Bilotta (Telecopier: (212) 302 8767) with a copy to AIG Financial Products Corp., as Administrator, (i) if prior to April 7, 2002, 100 Nyala Farm, Westport, CT 06880, Attention: Chief Financial Officer (Telecopier: (203) 222-4780) or (ii) if on or after April 7, 2002, 50 Danbury Road Wilton, CT 06894-4444, Attention: Chief Financial Officer (Telecopier: (203) 222-4780) (or at such other address as any such party may specify from time to time in a written notice to the parties mentioned above). On or prior to the execution of this Agreement, the Escrow Agent has delivered to the Depositary an incumbency certificate containing specimen signatures of the representatives of the Escrow Agent who are authorized to give notices and instructions with respect to this Agreement. The Depositary may conclusively rely on such certificate until the Depositary receives written notice from the Escrow Agent to the contrary. (b) The Depositary shall be fully protected and authorized in relying upon any instruction, notice, certification, demand, consent, authorization, receipt, power of attorney or other writing delivered to it by the Escrow Agent without being required to make any investigation or inquiry thereof, determine the authenticity or validity thereof or the correctness 8 of any fact stated therein, the propriety or validity of the service thereof, or the jurisdiction of the court issuing any judgment or order. The Depositary may act in reliance upon any signature believed by it to be genuine and reflected in the above-mentioned incumbency certificate, and may assume that the person so signing has been properly authorized to do so. Except as provided in this Agreement, the Depositary shall not be deemed to have any duty or notice hereunder unless and until it has been provided with written notice. (c) Anything to the contrary notwithstanding, the Depositary may consult with legal counsel of its selection in the event of any dispute, or question as to the meaning or construction of any of the provisions hereof or its duties hereunder, and it shall incur no liability and shall be fully authorized and protected in acting in accordance with the opinion and instructions of such counsel. SECTION 9. Obligations Unconditional. The Depositary hereby acknowledges and agrees that its obligation to repay each Deposit together with interest earned thereon as provided herein is absolute, irrevocable and unconditional and constitutes a full recourse obligation of the Depositary enforceable against it to the full extent of all of its assets and properties. SECTION 10. Funds Transfers. In the event funds transfer instructions are given (other than in writing at the time of execution of this Agreement), whether in writing, by telecopier or otherwise, the Depositary is authorized to seek confirmation of such instructions by telephone call back to the person or persons designated by the Escrow Agent, and the Depositary may rely upon the confirmations of anyone purporting to be the person or persons so designated. To assure accuracy of the instructions it receives, the Depositary may record such telephone call backs. If the Depositary is unable to confirm any instructions, or if not satisfied with the confirmation it receives, it will not execute the instruction until all issues have been resolved. The person and telephone numbers for call backs may be changed only in writing actually received and acknowledged by the Depositary. The Depositary shall receive notification of any errors, delays or other problems within thirty (30) days after a transaction has been executed. SECTION 11. Entire Agreement. This Agreement (including all attachments hereto) sets forth all of the promises, covenants, agreements, conditions and understandings between the Depositary and the Escrow Agent with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and undertakings, inducements or conditions, express or implied, oral or written. SECTION 12. Governing Law. This Agreement, and the rights and obligations of the Depositary and the Escrow Agent with respect to the Deposits, shall be governed by, and entirely construed in accordance with, the laws of the State of New York and subject to the provisions of Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. 9 SECTION 13. Waiver of Jury Trial Right. EACH OF THE DEPOSITARY AND THE ESCROW AGENT ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY. SECTION 14. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. IN WITNESS WHEREOF, the Escrow Agent and the Depositary have caused this Delayed Deposit Agreement (Class A) to be duly executed as of the day and year first above written. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------------------ Name: Title: INTESABCI S.P.A., acting through its NEW YORK BRANCH, as Depositary By ------------------------------------ Name: Title: By ------------------------------------ Name: Title: Schedule I Schedule of Deposits -------------------- (Class A)
Aircraft Deposit Date Tail No. Deposit Amount Account No. ------------ -------- -------------- ----------- October 15, 2002 N327TZ $22,972,800.00 12060 081 0013 October 15, 2002 N328TZ $22,972,800.00 12060 081 0015 October 15, 2002 N329TZ $23,023,500.00 12060 081 0017
EXHIBIT A NOTICE OF PURCHASE WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Delayed Deposit Agreement (Class A) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Delayed Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Delayed Deposit Agreement. In accordance with Section 2.3(a) of the Delayed Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of the Deposit, $_______, held by the Depositary in Account No. ------------. The undersigned hereby directs the Depositary to pay the proceeds of the Deposit to [________________, Account No. _____, Reference: _________] on _________ upon the telephonic request of a representative of Wilmington Trust Company, the Pass Through Trustee. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------ Name: Title: Dated: _________, ____ EXHIBIT B NOTICE OF FINAL WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Delayed Deposit Agreement (Class A) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Delayed Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Delayed Deposit Agreement. In accordance with Section 2.3(b) of the Delayed Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of all Deposits (as defined in the Delayed Deposit Agreement). The undersigned hereby directs the Depositary to pay, on , the proceeds of the Deposits and accrued and unpaid interest thereon to the Paying Agent at Wilmington Trust Company, ABA # _______________, Account No. ___________, Reference: American Trans Air 2002-1A. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------ Name: Title: Dated: _________, ____ EXHIBIT C NOTICE OF REPLACEMENT WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Delayed Deposit Agreement (Class A) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Delayed Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Delayed Deposit Agreement. In accordance with Section 2.3(b)(ii) of the Delayed Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of all Deposits [plus all accrued and unpaid interest on the Deposits to but excluding the date of withdrawal] for payment on __________. The undersigned hereby directs the Depositary to pay the proceeds of the Deposits to [Name of Replacement Depositary] at __________________________, ABA# _____________, Account No. _____________, Reference: American Trans Air 2002-1A [and to pay accrued and unpaid interest thereon to the Paying Agent at ___________, ABA #___________, Acct. No. ___________, Reference: American Trans Air 2002-1A]. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION as Escrow Agent By: ------------------------ Name: ------------------- Title: ------------------ Dated: _________, _____ EX-4.19 21 file020.txt DELAYED DEPOSIT AGREEMENT CLASS B EXECUTION COPY - -------------------------------------------------------------------------------- DELAYED DEPOSIT AGREEMENT (Class B) Dated as of March 28, 2002 between WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION as Escrow Agent and INTESABCI S.P.A., acting through its NEW YORK BRANCH, as Depositary - -------------------------------------------------------------------------------- DELAYED DEPOSIT AGREEMENT (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time, this "Agreement") between WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, a national banking association, as Escrow Agent under the Escrow and Paying Agent Agreement referred to below (in such capacity, together with its successors in such capacity, the "Escrow Agent"), and INTESABCI S.P.A, acting through its NEW YORK BRANCH, as depositary bank hereunder (the "Depositary"). W I T N E S S E T H WHEREAS, American Trans Air, Inc. ("ATA"), Amtran, Inc ("Amtran") and Wilmington Trust Company have entered into a Pass Through Trust Agreement dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Pass Through Trust Agreement") relating to American Trans Air 2002-1B Pass Through Trust pursuant to which the American Trans Air Pass Through Trust, Series 2002-1B Certificates (the "Class B Certificates") are being issued; WHEREAS, ATA has entered into a Certificate Purchase Agreement dated as of March 26, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Certificate Purchase Agreement") with Amtran and PK AirFinance US, Inc. (the "Purchaser", and together with its transferees and assigns as owners of the Class B Certificates, the "Investors") which provides for the purchase of the Class B Certificates; WHEREAS, ATA and Amtran have entered into a separate letter agreement with the Purchaser providing for the purchase of an additional $26,904,000 principal amount of the Class B Certificates (the "Additional Class B Certificates") on October 15, 2002 or such other date mutually agreed to by ATA, Amtran and the Purchaser (such date, the "Delayed Funding Date"); WHEREAS, (i) ATA, Amtran, the Pass Through Trustee and certain other persons concurrently herewith are entering into the Note Purchase Agreement, dated as of the date hereof (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Note Purchase Agreement") and (ii) pursuant to the Note Purchase Agreement (as amended by the Delayed Funding Implementation Agreement (as defined below) as of the Delayed Funding Date) the Pass Through Trustee, utilizing a portion of the proceeds from the sale of the Additional Class B Certificates (the "Net Proceeds") is expected to acquire from time to time on or prior to February 28, 2003 equipment notes (the "Equipment Notes") issued to finance or refinance the acquisition of certain aircraft by ATA, as lessee or as owner; WHEREAS, the Escrow Agent, the Purchaser, the Pass Through Trustee and Wilmington Trust Company, as paying agent for the Escrow Agent (in such capacity, together with its successors in such capacity, the "Paying Agent") concurrently herewith are entering into an Escrow and Paying Agent Agreement (Class B), dated as of the date hereof (as amended, 2 modified or supplemented from time to time in accordance with the terms thereof, the "Escrow and Paying Agent Agreement"); WHEREAS, the ATA, Amtran, Wilmington Trust Company as the Trustee and Subordination Agent, the Escrow Agent, the Paying Agent, the Purchaser and certain other parties concurrently herewith are entering into a Delayed Funding Implementation Agreement, dated as of the date hereof (the "Delayed Funding Implementation Agreement"), pursuant to which the parties thereto agree, as of the Delayed Funding Date, to supplement and modify the Operative Agreements (as defined in the Intercreditor Agreement); and WHEREAS, the Purchaser and the Pass Through Trustee intend that, the Net Proceeds be held in escrow by the Escrow Agent on behalf of the Investors pursuant to the Escrow and Paying Agent Agreement (as amended by the Delayed Funding Implementation Agreement as of the Delayed Funding Date), subject to withdrawal upon request of and proper certification by the Pass Through Trustee for the purpose of purchasing Equipment Notes, and that pending such withdrawal the Net Proceeds be deposited by the Escrow Agent with the Depositary pursuant to this Agreement, which provides for the Depositary to pay interest for distribution to the Investors and to establish accounts from which the Escrow Agent shall requisition or demand withdrawals upon request of and proper certification by the Pass Through Trustee. NOW, THEREFORE, in consideration of the obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1.1. Acceptance of Depositary. The Depositary hereby agrees to act as depositary bank as provided herein and in connection therewith to accept all amounts to be delivered to or held by the Depositary pursuant to the terms of this Agreement. The Depositary further agrees to hold, maintain and safeguard the Deposits and the Accounts (as defined below) during the term of this Agreement in accordance with the provisions of this Agreement. The Depositary shall neither be responsible for or under, nor chargeable with knowledge of, the terms and conditions of any other agreement, instrument or document to which it is not a party, other than the Registration Rights Agreement (as defined in the Pass Through Trust Agreement) and Section 4(a)(vii) of the Note Purchase Agreement. This Agreement sets forth all of the obligations of the Depositary, and no additional obligations shall be implied from the terms of this Agreement or any other agreement, instrument or document. The Escrow Agent shall not have any right to withdraw, assign or otherwise transfer moneys held in the Accounts except as permitted by this Agreement. SECTION 1.2. Establishment of Accounts. The Escrow Agent (or ATA acting on its behalf) shall provide to the Depositary at least three Business Days' notice of the Delayed Funding Date. The Escrow Agent hereby instructs the Depositary, and the Depositary agrees, to 3 establish on the Delayed Funding Date (i) the separate deposit accounts listed on Schedule I hereto required in connection with the deposits contemplated by Section 2.1 hereof (each, an "Account" and collectively, the "Accounts"), and (ii) such additional separate deposit accounts as may be required in connection with the deposits contemplated by Section 2.4 hereof (each, also an "Account") in each case, in the name of the Escrow Agent and all on the terms and conditions set forth in this Agreement. SECTION 2.1. Deposits. The Escrow Agent shall direct the Purchaser to deposit with the Depositary on the Delayed Funding Date (the "Deposit Date") in immediately available funds by wire transfer to the Depositary at One William Street, New York, NY 10004, ABA #026005319, Attention: Paul Florcruz, Reference: American Trans Air 2002-1B, and the Depositary shall accept from the Purchaser, on behalf of the Escrow Agent, the Net Proceeds in the amount of US$20,130,900. Upon acceptance of such amount, the Depositary shall (i) establish each of the deposits specified in Schedule I hereto maturing on the date set forth in Schedule I hereto, (including any deposit made pursuant to Section 2.4 hereof, individually, a "Deposit" and, collectively, the "Deposits") and (ii) credit each Deposit to the related Account as set forth therein. No amount shall be deposited in any Account other than the related Deposit. SECTION 2.2. Interest. (a) Each Deposit shall bear interest from and including the date of deposit to but excluding the date of withdrawal at the rate of 10.699% (calculated on the basis of a year of twelve 30-day months) per annum payable to the Paying Agent on behalf of the Escrow Agent quarterly in arrears on each February 20, May 20, August 20 and November 20 (each, an "Interest Payment Date") and on the date of the Final Withdrawal (as defined below), commencing on the first Interest Payment Date occurring after the Delayed Funding Date, all in accordance with the terms of this Agreement (whether or not any such Deposit is withdrawn on an Interest Payment Date). Interest accrued on any Deposit that is withdrawn pursuant to a Notice of Purchase Withdrawal (as defined below) shall be paid on the next Interest Payment Date, notwithstanding any intervening Final Withdrawal (as defined below). In addition, interest accrued on any Deposit that is withdrawn pursuant to a Notice of Replacement Withdrawal (as defined below) but not paid on the date of the Replacement Withdrawal shall be paid on the next Interest Payment Date. (b) The parties hereto further acknowledge and agree that upon any increase in the rate of interest on the Class B Certificates (such increase referred to as a "Rate Increase") pursuant to the terms of the Registration Rights Agreement, the rate of interest borne by each Deposit in accordance with Section 2.2 (a) above shall increase by the amount of such Rate Increase, and upon any subsequent decrease in the rate of interest of the Equipment Notes (such decrease referred to as a "Rate Decrease") pursuant to the terms of the Registration Rights Agreement, the rate of interest borne by such Deposit shall decrease by the amount of such Rate Decrease. Pursuant to the Pass Through Trust Agreement, ATA has agreed to notify the 4 Depositary of each Rate Increase and Rate Decrease, provided that failure by the Depositary to receive any such notice shall not effect the interest rate borne by each Deposit. SECTION 2.3. Withdrawals. (a) On and after the date seven days after the establishment of any Deposit, the Escrow Agent may, by providing at least one Business Day's prior notice of withdrawal to the Depositary in the form of Exhibit A hereto (a "Notice of Purchase Withdrawal"), request withdrawal of the entire balance of such Deposit, except that at any time prior to the actual withdrawal of such Deposit, the Escrow Agent or the Pass Through Trustee may, by notice to the Depositary, cancel such withdrawal (including on the scheduled date therefor), and thereafter such Deposit shall continue to be maintained by the Depositary in accordance with the original terms thereof. Following such withdrawal the balance in the related Account shall be zero and the Depositary shall close such Account. As used herein, "Business Day" means any day, other than a Saturday, Sunday or other day on which commercial banks are authorized or required by law to close in New York, New York, Indianapolis, Indiana, Wilmington, Delaware or Salt Lake City, Utah. (b) (i) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit B hereto (a "Notice of Final Withdrawal"), request withdrawal of the entire amount of all of the remaining Deposits together with the payment by the Depositary of all accrued and unpaid interest earned on such Deposits to but excluding the specified date of withdrawal (a "Final Withdrawal"), on such date as shall be specified in such Notice of Final Withdrawal. If a Notice of Final Withdrawal has not been given to the Depositary on or before February 28, 2003 and there are unwithdrawn Deposits on such date, the Depositary shall pay the amount of the Final Withdrawal to the Paying Agent on March 17, 2003. (ii) The Escrow Agent may, by providing at least 15 days' prior notice of withdrawal to the Depositary in the form of Exhibit C hereto (a "Notice of Replacement Withdrawal"), request withdrawal of the entire amount of all Deposits then held by the Depositary together with, if the Replacement Withdrawal occurs on an Interest Payment Date, the payment by the Depositary of all accrued and unpaid interest on such Deposits to but excluding the specified date of withdrawal (a "Replacement Withdrawal"), on such date as shall be specified in such Notice of Replacement Withdrawal. (c) If the Depositary receives a duly completed Notice of Purchase Withdrawal, Notice of Final Withdrawal or Notice of Replacement Withdrawal (each, a "Withdrawal Notice") complying on its face with the provisions of this Agreement, it shall make the payments specified therein in accordance with the provisions of this Agreement. If such complying Withdrawal Notice is received by the Depositary no later than 3:00 p.m. (New York City time) on a Business Day, the Depositary shall make the payments requested in such Withdrawal Notice no later than 11:00 a.m. (New York City time) on the next 5 succeeding Business Day or such later day specified in such Withdrawal Notice, and if such complying Withdrawal Notice is received by the Depositary after 3:00 p.m. (New York City time) on a Business Day, the Depositary shall make the payments requested in such Withdrawal Notice no later than 11:00 a.m. (New York time) on the second Business Day next following such Business Day or such later date specified in such Withdrawal Notice. SECTION 2.4. Other Accounts. On the date of withdrawal of any Deposit (pursuant to a Notice of Purchase Withdrawal), the Escrow Agent, or the Pass Through Trustee on behalf of the Escrow Agent, shall be entitled to re-deposit (or cause to be re-deposited) with the Depositary any portion thereof and the Depositary shall accept the same for deposit hereunder. Any sums so received for deposit shall be established as a new Deposit and credited to a new Account, all as more fully provided in Section 2.1 hereof, and thereafter the provisions of this Agreement shall apply thereto as fully and with the same force and effect as if such Deposit had been established on the Deposit Date except that (i) such Deposit may not be withdrawn prior to the date seven days after the establishment thereof and (ii) such Deposit shall mature on the date set forth in Schedule I hereto, and bear interest as provided in Section 2.2. The Depositary shall promptly give notice to the Escrow Agent of receipt of each such re-deposit and the Account number assigned thereto. SECTION 3. Termination. (a) This Agreement shall terminate on the fifth Business Day after the later of the date on which (i) all of the Deposits shall have been withdrawn and paid as provided herein without any re-deposit of any portion thereof being made and (ii) all accrued and unpaid interest earned on the Deposits shall have been paid as provided herein, but in no event prior to the date on which the Depositary shall have performed in full its obligations hereunder. (b) For the avoidance of doubt, the obligations of the Depositary under the last two sentences of Section 2.2(a) hereof shall remain in full force and effect notwithstanding the execution and delivery of a Replacement Deposit Agreement in accordance with Section 4(a)(vii) of the Note Purchase Agreement. SECTION 4. Payments. All payments (including, without limitation, those payments made in respect of Taxes (as defined and provided for below)) made by the Depositary hereunder shall be paid in United States Dollars and in immediately available funds by wire transfer (i) in the case of accrued interest on the Deposits payable under Section 2.2 hereof or any Final Withdrawal, directly to the Paying Agent at Wilmington Trust Company, Wilmington, DE, ABA # 031-100-092, Account No. 57831-0, Attention: Jeanne Oller, Reference: American Trans Air 2002-1B, or to such other account as the Paying Agent may direct from time to time in writing to the Depositary and the Escrow Agent and, (ii) in the case of any withdrawal of one or more Deposits pursuant to a Notice of Purchase Withdrawal or Notice of Replacement Withdrawal, directly to or as directed by the Pass Through Trustee as specified and in the manner 6 provided in such Notice of Purchase Withdrawal or Notice of Replacement Withdrawal. The Depositary hereby waives any and all rights of set-off, combination of accounts, right of retention or any similar right (whether arising under applicable law, contract or otherwise) it may have against the Deposits howsoever arising. Except as provided below, all payments on or in respect of each Deposit shall be made by the Depositary free and clear of and without reduction for or on account of any and all taxes, levies or other impositions or charges (collectively, "Taxes"). However, if the Depositary or the Paying Agent (pursuant to Section 2.04 of the Escrow and Paying Agent Agreement) shall be required by law to deduct or withhold any Taxes from or in respect of any sum payable hereunder, the Depositary shall (i) make such deductions or withholding, (ii) pay the full amount deducted or withheld (including in respect of such additional amounts) to the relevant taxation authority and (iii) if the Taxes required to be deducted or withheld are imposed by the Republic of Italy or any political subdivision thereof, pay such additional amounts as may be necessary in order that the actual amount received by the designated recipient of such sum under this Agreement or the Escrow and Paying Agent Agreement after such deduction or withholding equals the sum it would have received had no such deduction or withholding been required. If the date on which any payment due on any Deposit would otherwise fall on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day, and no additional interest shall accrue in respect of such extension. SECTION 5. Representation and Warranties. The Depositary hereby represents and warrants to ATA, the Escrow Agent, the Pass Through Trustee, the Investors and the Paying Agent that: (a) it is a banking corporation duly organized and existing under the laws of the Republic of Italy, acting through its New York branch; (b) it has full power, authority and legal right to conduct its business and operations as currently conducted and to enter into and perform its obligations under this Agreement; (c) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of it and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of it, and this Agreement has been duly executed and delivered by it and constitutes its legal, valid and binding obligations enforceable against it in accordance with the terms hereof; and (d) no authorization, consent or approval of or other action by, and, except for administrative and ministerial filings which the Depositary is obligated to make in the ordinary course of its business, no notice to or filing with, any Italian or United States federal or state governmental authority or regulatory body is required for the execution, delivery or performance by it of this Agreement. 7 SECTION 6. Transfer. Neither party hereto shall be entitled to assign or otherwise transfer this Agreement (or any interest herein) other than (in the case of the Escrow Agent) to a successor escrow agent under the Escrow and Paying Agent Agreement, and any purported assignment in violation thereof shall be void. This Agreement shall be binding upon the parties hereto and their respective successors and (in the case of the Escrow Agent) permitted assigns. SECTION 7. Amendment, Etc. This Agreement may not be amended, waived or otherwise modified except by an instrument in writing signed by the parties hereto. SECTION 8. Notices. (a) Unless otherwise expressly provided herein, any notice, instruction or other communication under this Agreement shall be in writing (including by facsimile) and shall be deemed to be given and effective upon receipt thereof. All notices shall be sent to (x) in the case of the Depositary, IntesaBci S.p.A., New York Branch, Attention: Transportation Finance Group (Telecopier: 212-607-3966) and with a copy to IntesaBci S.p.A. New York Branch, One William Street, New York, NY 10004, Attention: Paul Florcruz, Dealing Room (Telecopier: 212-422-6235) or (y) in the case of the Escrow Agent, Wells Fargo Bank Northwest, National Association, 79 South Main Street, 3rd Floor, Salt Lake City, UT 84111, Attention: Corporate Trust Services (Telecopier: 801-246-5053), in each case, with a copy to the Pass Through Trustee, Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, DE 19890, Attention: Corporate Trust Administration (Telecopier: 302-636-4140), to ATA, 7337 West Washington Street, Attention: Kenneth K. Wolff, Chief Financial Officer (Telecopier: 317-240-7091) and to the Purchaser, PK AirFinance US, Inc., 400 Madison Avenue, New York, NY 10017, Attention: Vice-President-Marketing (Telecopier: 212-397-9393) with a copy to PK AirFinance, S.A., European Bank and Business Center, 6D Route de Treves, Senningerberg, 2633 Luxembourg, Attention: Vice-President - Marketing, (Telecopier: 352- 3480-50) and Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, NY 10019, Attention: Joseph M. Juhas, Esq./Dev. R. Sen, Esq. (Telecopier: 212-259-6333) (or at such other address as any such party may specify from time to time in a written notice to the parties mentioned above). On or prior to the execution of this Agreement, the Escrow Agent has delivered to the Depositary an incumbency certificate containing specimen signatures of the representatives of the Escrow Agent who are authorized to give notices and instructions with respect to this Agreement. The Depositary may conclusively rely on such certificate until the Depositary receives written notice from the Escrow Agent to the contrary. (b) The Depositary shall be fully protected and authorized in relying upon any instruction, notice, certification, demand, consent, authorization, receipt, power of attorney or other writing delivered to it by the Escrow Agent without being required to make any investigation or inquiry thereof, determine the authenticity or validity thereof or the correctness of any fact stated therein, the propriety or validity of the service thereof, or the jurisdiction of the court issuing any judgment or order. The Depositary may act in reliance upon any signature believed by it to be genuine and reflected in the above-mentioned incumbency certificate, and 8 may assume that the person so signing has been properly authorized to do so. Except as provided in this Agreement, the Depositary shall not be deemed to have any duty or notice hereunder unless and until it has been provided with written notice. (c) Anything to the contrary notwithstanding, the Depositary may consult with legal counsel of its selection in the event of any dispute, or question as to the meaning or construction of any of the provisions hereof or its duties hereunder, and it shall incur no liability and shall be fully authorized and protected in acting in accordance with the opinion and instructions of such counsel. SECTION 9. Obligations Unconditional. The Depositary hereby acknowledges and agrees that its obligation to repay each Deposit together with interest earned thereon as provided herein is absolute, irrevocable and unconditional and constitutes a full recourse obligation of the Depositary enforceable against it to the full extent of all of its assets and properties. SECTION 10. Funds Transfers. In the event funds transfer instructions are given (other than in writing at the time of execution of this Agreement), whether in writing, by telecopier or otherwise, the Depositary is authorized to seek confirmation of such instructions by telephone call back to the person or persons designated by the Escrow Agent, and the Depositary may rely upon the confirmations of anyone purporting to be the person or persons so designated. To assure accuracy of the instructions it receives, the Depositary may record such telephone call backs. If the Depositary is unable to confirm any instructions, or if not satisfied with the confirmation it receives, it will not execute the instruction until all issues have been resolved. The person and telephone numbers for call backs may be changed only in writing actually received and acknowledged by the Depositary. The Depositary shall receive notification of any errors, delays or other problems within thirty (30) days after a transaction has been executed. SECTION 11. Entire Agreement. This Agreement (including all attachments hereto) sets forth all of the promises, covenants, agreements, conditions and understandings between the Depositary and the Escrow Agent with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and undertakings, inducements or conditions, express or implied, oral or written. SECTION 12. Governing Law. This Agreement, and the rights and obligations of the Depositary and the Escrow Agent with respect to the Deposits, shall be governed by, and entirely construed in accordance with, the laws of the State of New York and subject to the provisions of Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. 9 SECTION 13. Waiver of Jury Trial Right. EACH OF THE DEPOSITARY AND THE ESCROW AGENT ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY. SECTION 14. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. IN WITNESS WHEREOF, the Escrow Agent and the Depositary have caused this Delayed Deposit Agreement (Class B) to be duly executed as of the day and year first above written. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By -------------------------------- Name: Title: INTESABCI S.P.A., acting through its NEW YORK BRANCH, as Depositary By -------------------------------- Name: Title: By -------------------------------- Name: Title: Schedule I Schedule of Deposits (Class B)
Aircraft Deposit Date Tail No. Deposit Amount Account No. ------------ -------- -------------- ----------- October 15, 2002 N327TZ $6,727,200.00 12060 081 0014 October 15, 2002 N328TZ $6,727,200.00 12060 081 0016 October 15, 2002 N329TZ $6,676,500.00 12060 081 0018
EXHIBIT A NOTICE OF PURCHASE WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Delayed Deposit Agreement (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Delayed Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Delayed Deposit Agreement. In accordance with Section 2.3(a) of the Delayed Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of the Deposit, $_______, held by the Depositary in Account No. _______________. The undersigned hereby directs the Depositary to pay the proceeds of the Deposit to [________________, Account No. _____, Reference: _________] on _________ upon the telephonic request of a representative of Wilmington Trust Company, the Pass Through Trustee. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------ Name: Title: Dated: _________, ____ EXHIBIT B NOTICE OF FINAL WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Delayed Deposit Agreement (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Delayed Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Delayed Deposit Agreement. In accordance with Section 2.3(b) of the Delayed Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of all Deposits (as defined in the Delayed Deposit Agreement). The undersigned hereby directs the Depositary to pay, on ______________________, the proceeds of the Deposits and accrued and unpaid interest thereon to the Paying Agent at Wilmington Trust Company, ABA # _______________, Account No. ___________, Reference: American Trans Air 2002-1B. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By ------------------------ Name: Title: Dated: _________, ____ EXHIBIT C NOTICE OF REPLACEMENT WITHDRAWAL IntesaBci S.p.A., New York Branch One William Street New York, NY 10004 Attention: Paul Florcruz Telecopier: 212-422-6235 Gentlemen: Reference is made to the Delayed Deposit Agreement (Class B) dated as of March 28, 2002 (as amended, modified or supplemented from time to time in accordance with the terms thereof, the "Delayed Deposit Agreement") between Wells Fargo Bank Northwest, National Association, as Escrow Agent, and IntesaBci S.p.A., acting through its New York Branch, as Depositary (the "Depositary"). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Delayed Deposit Agreement. In accordance with Section 2.3(b)(ii) of the Delayed Deposit Agreement, the undersigned hereby requests the withdrawal of the entire amount of all Deposits [plus all accrued and unpaid interest on the Deposits to but excluding the date of withdrawal] for payment on __________. The undersigned hereby directs the Depositary to pay the proceeds of the Deposits to [Name of Replacement Depositary] at __________________________, ABA# _____________, Account No. _____________, Reference: American Trans Air 2002-1B [and to pay accrued and unpaid interest thereon to the Paying Agent at ___________, ABA #___________, Acct. No. ___________, Reference: American Trans Air 2002-1B]. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By: --------------------------------- Name: Title: Dated: _________, ____ EX-4.19(A) 22 file021.txt DELAYED DEPOSIT (CLASS B) - AMENDMENT NO. 1 DELAYED DEPOSIT AGREEMENT (CLASS B) AMENDMENT NO. 1 [ATA EETC 2002-1] DATED AS OF OCTOBER 15, 2002 BETWEEN WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, AS ESCROW AGENT AND INTESABCI S.P.A., ACTING THROUGH ITS NEW YORK BRANCH, AS DEPOSITARY DELAYED DEPOSIT AGREEMENT (CLASS B) AMENDMENT NO. 1 (ATA EETC 2002-1) RECITALS: A. Wells Fargo Bank Northwest, National Association, a national banking association, as escrow agent (in such capacity together with its successors in such capacity, the "Escrow Agent"), the Escrow and Paying Agent Agreements (as defined below), and IntesaBCI S.P.A., acting through its New York branch ("Depositary"), entered into a Delayed Deposit Agreement (Class B) dated as of March 28, 2002 (the "Delayed Deposit Agreement"). All capitalized terms in this Amendment that are not defined herein will have the same meaning as provided in the Delayed Deposit Agreement. All references to "Sections" or "Exhibits" refer to Sections and Exhibits of the Delayed Deposit Agreement, unless otherwise noted herein. The Escrow Agent and Depositary are collectively referred to in this Amendment as the "Parties." B. The Parties intend to amend and revise the Delayed Deposit Agreement as provided below. Therefore, for good and valuable consideration, the Parties hereby agree, effective as of the 15th day of October, 2002, to amend and revise the Delayed Deposit Agreement as follows: 1. Except as specifically modified in this Amendment, the terms of the Delayed Deposit Agreement will remain in full force and effect. In the event that the terms of this Amendment conflict in any way with the terms of the Delayed Deposit Agreement, the terms of this Amendment will control. 2. The third recital paragraph beginning "WHEREAS" of the Delayed Deposit Agreement will be revised to delete the text indicated by strike-out text below, to replace such deleted text with the language indicated by double-underlined text below, and to retain the language indicated by italicized text below: WHEREAS, ATA and Amtran have entered into a separate letter agreement with the Purchaser providing for the purchase of an additional $25,149,000 principal amount of the Class B Certificates (the "Additional Class B Certificates") on October 15, 2002 or such other date mutually agreed to by ATA, Amtran and the Purchaser (such date, the "Delayed Funding Date"); 3. Section 2.1 will be revised to delete the text indicated by strike-out text below, to replace such deleted text with the language indicated by double- Delayed Deposit Agreement Amendment No. 1 - Page 1 underlined text below, and to retain the language indicated by italicized text below: SECTION 2.1. Deposits. The Escrow Agent shall direct the Purchaser to deposit with the Depositary on the Delayed Funding Date (the "Deposit Date") in immediately available funds by wire transfer to the Depositary at One William Street, New York, NY 10004, ABA #026005319, Attention: Paul Florcruz, Reference: American Trans Air 2002-1B, and the Depositary shall accept from the Purchaser, on behalf of the Escrow Agent, the Net Proceeds in the amount of US$18,814,650. Upon acceptance of such amount, the Depositary shall (i) establish each of the deposits specified in Schedule I hereto maturing on the date set forth in Schedule I hereto, (including any deposit made pursuant to Section 2.4 hereof, individually, a "Deposit" and, collectively, the "Deposits") and (ii) credit each Deposit to the related Account as set forth therein. No amount shall be deposited in any Account other than the related Deposit. 4. Schedule I will be deleted in its entirety, and replaced by the Revised Schedule I attached to this Amendment. [Remainder of Page Intentionally Left Blank] Delayed Deposit Agreement Amendment No. 1 - Page 2 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Escrow Agent By --------------------------------------- Name: Title: Address: 299 South Main Street 12th Floor Salt Lake City, Utah 84111 INTESABCI S.P.A., acting through its NEW YORK BRANCH as Depositary By --------------------------------------- Name: Title: By --------------------------------------- Name: Title: Address: One William Street New York, NY 10004 Delayed Deposit Agreement Amendment No. 1 - Signature Page Revised Schedule I Schedule of Deposits -------------------- (Class B) - ------------------ -------------------- ------------------ ----------------- Deposit Date Aircraft Tail No. Deposit Amount Account No. - ------------------ -------------------- ------------------ ----------------- October 15, 2002 N327TZ $6,288,450.00 12060 081 0014 - ------------------ -------------------- ------------------ ----------------- October 15, 2002 N328TZ $6,288,450.00 12060 081 0016 - ------------------ -------------------- ------------------ ----------------- October 15, 2002 N329TZ $6,237,750.00 12060 081 0018 - ------------------ -------------------- ------------------ ----------------- Delayed Deposit Agreement Amendment No. 1 Revised Schedule I EX-4.20 23 file022.txt DELAYED INDEMNITY AGREEMENT ================================================================================ DELAYED INDEMNITY AGREEMENT DATED AS OF MARCH 28, 2002 BETWEEN INTESABCI S.P.A., NEW YORK BRANCH as Depositary AMERICAN TRANS AIR, INC. AND AMTRAN, INC. ================================================================================ TABLE OF CONTENTS
PAGE ---- SECTION 1. INDEMNITY PAYMENTS..........................................................1 1.01 Indemnity Payments..........................................................1 1.02 Overdue Amounts. (a)........................................................2 1.03 Reduction of Notional Amounts...............................................2 1.04 Subsequent Index Period.....................................................3 1.05 Initial Index Rate..........................................................3 1.06 Replacement Drawing.........................................................3 1.07 Prepayment Drawing..........................................................3 SECTION 2. COLLATERAL ACCOUNT AND INVESTMENTS..........................................4 2.01 Collateral Account..........................................................4 2.02 Investment of Balance in Collateral Account.................................4 2.03 Pledge......................................................................4 2.04 Application and Termination.................................................4 2.05 No Duplication..............................................................5 SECTION 3. REPRESENTATIONS AND WARRANTIES..............................................5 SECTION 4. PAYMENTS, NO SETOFF.........................................................6 SECTION 5. INCREASED COSTS.............................................................6 SECTION 6. CAPITAL ADEQUACY............................................................7 SECTION 7. GUARANTEE...................................................................7 SECTION 8. BREAKAGE....................................................................9 SECTION 9. EXPENSES; INDEMNITY.........................................................9 SECTION 10. REMEDIES...................................................................10 SECTION 11. AMENDMENT, ETC.............................................................10 SECTION 12. NOTICES....................................................................10 SECTION 13. ENTIRE AGREEMENT...........................................................10 SECTION 14. GOVERNING LAW..............................................................11 SECTION 15. WAIVER OF JURY TRIAL RIGHT.................................................11 SECTION 16. COUNTERPARTS...............................................................11 SECTION 17. NO THIRD-PARTY BENEFICIARIES...............................................11
i DELAYED INDEMNITY AGREEMENT DELAYED INDEMNITY AGREEMENT, dated as of March 28, 2002 (this "Agreement") between INTESABCI S.P.A., New York Branch ("IntesaBci," and in its capacity as depositary bank under the Delayed Deposit Agreements referred to below, the "Depositary"), AMERICAN TRANS AIR, INC. ("ATA") and AMTRAN, INC. (the "Guarantor" or "Amtran"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, in connection with the financing of up to five aircraft to be operated by ATA, Wells Fargo Bank Northwest, N.A., as escrow agent (the "Escrow Agent"), and the Depositary are entering into (a) the Delayed Deposit Agreement (Class A), dated as of March 28, 2002 (the "Delayed Class A Deposit Agreement"), and (b) the Delayed Deposit Agreement (Class B) dated as of March 28, 2002 (the "Delayed Class B Deposit Agreement") (the Class A Deposit Agreement and the Class B Deposit Agreement, collectively, the "Delayed Deposit Agreements"), pursuant to which, among other things, (i) the Depositary will establish accounts into and from which the Escrow Agent shall make deposits, requests, withdrawals and re-deposits and (ii) the Depositary will pay the Escrow Agent a fixed rate of interest on each Deposit; WHEREAS, on the Delayed Funding Date, the Escrow Agent shall deposit (i) $68,969,100.00 with the Depositary under the Delayed Class A Deposit Agreement and (ii) $20,130,900.00 with the Depositary under the Delayed Class B Deposit Agreement; and WHEREAS, it is a condition precedent to the obligation of the Depositary to enter into the Delayed Deposit Agreements that ATA and the Guarantor enter into this Delayed Indemnity Agreement. NOW, THEREFORE, in consideration of the Depositary entering into the Delayed Deposit Agreements and the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows (capitalized terms not defined herein shall have the meanings set forth in Annex A hereto or if not therein defined, as defined in the Deposit Agreements): SECTION 1. Indemnity Payments. 1.01 Indemnity Payments. ATA agrees to pay (each such payment, an "Indemnity Payment"), to IntesaBci no later than 11:00 a.m. (New York City time) on each February 20, May 20, August 20 and November 20 on which interest is due under Section 2.2 of each Delayed Deposit Agreement and on the Final Withdrawal Date (each such date, an "Indemnity Payment Date"): (a) in the case of each Interest Payment Date occurring prior to the Final Withdrawal Date, an amount equal to the excess, if any, of (i) the aggregate amount of interest accrued on the Deposits in accordance with each Delayed Deposit Agreement during the Relevant Period for, and due and payable on, such Interest Payment Date over (ii) the sum of the Notional Earnings for each Notional Amount during such Relevant Period; (b) in the case of a Final Withdrawal Date which is not an Interest Payment Date, an amount equal to the excess, if any, of (i) the aggregate amount of interest accrued on the Deposits in accordance with each Delayed Deposit Agreement during the Relevant Period for, and due and payable on, the Final Withdrawal Date over (ii) the sum of the Notional Earnings on the amount of each Notional Amount outstanding on the Final Withdrawal Date (prior to giving effect to the Final Withdrawals under and as defined in each Delayed Deposit Agreement) during such Relevant Period; and (c) in the case of each Interest Payment Date occurring after the Final Withdrawal Date or a Final Withdrawal Date occurring on an Interest Payment Date, an amount equal to the excess, if any, of (i) the amount of interest accrued on the Deposits in accordance with each Delayed Deposit Agreement during the Relevant Period for, and due and payable on, such Interest Payment Date over (ii) the sum of (x) the sum of the Notional Earnings for each Notional Amount during such Relevant Period minus (y) unless the Final Withdrawal Date is an Interest Payment Date, the amount, if any, described in clause (b)(ii) above. Not later than three (3) Business Days prior to each Indemnity Payment Date, IntesaBci shall provide to ATA an estimate of the Indemnity Payment payable on such Indemnity Payment Date in accordance with the immediately preceding sentence. Not later than one Business Day prior to each Indemnity Payment Date, IntesaBci shall provide ATA with an invoice specifying the Indemnity Payment payable on such Indemnity Payment Date, which invoice shall be prima facie evidence of ATA's obligation to pay such Indemnity Payment. For avoidance of doubt, ATA shall not be obligated to pay any Indemnity Payment to the extent IntesaBci, as Depositary, has not paid interest on the Deposits or any other amount payable by it in accordance with the terms of the Delayed Deposit Agreements. 1.02 Overdue Amounts. (a) ATA agrees to pay to IntesaBci interest on any amount that shall not be paid by ATA when due under this Agreement (an "Overdue Amount") at the Base Rate plus 2%. Such interest shall be payable on demand and accrue on the portion of such overdue amount remaining unpaid from time to time, from (and, including) the date that such amount is not paid when due to (but excluding) the date when such overdue amount is paid in full, and shall be payable upon demand from time to time by IntesaBci. (b) Without limiting the generality of the foregoing, overdue interest accrued under Section 1.02(a) because amounts are on deposit in the Collateral Account which IntesaBci would be entitled to withdraw and apply in accordance with Section 2.03 hereof, but which IntesaBci cannot so withdraw and apply due to the operation of the "automatic stay" provisions of the United States Bankruptcy Code, shall be deemed Overdue Amounts from and including the date as of which such provisions are in effect to but excluding the date on which IntesaBci is permitted to apply and withdraw them. 1.03 Reduction of Notional Amounts. If one or more Deposits are withdrawn on any day in accordance with the Delayed Deposit Agreements, the Notional Amounts shall be deemed to be reduced by an amount equal to the excess of (i) the aggregate amount of the Deposits withdrawn on such day over (ii) the aggregate amount redeposited with the Depositary on such day under each Delayed Deposit Agreement; provided that the Notional Amounts shall be deemed to be increased by the aggregate amount redeposited with the Depositary under such 2 Delayed Deposit Agreement. Such reduction shall be applied to the Notional Amounts in the same order that the Index Period for each Notional Amount terminates (i.e., the reduction shall be applied first to the Notional Amount which shall then have an Index Period ending on or closest to the applicable day of withdrawal); provided that if the last day of the Index Period for two or more Notional Amounts shall be the same, then the reduction applied to such Notional Amounts shall be applied in inverse order to the Notional Amounts deemed reduced as a result of the relevant Deposit or Deposits withdrawal (pro rata as appropriate). 1.04 Subsequent Index Period. No later than one (1) Business Day prior to the end of the Initial Index Period, and each Subsequent Index Period, or during any Floating Index Period, for any Notional Amount, ATA may, by written notice to IntesaBci, select an additional period (each, a "Subsequent Index Period") for such Notional Amount not to extend beyond March 17, 2003 in each instance; provided that if ATA shall not select a Subsequent Index Period for such Notional Amount by 2:00 p.m. (New York City time) on such Business Day, ATA shall have deemed to have selected a Subsequent Index Period for such Notional Amount from and including the last day of the Initial Index Period or the immediately preceding Subsequent Index Period (as the case may be) to but excluding the next Business Day thereafter. Upon the selection (or deemed selection) of a Subsequent Index Period for a Notional Amount, IntesaBci shall promptly determine and then provide written notice to ATA of the Index Rate for such Subsequent Index Period for such Notional Amount. The Index Rate for any one day Subsequent Index Period shall be the Federal Funds Index Rate for such day (as determined by IntesaBci). The Index Rate for any Subsequent Index Period (other than for one day) shall be an interest rate per annum determined by IntesaBci in the same manner as the indicative interest rates per annum of Initial Period (other than for one day) heretofore provided to ATA by IntesaBci were determined, which determination shall be prima facie evidence of the amount thereof. 1.05 Initial Index Rate. Promptly following its determination thereof, the Depositary shall notify ATA of the Initial Index Rate for each Notional Amount. 1.06 Replacement Drawing. In the event of a Replacement Drawing, ATA shall pay to the Depositary no later than 11:00 a.m. (New York City time) on: (a) if accrued interest on the drawn Deposits is payable on the date of the Replacement Drawing (the "Replacement Drawing Date") or, otherwise, the succeeding Interest Payment Date the excess, if any, of (x) the aggregate amount of interest accrued on the Deposits in accordance with each Deposit Agreement during the Relevant Period for, and required to be paid on the Replacement Drawing Date or such Interest Payment Date over (y) the sum of the Notional Earnings on the amount of each Notional Amount outstanding on the Replacement Drawing Date (prior to giving effect to the Replacement Drawing effected on such date) during such Relevant Period; and (b) the Replacement Drawing Date, subject to the last sentence of Section 9 hereof, any breakage costs described in Section 8 hereof. 3 1.07 Prepayment Drawing. In the event of a Prepayment Drawing is respect of any Deposit, ATA shall pay to the Depositary no later than 11:00 a.m. (New York City time) on the date of such drawing: (a) the excess, if any, of (x) the aggregate amount of interest accrued on such Deposit in accordance with each Deposit Agreement during the Relevant Period for, and required to be paid on the such date over (y) the sum of the Notional Earnings on the amount of each Notional Amount outstanding in respect of such Deposit accrued through such date (prior to giving effect to the Prepayment Drawing effected on such date) during such Relevant Period; and (b) subject to the last sentence of Section 9 hereof, any breakage costs described in Section 8 hereof. SECTION 2. Collateral Account and Investments. 2.01 Collateral Account. There is hereby established with IntesaBci a collateral account (the "Collateral Account") in the name and under the control of IntesaBci into which ATA shall deposit cash from time to time in accordance with the provisions of Section 2 hereof. The balance from time to time in the Collateral Account shall be subject to withdrawal only as provided herein. 2.02 Investment of Balance in Collateral Account. Amounts on deposit in the Collateral Account shall be invested from time to time in Permitted Investments. Such Permitted Investments shall be held in the name and be under the control of IntesaBci. All Investment Earnings in respect of investments of amounts in the Collateral Account shall be credited to the Collateral Account and constitute a portion of the Pledged Security. IntesaBci agrees that the Permitted Investments shall earn interest from time to time at the LIBID Rate. 2.03 Pledge. As collateral security for the prompt payment in full when due of ATA's obligations under this Agreement and the Delayed Indemnity Agreement (the "Secured Obligations"), ATA hereby pledges and grants to IntesaBci a security interest in all of ATA's right, title and interest in and to the Collateral Account, all Permitted Investments made with amounts standing to the credit of the Collateral Account, all Investment Earnings thereon and all other monies, earnings and investments standing to the credit thereof (collectively, the "Pledge Security"). If at any time ATA shall fail to pay any Secured Obligation when due, IntesaBci may (in its sole discretion) (i) liquidate any investments made in respect of amounts deposited in the Collateral Account and (ii) apply or cause to be applied the balance from time to time outstanding to the credit of the Collateral Account to the payment of such Secured Obligation. 2.04 Application and Termination. (a) On each Indemnity Payment Date, an amount in the Collateral Account equal to the Indemnity Payment payable on such date shall be applied to ATA's obligations, if any, to make such Indemnity Payment on such Indemnity Payment Date. (b) Upon the later of (i) the later of (x) the date on which all of the Deposits shall have been withdrawn and paid (or shall be required to be withdrawn and paid) as provided in the Delayed Deposit Agreements without any redeposit and (y) the date on which all accrued and unpaid interest on the Deposits shall have been paid (or shall have become due and payable) 4 as provided in the Delayed Deposit Agreements (the later of clauses (x) and (y) being referred to as the "Deposit Agreement Termination Date") and (ii) the payment in full of all Secured Obligations due and payable on or prior to the Deposit Agreement Termination Date (the "Termination Date"), IntesBci shall forthwith pay all amounts in the Collateral Account, together with any unreleased Investment Earnings thereon, to ATA. 2.05 No Duplication. The obligations of ATA under Section 2.01 hereof and the obligations of IntesaBci under Section 2.02 shall be without duplication of their respective commensurate obligations under the Indemnity Agreement. SECTION 3. Representations and Warranties. (a) ATA represents and warrants to IntesaBci on the date hereof and on the Delayed Funding Date that: (i) ATA is duly incorporated, validly existing and in good standing under the laws of the State of Indiana and has the full corporate power, authority and legal right under the laws of the State of Indiana to execute and deliver this Agreement and to carry out the obligations of ATA under this Agreement; (ii) the execution and delivery by ATA of this Agreement and the performance by ATA of its obligations under this Agreement have been duly authorized by ATA and will not violate its Articles of Incorporation or by-laws, any law, rule or regulation binding on ATA or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; and (iii) this Agreement constitutes the legal, valid and binding obligation of ATA, enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity. (b) Amtran represents and warrants to IntesaBci that: (i) Amtran is duly incorporated, validly existing and in good standing under the laws of the State of Indiana and has the full corporate power, authority and legal right under the laws of the State of Indiana to execute and deliver this Agreement and to carry out the obligations of Amtran under this Agreement; (ii) the execution and delivery by Amtran of this Agreement and the performance by Amtran of its obligations under this Agreement have been duly authorized by Amtran and will not violate its Articles of Incorporation or by-laws, any law, rule or regulation binding on Amtran or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it is bound; (iii) this Agreement constitutes the legal, valid and binding obligation of Amtran, enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; 5 (iv) except as set forth in Amtran's most recent Annual Report on Form 10-K as amended, filed by Amtran with the SEC on or prior to the date hereof, or in any Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by Amtran with the SEC subsequent to such Form 10-K and on or prior to the date hereof, no action, claim or proceeding is now pending or, to the Actual Knowledge of Amtran, threatened, against Amtran, before any court, governmental body, arbitration board, tribunal or administrative agency, which is reasonably likely to be determined adversely to Amtran and if determined adversely to Amtran would result in a Material Adverse Change; and (v) the audited consolidated balance sheet of Amtran with respect to Amtran's most recent fiscal year included in Amtran's most recent Annual Report on Form 10-K, as amended, filed by Amtran with the SEC, and the related consolidated statements of operations and cash flows for the period then ended have been prepared in accordance with GAAP and fairly present in all material respects the financial condition of Amtran and its consolidated subsidiaries as of such date and the results of its operations and cash flows for such period, and since the date of such balance sheet there has been no material adverse change in such financial condition or operations of Amtran, except for matters disclosed in (a) the financial statements or Annual Report on Form 10-K referred to above or (b) any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by Amtran with the SEC on or prior to the date hereof. SECTION 4. Payments, No Setoff. All amounts (including, without limitation, those payments made in respect of Taxes (as defined and provided for below)) payable by ATA to IntesaBci hereunder shall be paid in U.S. Dollars in immediately available funds, to the account of IntesaBci at: IntesaBci S.p.A., New York Branch, One Williams Street, ABA#026005319, Account No. 12210330049, Reference: ATA Pass Through Trust 2002-l Deposit Indemnity or as IntesaBci may direct from time to time in writing to ATA. All amounts payable hereunder shall be made free and clear of, and without reduction for, or on account of, any and all taxes, levies or other impositions or charges ("Taxes"), other than taxes based on or measured by gross or net income, gross or net receipts, net worth, capital, franchise taxes or similar doing business taxes. SECTION 5. Increased Costs. In the event that any change in law or governmental rule, regulation or order, or in the interpretation, administration or application thereof (including the adoption of any new law or governmental rule, regulation or order), or any determination of a court or by any central bank or Government Entity, in each case that becomes effective after the date hereof, or compliance by IntesaBci (at its applicable lending office) with any guideline, request or directive issued or made after the date hereof by any such central bank or Government Entity (whether or not having the force of law): (i) subjects IntesaBci (or its applicable lending office) to any additional Tax (other than taxes excluded under Section 4 above) with respect to its obligations, commitments or extensions of credit hereunder, or under any of the Delayed Deposit Agreements or any payments to IntesaBci (or its applicable lending office) of any Indemnity Payment, interest, fees or any other amount payable under or in respect to this Agreement or any of the Delayed Deposit Agreements; or 6 (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits in or for the account of, or advances or loans by, or other credit extended by, IntesaBci; - -and the result of any of the foregoing is that IntesaBci shall incur increased costs which are attributable to this Agreement or the Delayed Deposit Agreements or to reduce any amount received or receivable by IntesaBci (or its applicable lending office) with respect to this Agreement; then, in any such case, ATA shall pay to IntesaBci, within five Business Days after receipt of the statement referred to in the next sentence, such additional amount or amounts as may be necessary to compensate IntesaBci for any such increased cost or reduction in amounts received or receivable hereunder. IntesaBci, promptly after the occurrence of such event, shall deliver to ATA a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to IntesaBci under this Section 5, which statement shall be prima facie evidence of ATA's obligation to pay such additional amounts. SECTION 6. Capital Adequacy. If the adoption after the date hereof of any applicable law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change after the date hereof in any existing interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or the promulgation after the date hereof of any guidelines, request or directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of IntesaBci or any corporation controlling IntesaBci as a consequence of IntesaBci's commitments, obligations or extensions of credit hereunder or under the Delayed Deposit Agreements to a level below that which IntesaBci or such controlling corporation could have achieved but for such adoption, change or promulgation (taking into consideration the policies of IntesaBci or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by ATA from IntesaBci of the statement referred to in the next sentence, ATA shall pay to IntesaBci such additional amount or amounts as will compensate IntesaBci or such controlling corporation on an after-tax basis for such reduction. IntesaBci shall deliver to ATA a written statement, setting forth in reasonable detail the basis of the calculation of such additional amounts, which statement shall be prima facie evidence of ATA's obligation to pay such additional amounts. SECTION 7. Guarantee. (a) The Guarantor hereby guarantees to the Depositary the prompt payment in full when due of all amounts payable by ATA hereunder strictly in accordance with the terms hereof (such obligations being herein collectively called the "Obligations"). This is a guarantee of payment, not of collection. Accordingly, the Guarantor hereby further agrees that if ATA shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Obligations, the Guarantor will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. 7 (b) The obligations of the Guarantor under Section 7(a) are irrevocable, absolute and unconditional irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of ATA under this Agreement or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 7(b) that the obligations of the Guarantor hereunder shall be irrevocable, absolute and unconditional under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantor hereunder, which shall remain irrevocable, absolute and unconditional as described above: (i) at any time or from time to time, without notice to the Guarantor, the time for any performance of or compliance with any of the Obligations shall be extended, or such performance or compliance shall be waived, or such Obligations shall be increased; (ii) any of the acts mentioned in any of the provisions of this Agreement or any other agreement or instrument referred to herein or therein shall be done or omitted; (iii) the maturity of any of the Obligations shall be accelerated, or any of the Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement or any other agreement or instrument referred to herein or therein shall be waived or any other guarantee of any of the Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; (iv) the dissolution, merger, consolidation, sale of all or substantially all of the assets or other corporate reorganization of ATA; or (v) any lien or security interest granted to, or in favor of, the Depositary as security for any of the Obligations shall be released or fail to be perfected. (c) The Guarantor hereby expressly waives diligence, presentment, demand of payment, notice of acceptance hereof, notice of the incurrence of any Obligation, protest and all notices whatsoever, and any requirement that the Depositary pursue or exhaust any right, power or remedy or otherwise proceed against ATA under this Agreement or any other agreement or instrument referred to herein or therein, or against any other Person under any other guarantee of, or security for, any of the Obligations. (d) The obligations of the Guarantor under this Section 7 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of ATA in respect of the Obligations is rescinded or must be otherwise restored by any holder of any of the Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise and the Guarantor agrees that it will indemnify the Depositary on demand for all reasonable costs and expenses (including, without limitation, fees of counsel) incurred by the Depositary prior to payment in full of their respective claims by the Guarantor in connection with such rescission or restoration, including any such costs and expenses incurred in defending 8 against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any applicable law. (e) ATA hereby acknowledges and confirms that it has an unqualified obligation to reimburse the Guarantor for the full amount of the Obligations hereby guaranteed by the Guarantor and paid or otherwise satisfied by the Guarantor. The Guarantor hereby agrees that until the payment and satisfaction in full of all Obligations, the Depositary shall be entitled to prove against the estate of ATA in connection with any bankruptcy, insolvency, reorganization, rearrangement or winding up proceedings in respect of the whole of the Obligations (including any amount on account thereof theretofore paid by the Guarantor pursuant to the aforesaid guarantee), and the Guarantor shall have no right to be subrogated to Depositary in respect of such proof until the Depositary shall have received from such estate payment in full of their respective claims with interest; nor shall the Guarantor purport to exercise any right or remedy arising by reason of any performance by it of its obligation in 8(a) whether by subrogation or otherwise, against ATA or any other guarantor of any of the Obligations or any security for any of the Obligations until the Depositary shall have received payment in full of their respective claims with interest. (f) The Guarantor agrees that, as between it and the Depositary, its obligations under this Section 7 may be declared to be forthwith due and payable as provided in Section 2 for purposes of Section 7(a) notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against ATA and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by the Guarantor for purposes of Section 7(a). (g) The obligations in this Section 7 are continuing, and shall apply to all Obligations whenever arising. SECTION 8. Breakage. If (x) any Notional Amount is reduced or increased other than during a Floating Index Period therefor or on the last day of the Index Period therefor (including by virtue of a Replacement Drawing or a Prepayment Drawing), (y) any withdrawal is cancelled with respect to which a notice has been delivered to the Depositary pursuant to Section 2.3(a) of any Deposit Agreement less than one Business Day prior to the scheduled date of such withdrawal (unless the Index Rate for such date is the Federal Funds Index Rate) or (z) any investment of amounts in the Collateral Account is liquidated prior to the maturity date therefor (each, a "Breakage Event"), then ATA shall compensate IntesaBci for any loss, cost or expense (including, without limitation, any cost of funding or loss incurred as a result of terminating, liquidating, obtaining or re-establishing any hedge or related trading position) incurred by IntesaBci in connection with such Breakage Event. A certificate of IntesaBci setting forth in reasonable detail any amount or amounts that IntesaBci is entitled to receive pursuant to this Section 8 shall be delivered to ATA and shall be prima facie evidence of ATA's obligation to pay such amount or amounts. ATA shall pay IntesaBci the amount shown as due on any such certificate within five Business Days after receipt thereof. 9 SECTION 9. Expenses; Indemnity. (a) ATA shall pay all reasonable out-of-pocket expenses incurred by IntesaBci, including the reasonable fees, charges and disbursements of special New York and Italian counsel for IntesaBci, in connection with the preparation of this Agreement, the Delayed Deposit Agreements or any amendments, modifications or waivers of the provisions hereof or thereof. (b) The provisions of Section 9.1 of the Leased Aircraft Participation Agreement attached as Exhibit A-l to the Note Purchase Agreement, together with related definitions and ancillary provisions, are hereby incorporated herein by reference, as if set forth herein in full, mutatis mutandis; provided that as incorporated herein, (i) each reference therein to "this Agreement" shall be deemed to be a reference to this Agreement, (ii) each reference therein to "Indemnitee" shall be deemed to be a reference to IntesaBci (in its capacity as Depositary) together with its affiliates, directors, officers, employees, agents, successors and assigns, (iii) each reference therein to "Lessee" shall be deemed to be reference to ATA, (iv) each reference therein to "Section 9.1", or any subsection of "Section 9.1", shall be deemed to be a reference to this Section 9(b) or applicable subsection, (v) each reference therein to "Operative Agreements" shall be deemed to be a reference to the "Operative Agreements" under each of the Participation Agreements, (vi) each reference therein to "Aircraft" shall be deemed to be a reference to the "Aircraft" under each of the Participation Agreements and (vii) the term "Pass Through Agreements" shall be deemed to include this Agreement. (c) All amounts due under this Section 9 shall be paid no later than five Business Days after written demand therefor. SECTION 10. Remedies. Upon the breach by ATA of any of its obligations under this Agreement, IntesaBci may exercise any right or remedy that may be available to it under applicable law. ATA agrees to indemnify and hold harmless IntesaBci for any reasonable cost or expense incurred by it in connection with, or arising out of, the enforcement by IntesaBci of this Agreement against ATA. SECTION 11. Amendment, Etc. This Agreement may not be amended, waived or otherwise modified except by an instrument in writing signed by the party against whom the amendment, waiver or other modification is sought to be enforced. SECTION 12. Notices. Unless otherwise expressly provided herein, any notice or other communication under this Agreement shall be in writing (including by facsimile) and shall be deemed to be given and effective upon receipt thereof. All notices shall be sent to (x) in the case of IntesaBci, IntesaBci S.p.A. , New York Branch, One Williams Street, New York, New York 10004, Attention: Transportation Finance Group (Telecopier: (212) 607-3966), (y) in the case of ATA, American Trans Air, Inc., 7337 West Washington Street, Indianapolis, IN 46321-0609, Attention: Kenneth K. Wolff (Telecopier: (317) 240-7091) or (z) in the case of Amtran, Amtran, Inc., 7337 West Washington Street, Indianapolis, IN 46321-0609 , Attention: Kenneth K. Wolff (Telecopier: (317) 240-7091) (or at such other address as a party may specify from time to time in a written notice to the other parties). On or prior to the execution of this Agreement, ATA has delivered to IntesaBci a certificate containing specimen signatures of the representatives of ATA who are authorized to give notices and instructions with respect to this 10 Agreement. IntesaBci may conclusively rely on such certificate until IntesaBci receives written notice from ATA to the contrary. SECTION 13. Entire Agreement. This Agreement (including all attachments hereto) sets forth all of the promises, covenants, agreements, conditions and understandings between IntesaBci and ATA with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and undertakings, inducements and conditions, express or implied, oral or written. SECTION 14. Governing Law. THIS AGREEMENT, AND THE RIGHTS AND OBLIGATIONS OF INTESABCI AND ATA HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 15. Waiver Of Jury Trial Right. EACH OF INTESABCI AND ATA ACKNOWLEDGES AND ACCEPTS THAT IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SUCH PARTY IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY. SECTION 16. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument. SECTION 17. No Third-Party Beneficiaries. This Agreement is not intended to, and shall not, provide any person not a party hereto with any rights of any nature whatsoever against any of the parties hereto and no person not a party hereto shall have any right, power or privilege in respect of any party hereto, or have any benefit or interest, arising out of this Agreement. 11 IN WITNESS WHEREOF, IntesaBci, Amtran and ATA have caused this Indemnity Agreement to be duly executed as of the day and year first above written. INTESABCI S.P.A., NEW YORK BRANCH as Depositary By: -------------------------------- Name: Title: By: -------------------------------- Name: Title: AMERICAN TRANS AIR, INC. By: -------------------------------- Name: Title: AMTRAN, INC. By: -------------------------------- Name: Title: 12 SCHEDULE I
- --------------------------------------------------------------------------------------------------- Expected Manufacturer's Aircraft Aircraft Type Registration Number Serial Number Delivery Month ------------- ------------------- ------------- -------------- - --------------------------------------------------------------------------------------------------- Boeing 737-800 N327TZ 32610 November 2002 - --------------------------------------------------------------------------------------------------- Boeing 737-800 N328TZ 32611 November 2002 - --------------------------------------------------------------------------------------------------- Boeing 737-800 N329TZ 32882 December 2002 - ---------------------------------------------------------------------------------------------------
SCHEDULE II
- ------------------------------------------------------------------------------------------------------ Notional Amount Initial Index Period Initial Index Rate* --------------- -------------------- ------------------- - ------------------------------------------------------------------------------------------------------ $29,700,000.00 [.............. ] - [.............. ] [.............. ]% - ------------------------------------------------------------------------------------------------------ $29,700,000.00 [.............. ] - [.............. ] [.............. ]% - ------------------------------------------------------------------------------------------------------ $29,700,000.00 [.............. ] - [.............. ] [.............. ]% - ------------------------------------------------------------------------------------------------------
* LIBOR minus 27.5 basis points as determined by the Depositary, which determination shall be conclusive, absent manifest error. ANNEX A DEFINITIONS "Actual Knowledge" means as it applies to ATA, actual knowledge of a Vice President or more senior officer of ATA having responsibility for the transactions contemplated by the Indemnity Agreement; provided that ATA shall be deemed to have "Actual Knowledge" of any matter as to which it has received notice from IntesaBci, such notice having been given pursuant to Section 12. "Aircraft" means each of the aircraft listed on Schedule I hereto. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of (i) (a) the Federal Funds Effective Rate, plus (b) one-half of one percent (1/2 of 1%) (calculated on the basis of a 360 day year) and (ii) the floating commercial loan rate per annum of IntesaBci (which rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer by IntesaBci) announced from time to time as its prime rate or equivalent for dollar loans in the USA, changing as and when said rate changes (calculated on the basis of a 365/366 day year). "Breakage Event" shall have the meaning set forth in Section 8. "Business Day" means any day, other than a Saturday or a Sunday, on which (x) commercial banks settle payments in New York and, (y) for the purpose of determining any Index Period, U.S. Dollar transactions are affected in London, England. "Collateral Account" shall have the meaning set forth in Section 2.01. "Deposit Agreement Termination Date" shall have the meaning set forth in Section 2.04(b). "Equipment Notes" has the meaning attributable thereto in the Note Purchase Agreement. "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next l/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next l/100 of 1%) of the quotations for such day for such transactions received by IntesaBci from three Federal funds brokers of recognized standing selected by IntesaBci. "Federal Funds Index Rate" shall mean, for any day of determination, the Federal Funds Effective Rate for such day minus 1/8% per annum. "Final Withdrawal Date" means the date on which all of the Deposits are withdrawn and no redeposits are made under the Delayed Deposit Agreement. "Floating Index Period" means, with respect to any Notional Amount, the period from and including the last day of the Initial Index Period therefor to but excluding the earlier of (x) the date such Notional Amount is withdrawn pursuant to the Delayed Deposit Agreements and (y) the first day of any Subsequent Index Period therefor. "Government Entity" means (a) any federal, state, provincial or similar government, and any body, board, department, commission, court, tribunal, authority, agency or other instrumentality of any such government or otherwise exercising any executive, legislative, judicial, administrative or regulatory functions of such government or (b) any other government entity having jurisdiction over any matter contemplated by this Agreement or relating to the observance or performance of the obligations of any of the parties to this Agreement. "Indemnity Agreement" means the Indemnity Agreement dated as of the date hereof among the parties hereto. "Indemnity Payment" shall have the meaning set forth in Section 1.01. "Indemnity Payment Date" shall have the meaning set forth in Section 1.01. "Index Period" means, with respect to any Notional Amount, the Initial Index Period, the Floating Index Period and each Subsequent Index Period therefor. "Index Rate" means, with respect to any Notional Amount, (i) during the Initial Index Period therefor, a rate per annum determined in the manner specified in the footnote to "Initial Index Rate" on Schedule II and during a Floating Index Period therefor, a rate per annum equal to the Federal Funds Index Rate, and (ii) during each Subsequent Index Period therefor, the rate per annum for such Subsequent Index Period determined in accordance with Section 1.04 hereof. "Initial Index Period" means, with respect to each Notional Amount, the period set forth opposite such Notional Amount under the heading "Initial Index Period" on Schedule II hereto; provided that if the last day of such period is stated to fall on a day that is not a Business Day, the last day of such period shall be extended to fall on the next subsequent day that is a Business Day. "Interest Payment Date" shall have the meaning given such term in the Delayed Deposit Agreements. "Investment Earnings" on any amount, means investment earnings on such amount net of losses and investment expenses reasonably incurred by IntesaBci in making or liquidating such investments. "Law" means (a) any constitution, treaty, statute, law, decree, regulation, order, rule or directive of any Government Entity and (b) any judicial or administrative interpretation or application of, or decision under, any of the foregoing. "Leased Aircraft Participation Agreement" shall have the meaning set forth in the Note Purchase Agreement. 2 "LIBID Rate" means, for any period between Interest Payment Dates, a rate per annum (calculated on the basis of a 360-day year and actual days elapsed) equal to (x) the rate determined by reference to Telerate Page 3750 as of 11:00 A.M. (London time), on the date two London business days prior to the first day of such period minus (y) 12.5 basis points. "LIBOR" means, with respect to each Notional Amount, a rate per annum (calculated on the basis of a 360-day year and actual days elapsed) equal to the rate determined by reference to Telerate Page 3750 as of 11:00 A.M. (London time)) two London business days prior to the Delayed Funding Date for a period comparable to the Initial Index Period for such Notional Amount. If there shall be no rate showing for any such Initial Index Period, the Depositary shall calculate the LIBOR rate for such Initial Index Period using standard interpolation methodology by reference to the rates specified for the periods that are next shorter and longer than such Initial Index Period. "Material Adverse Change" means, with respect to any Person, any event, condition or circumstance that materially and adversely affects such person's business or consolidated financial condition, or its ability to observe or perform its obligations, liabilities and agreements under this Agreement. "Note Purchase Agreement" means the Note Purchase Agreement dated as of the date hereof among ATA, Wilmington Trust Company, as Pass Through Trustee under each of the Pass Through Trust Agreements referred to therein, Wilmington Trust Company, as Subordination Agent, Wells Fargo Bank Northwest, N.A., as Escrow Agent, and Wilmington Trust Company, as Paying Agent. "Notice of Final Withdrawal" shall have the meaning set forth in the Delayed Deposit Agreements. "Notice of Purchase Withdrawal" shall have the meaning set forth in the Delayed Deposit Agreements. "Notional Amounts" means each of the amounts set forth under the heading "Notional Amounts" on Schedule II hereto as the same may be reduced from time to time in accordance with Section 1.03. "Notional Earnings" means, with respect to any Relevant Period and each Notional Amount, the sum of the Index Rate per annum on such Notional Amount for each day during such Relevant Period. The Notional Earnings shall be calculated on the basis of a year of 360 days and actual days elapsed. "Participation Agreement" means each Participation Agreement entered into in connection with the financing of each Aircraft (or a Substitute Aircraft in respect thereof). "Permitted Investments" means London interbank U.S. Dollar deposits with London banks (or London branches of banks, including IntesaBci's London branch) selected by IntesaBci maturing on or about each Interest Payment Date. 3 "Prepayment Drawing" means a withdrawal of one or more deposits pursuant to a Prepayment Withdrawal. "Prepayment Drawing Date" means the date of the Prepayment Drawing. "Relevant Date" means (i) in the case of the first Interest Payment Date, a Final Withdrawal Date, a Prepayment Drawing Date or a Replacement Drawing Date occurring prior to the first Interest Payment Date, the date of the Indemnity Agreement and (ii) in the case of any other Interest Payment Date, Final Withdrawal Date, Prepayment Drawing Date or Replacement Drawing Date, the Interest Payment Date immediately preceding such Interest Payment Date, Final Withdrawal Date, Prepayment Drawing Date or Replacement Drawing Date (as the case may be). "Relevant Period" means, with respect to any Interest Payment Date, Final Withdrawal Date, Prepayment Drawing Date or Replacement Drawing Date, the period from and including the Relevant Date for such Interest Payment Date, Final Withdrawal Date, Prepayment Drawing Date or Replacement Drawing Date, as the case may be, up to but excluding such Interest Payment Date, Final Withdrawal Date, Prepayment Drawing Date or Replacement Drawing Date (as the case may be). "Replacement Drawing" means a withdrawal of the Deposits pursuant to a Replacement Withdrawal. "Replacement Drawing Date" shall have the meaning set forth in Section 1.06(a). "SEC" means the Securities and Exchange Commission of the United States, or any Government Entity succeeding to its functions. "Secured Obligations" shall have the meaning set forth in Section 2.03. "Subsequent Index Period" with respect to each Notional Amount, shall have the meaning set forth in Section 1.04. "Substitute Aircraft" means any aircraft substituted for an Aircraft (or any other Aircraft with respect to such Aircraft) in accordance with (i) the Aircraft Purchase Agreement (as defined in the Note Purchase Agreement) upon a total loss of such Aircraft prior to the delivery thereof or (ii) Section 1(g) of the Note Purchase Agreement. 4 EX-4.20(A) 24 file023.txt DELAYED INDEMNITY AGREEMENT - AMENDMENT NO. 1 DELAYED INDEMNITY AGREEMENT AMENDMENT NO. 1 [ATA EETC 2002-1] DATED AS OF OCTOBER 15, 2002 BETWEEN INTESABCI S.P.A., ACTING THROUGH ITS NEW YORK BRANCH, AS DEPOSITARY, AMERICAN TRANS AIR, INC., AND ATA HOLDINGS CORP. (F/K/A AMTRAN, INC.) DELAYED INDEMNITY AGREEMENT AMENDMENT NO. 1 (ATA EETC 2002-1) RECITALS: A. IntesaBCI S.P.A., acting through its New York branch ("IntesaBCI," and in its capacity as depositary bank under the Delayed Deposit Agreements, the "Depositary"), American Trans Air, Inc., ("ATA"), and ATA Holdings Corp., formerly known as Amtran, Inc. ("the "Guarantor" or "Amtran") entered into a Delayed Indemnity Agreement dated as of March 28, 2002 (the "Delayed Indemnity Agreement"). All capitalized terms in this Amendment that are not defined herein will have the same meaning as provided in the Delayed Indemnity Agreement. All references to "Sections" or "Exhibits" refer to Sections and Exhibits of the Delayed Indemnity Agreement, unless otherwise noted herein. IntesaBCI, the Depositary, ATA, and the Guarantor are collectively referred to in this Amendment as the "Parties." B. The Parties intend to amend and revise the Delayed Indemnity Agreement as provided below. Therefore, for good and valuable consideration, the Parties hereby agree, effective as of the 15th day of October, 2002, to amend and revise the Delayed Indemnity Agreement as follows: 1. Except as specifically modified in this Amendment, the terms of the Delayed Indemnity Agreement will remain in full force and effect. In the event that the terms of this Amendment conflict in any way with the terms of the Delayed Indemnity Agreement, the terms of this Amendment will control. 2. The second recital paragraph beginning "WHEREAS" of the Delayed Indemnity Agreement will be revised to delete the text indicated by strike-out text below, to replace such deleted text with the language indicated by double-underlined text below, and to retain the language indicated by italicized text below: WHEREAS, on the Delayed Funding Date, the Escrow Agent shall deposit (i) $68,969,100.00 with the Depositary under the Delayed Class A Deposit Agreement and (ii) $18,814,650 with the Depositary under the Delayed Class B Deposit Agreement. 3. Schedule II will be deleted in its entirety, and replaced by the Revised Schedule II attached to this Amendment. [Remainder of Page Intentionally Left Blank] Delayed Indemnity Agreement Amendment No. 1 - Page 1 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. INTESABCI S.P.A., acting through its NEW YORK BRANCH as Depositary By --------------------------------------- Name: Title: By --------------------------------------- Name: Title: Address: One William Street New York, NY 10004 AMERICAN TRANS AIR, INC. By --------------------------------------- Name: Title: Address: 7337 West Washington Street Indianapolis, IN 46321 ATA HOLDINGS CORP., (f/k/a Amtran, Inc.) By --------------------------------------- Name: Title: Address: 7337 West Washington Street Indianapolis, IN 46321 Delayed Deposit Indemnity Amendment No. 1 - Signature Page REVISED SCHEDULE II - ----------------- --------------------------------------- --------------------- Notional Amount Initial Index Period Initial Index Rate* - ----------------- --------------------------------------- --------------------- $29,261,250.00 October 15, 2002 - November 4, 2002 1.53066% - ----------------- --------------------------------------- --------------------- $29,261,250.00 October 15, 2002 - November 6, 2002 1.52963% - ----------------- --------------------------------------- --------------------- $29,261,250.00 October 15, 2002 - November 29, 2002 1.51597% - ----------------- --------------------------------------- --------------------- *LIBOR minus 27.5 basis points as determined by the Depositary, which determination shall be conclusive, absent manifest error. Delayed Deposit Indemnity Amendment No. 1 - Revised Schedule II to Delayed Deposit Indemnity Agreement EX-5.2 25 file024.txt OPINION OF ATA HOLDINGS CORP. [Letterhead of ATA Holdings Corp.] November 22, 2002 Re: ATA Holdings Corp. American Trans Air, Inc. Registration Statement on Form S-4 Dear Sirs: I am the General Counsel of ATA Holdings Corp., an Indiana corporation (the "Guarantor"), and American Trans Air, Inc., an Indiana Corporation ("ATA", and together with the Guarantor, the "Company"), and am rendering this opinion in connection with the Registration Statement on Form S-4 (the "Registration Statement") of the Company, with respect to Pass Through Certificates, Series 2002-1A (the "New Series A Certificates"), and Pass Through Certificates, Series 2002-1B (the "New Series B Certificates", and together with the New Series A Certificates, the "New Certificates"), to be offered in exchange for all outstanding Pass Through Certificates, Series 2002-1A and 2002-1B (collectively, the "Old Certificates"). Each of the New Class A Certificates and the New Class B Certificates represents or will represent a fractional undivided interest in the American Trans Air, Inc. 2002-1A Pass Through Trust and the American Trans Air, Inc. 2002-1B Pass Through Trust (the "Trusts"), respectively. The Trusts were formed pursuant to two separate pass-through trust agreements, each dated as of March 28, 2002 (collectively, the "Pass Through Trust Agreements"), between ATA and Wilmington Trust Company, as pass-through trustee under each Trust (the "Trustee"). The applicable underlying payments on the New Certificates will be fully and unconditionally guaranteed under the guarantee agreement (the "Guarantee") by the Guarantor. The Old Certificates were originally issued in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). I have examined originals, or copies certified or otherwise identified to my satisfaction, of such documents, corporation records and other instruments and made such other investments and made such other investigations as I have deemed necessary or advisable for purposes of this opinion . Based thereon, I am of the opinion that: 1. Each of the Guarantor and the Company is a corporation duly organized and validly existing under the laws of the State of Indiana. 2 2. The Pass Through Trust Agreements have been duly authorized, executed and delivered by the Guarantor and/or the Company as the case may be. 3. The Guarantee has been duly authorized and issued by the Guarantor. 4. On the effective date of the Registration Statement, the New Certificates will have been duly authorized, executed, authenticated and delivered by each of the Company, the Guarantor and the Trustee. I am admitted to practice in the State of Indiana, and I express no opinion as to matters governed by any laws other than the laws of the State of Indiana and the Federal laws of the United State of America. I hereby consent to the filing of this opinion as an exhibit to the Registration statement. I also consent to the use of my name under the caption "Legal Matters" in the Prospectus contained in the Registration Statement. Very truly yours, /s/ Brian T. Hunt Brian T. Hunt Vice President and General Counsel EX-23.2 26 file025.txt CONSENT OF ERNST & YOUNG LLP Exhibit 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Summary Consolidated Financial and Operating Data," "Selected Consolidated Financial Data," and "Experts" and to the use of our report dated January 22, 2002 in the Registration Statement (Form S-4) for the registration of $259,892,000 of Pass Through Certificates, Series 2002-1. /s/ Ernst & Young LLP Ernst & Young LLP Indianapolis, Indiana November 22, 2002 EX-23.3 27 file026.txt AISI CONSENT [LETTERHEAD OF AISI] November 22, 2002 American Trans Air, Inc. 7337 West Washington Street Indianapolis, IN 46251 Re: American Trans Air, Inc. Pass Through Trust Certificates, Series 2002-1 Ladies and Gentlemen: We consent to the reference to our name in the text under the headings "Description of the Aircraft and the Appraisals," "Experts," "Appendix I - Glossary" and "Appendix II - Appraisal Letters" in the Registration Statement on Form S-4 being filed with the Securities and Exchange Commission relating to the above-captioned offering and to the inclusion in the Registration Statement of the report prepared by us with respect to the Aircraft referred to therein. Sincerely, /s/ John D. McNicol John D. McNicol Vice President Appraisals & Forecasts EX-23.4 28 file027.txt MBA CONSENT [LETTERHEAD OF MBA] November 22, 2002 American Trans Air, Inc. 7337 West Washington Street Indianapolis, IN 46251 Re: American Trans Air, Inc. Pass Through Trust Certificates, Series 2002-1 Ladies and Gentlemen: We consent to the reference to our name in the text under the headings "Description of the Aircraft and the Appraisals," "Experts," "Appendix I - Glossary" and "Appendix II - Appraisal Letters" in the Registration Statement on Form S-4 being filed with the Securities and Exchange Commission relating to the above-captioned offering and to the inclusion in the Registration Statement of the report prepared by us with respect to the Aircraft referred to therein. Sincerely, /s/ Robert F. Agnew Robert F. Agnew President & COO EX-23.5 29 file028.txt SH&E CONSENT [LETTERHEAD OF SH&E] November 22, 2002 American Trans Air, Inc. 7337 West Washington Street Indianapolis, IN 46251 Re: American Trans Air, Inc. Pass Through Trust Certificates, Series 2002-1 Ladies and Gentlemen: We consent to the reference to our name under the headings "Description of the Aircraft and the Appraisals," "Experts," "Appendix T - Glossary" and "Appendix II - Appraisal Letters" in the Registration Statement on S-4 being filed with the Securities and Exchange Commission relating to the above-captioned offering and to the inclusion in the Registration Statement of the report prepared by us with respect to the Aircraft referred to therein. Sincerely, /s/ Clive G. Medland Clive G. Medland Senior Vice President -----END PRIVACY-ENHANCED MESSAGE-----