Document:

<PAGE>

                                                                    EXHIBIT 10.1

                                                                  EXECUTION COPY

                            AIRTRAN HOLDINGS, INC.

               $17,500,000 13.00% SERIES A SENIOR SECURED NOTES
                              DUE APRIL 12, 2009

                                      and

         $17,500,000 12.27% SERIES B SENIOR SECURED CONVERTIBLE NOTES
                              DUE APRIL 12, 2009

                                  -----------

                                NOTE AGREEMENT

                                  -----------

                          Dated as of April 12, 2001
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                                 <C>
1.   AUTHORIZATION OF ISSUE OF NOTES............................................................    1

2.   PURCHASE AND SALE OF NOTES.................................................................    3
     2.1.  Purchase and Sale of PIK Notes.......................................................    3

3.   CONDITIONS OF CLOSING......................................................................    3
     3.1.  Documents............................................................................    4
     3.2.  Representations and Warranties; No Default...........................................    5
     3.3.  Purchase Permitted...................................................................    5
     3.4.  Opinion of Company's Counsel.........................................................    6
     3.5.  Material Adverse Change..............................................................    6
     3.6.  Related Proceedings; Consummation of Related Transactions............................    6
     3.7.  Fees and Expenses....................................................................    7
     3.8.  Proceedings..........................................................................    7

4.   PREPAYMENTS................................................................................    7
     4.1.  Required Prepayments of Series A Notes...............................................    7
     4.2.  Prepayment of all of the Notes.......................................................    7
     4.3.  Partial Payments Pro Rata............................................................    8
     4.4.  Offer to Prepay Notes in the Event of a Change in Control............................    8
     4.5.  Retirement of Notes..................................................................    9
     4.6.  Conversion...........................................................................   10

5.   AFFIRMATIVE COVENANTS......................................................................   19
     5.1.  Financial Statements.................................................................   19
     5.2.  Information Required by Rule 144A....................................................   21
     5.3.  Covenant to Secure Notes Equally.....................................................   21
     5.4.  Compliance with Law..................................................................   21
     5.5.  Maintenance of Properties and Insurance..............................................   22
     5.6.  Payment of Taxes.....................................................................   22
     5.7.  Corporate Existence, etc.............................................................   23
     5.8.  Lines of Business....................................................................   23
     5.9.  ERISA Compliance.....................................................................   23
     5.10. Environmental Covenants..............................................................   24
     5.11. Environmental Indemnities............................................................   24
     5.12. Closing Fee..........................................................................   25
     5.13. Restricted Payments..................................................................   25
     5.14. Airways' Distributions...............................................................   25
     5.15. Airways Collateral Support Agreement.................................................   25
     5.16. Security Interests...................................................................   25
     5.17. Books and Records....................................................................   25
     5.18. Use of Proceeds......................................................................   26

6.   NEGATIVE COVENANTS.........................................................................   26
     6.1.  Limitation on Restricted Payments....................................................   26
     6.2.  Waiver of Stay, Extension or Usury Laws..............................................   29
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                                <C>
     6.3.   Title to Collateral; Limitation on Liens............................................   29
     6.4.   Restrictions on Becoming an Investment Company......................................   29
     6.5.   Limitation on Indebtedness..........................................................   29
     6.6.   Limitation on Distributions from Restricted Subsidiaries............................   31
     6.7.   Asset Dispositions..................................................................   32
     6.8.   Limitation on Affiliate Transactions................................................   32
     6.9.   Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries......   33
     6.10.  Limitation on Sale/Leaseback Transactions...........................................   33

7.   Intentionally Omitted......................................................................   33

8.   EVENTS OF DEFAULT..........................................................................   33
     8.1.   Acceleration........................................................................   34
     8.2.   Rescission of Acceleration..........................................................   36
     8.3.   Notice of Acceleration or Rescission................................................   36
     8.4.   Other Remedies......................................................................   37

9.   REPRESENTATIONS AND WARRANTIES.............................................................   37
     9.1.   Organization........................................................................   37
     9.2.   Power and Authority.................................................................   37
     9.3.   Establishment of Security Interest..................................................   38
     9.4.   Disclosure..........................................................................   38
     9.5.   Subsidiaries........................................................................   38
     9.6.   Capitalization......................................................................   39
     9.7.   Registration........................................................................   39
     9.8.   No Violation........................................................................   39
     9.9.   No Consents.........................................................................   40

10.  REPRESENTATIONS OF EACH PURCHASER..........................................................   47

11.  DEFINITIONS................................................................................   47
     11.2.  Accounting Principles, Terms and Determinations.....................................   65

12.  MISCELLANEOUS..............................................................................   65
     12.1.  Note Payments.......................................................................   65
     12.2.  Expenses............................................................................   66
     12.3.  Consent to Amendments...............................................................   66
     12.4.  Form, Registration, Transfer and Exchange of Notes; Lost Notes......................   66
     12.5.  Persons Deemed Owners; Participations...............................................   67
     12.6.  Survival of Representations and Warranties; Entire Agreement........................   67
     12.7.  Successors and Assigns..............................................................   68
     12.8.  Disclosure to Other Persons; Transfer Restrictions..................................   68
     12.9.  Notices.............................................................................   68
     12.10. Payments Due on Non-Business Days...................................................   69
     12.11. Satisfaction Requirement............................................................   69
     12.12. GOVERNING LAW.......................................................................   69
     12.13. Severability........................................................................   69
     12.14. Descriptive Headings................................................................   69
     12.15. Counterparts........................................................................   69
</TABLE>

                                      ii

<PAGE>

     12.16.  Severalty of Obligations..............................    69

PURCHASER SCHEDULE.................................................     1

                                      iii
<PAGE>

                                   EXHIBITS

EXHIBIT A-1      -     FORM OF SERIES A NOTE

EXHIBIT A-2      -     FORM OF SERIES B NOTE

EXHIBIT B-1      -     FORM OF SERIES A PIK NOTE

EXHIBIT B-2      -     FORM OF SERIES B PIK NOTE

EXHIBIT C        -     FORM OF COLLATERAL TRUST AGREEMENT

EXHIBIT D        -     FORM OF REGISTRATION RIGHTS AGREEMENT

EXHIBIT E        -     FORM OF COLLATERAL SUPPORT AGREEMENT

EXHIBIT F        -     FORM OF OPINION OF COMPANY'S COUNSEL

EXHIBIT F-1      -     FORM OF OPINION OF FAA SPECIAL COUNSEL

EXHIBIT G        -     FORM OF AIRCRAFT MORTGAGE

EXHIBIT H        -     FORM OF MORTGAGE

EXHIBIT I        -     FORM OF SECURITY AGREEMENT

                                   SCHEDULES

PURCHASER SCHEDULE

SCHEDULE 9.1.1   -     SUBSIDIARIES

SCHEDULE 9.4     -     RELATED PARTY TRANSACTIONS

SCHEDULE 9.5     -     SECURITIES

SCHEDULE 9.6     -     CAPITALIZATION

SCHEDULE 9.15    -     IDENTIFIED LIENS

                                     -iv-
<PAGE>

SCHEDULE 9.22    -     MATERIAL ADVERSE CHANGE

SCHEDULE 9.29    -     BROKERS, FEES

                                      -v-
<PAGE>

                            AIRTRAN HOLDINGS, INC.
                            9955 AirTran Boulevard
                            Orlando, Florida 32827

                                                            As of April 12, 2001
To Each of the Purchasers Named in the
Purchaser Schedule Attached Hereto

Ladies and Gentlemen:

     The undersigned, AirTran Holdings, Inc. (herein called the "Company")
hereby agrees with the purchasers named in the Purchaser Schedule attached
hereto (herein called the "Purchasers"), as follows:

1.   AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize the issue of
the following:

           1.1.  its senior secured promissory notes in the aggregate principal
amount of $17,500,000, to be dated the date of issue thereof, to mature April
12, 2009, to bear interest on the unpaid balance thereof from the date thereof
until the principal thereof shall have become due and payable at the rate of
13.00% per annum and on overdue payments at the rate specified therein, and to
be substantially in the form of Exhibit A-1 attached hereto. The term "Series A
                                -----------
Notes" as used herein shall include each such senior secured promissory note
delivered pursuant to any provision of this Agreement and each such senior
secured promissory note delivered in substitution or exchange for any other
Series A Note pursuant to any such provision;

           1.2.  its senior secured convertible promissory notes in the
aggregate principal amount of $17,500,000, to be dated the date of issue
thereof, to mature April 12, 2009, to bear interest on the unpaid balance
thereof from the date thereof until the principal thereof shall have become due
and payable at the Convertible Rate and on overdue payments at the rate
specified therein, and to be substantially in the form of Exhibit A-2 attached
                                                          -----------
hereto. The "Convertible Rate" shall mean (a) for the period from the Closing
Date and through the last day of the month of April, 12.27% per annum, (b) for
each calendar month, beginning May 2001, as determined on the first Business Day
of such month, (i) 12.27% per annum if any of the following are not satisfied:
(A) (i) all Conversion Shares issued or issuable upon the conversion of the
Convertible Notes are listed on the American Stock Exchange or any other
securities exchange on which the Common Stock is then listed or (ii)
Conversion Shares issued or issuable upon conversion of the Convertible Notes
are authorized for quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or the National Market System of NASDAQ,
(B) the Resale Shelf is then effective and has not ceased to be effective or
usable in connection with the Resale of Registrable Securities on any trading
day of the immediately preceding calendar month, and (C) the average of the
Closing Prices for each trading day of the immediately preceding calendar month
is equal to or greater than $6.42, or (ii) 7.75% per annum if the foregoing
conditions in clauses (A), (B) and (C) are satisfied. The term "Series B Notes"
<PAGE>

as used herein shall include each such senior secured convertible promissory
note delivered pursuant to any provision of this Agreement and each such senior
secured convertible promissory note delivered in substitution or exchange for
any other Series B Note pursuant to any such provision;

           1.3.  its senior secured promissory notes in an amount to evidence
the aggregate amounts of interest that the Company may from time to time pay in
kind pursuant to paragraph 2.1.1 hereof, to be dated the date of issue thereof,
to mature April 12, 2009, to bear interest on the unpaid balance thereof until
the principal thereof shall have become due and payable at the rate of 15.00% or
such lesser interest rate as specified therein, and to be substantially in the
form of Exhibit B-1 attached hereto. The term "Series A PIK Notes" as used
        -----------
herein shall include each senior secured promissory note delivered pursuant to
any provision of this Agreement and each such senior secured promissory note
delivered in substitution or exchange for any other Series A PIK Note pursuant
to any such provision; and

           1.4.  its senior secured convertible promissory notes in an amount to
evidence the aggregate amounts of interest that the Company may from time to
time pay in kind pursuant to paragraph 2.1.2 hereof, to be dated the date of
issue thereof, to mature April 12, 2009, to bear interest on the unpaid balance
thereof until the principal thereof shall have become due and payable at the
Series B PIK Rate or such lesser interest rate as specified therein, and to be
substantially in the form of Exhibit B-2 attached hereto. The "Series B PIK
                             -----------
Rate" shall mean (a) for the period from the Closing Date and through the last
day of the month of April, 14.27% per annum, (b) for each calendar month,
beginning May 2001, as determined on the first Business Day of such month, (i)
14.27% per annum if any of the following are not satisfied: (A) (i) all
Conversion Shares issued or issuable upon the conversion of the Convertible
Notes are listed on the American Stock Exchange or any other securities exchange
on which the Common Stock is then listed or (ii) all Conversion Shares issued or
issuable upon conversion of the Convertible Notes are authorized for quotation
on the NASDAQ or the National Market System of NASDAQ, (B) the Resale Shelf is
then effective and has not ceased to be effective or usable in connection with
the Resale of Registrable Securities on any trading day of the immediately
preceding calendar month, and (C) the average of the Closing Prices for each
trading day of the immediately preceding calendar month is equal to or greater
than $6.42, or (ii) 9.75% per annum if the foregoing conditions in clauses (A),
(B) and (C) are satisfied. The term "Series B PIK Notes" as used herein shall
include each senior secured convertible promissory note delivered pursuant to
any provision of this Agreement and each such senior secured convertible
promissory note delivered in substitution or exchange for any other Series B PIK
Note pursuant to any such provision.

           1.5.  The obligations under the Notes will be secured by mortgages
on, security interests in, or pledges of (the "Security Interests"), certain
assets of Airways and certain of its current and future subsidiaries
(collectively, the "Grantors") pursuant to (a) the Security Agreement, (b) the
Aircraft Mortgage, (c) the Mortgage, and (d) the other Collateral Documents. The
Security Interests will secure the payment and performance when due of all of
the obligations of the Company, the Guarantors, if any, and the Grantors, if
any, under the Notes, this Agreement, and the Collateral Documents, and shall be
subject to the Collateral Trust

                                      -2-
<PAGE>

Agreement. Wilmington Trust Company shall serve as the Collateral Trustee
pursuant to the Collateral Trust Agreement.

2.   PURCHASE AND SALE OF NOTES. The Company hereby agrees to sell to each
Purchaser and, subject to the terms and conditions herein set forth, each
Purchaser agrees to purchase from the Company the aggregate principal amount of
Series A Notes and Series B Notes set forth opposite such Purchaser's name in
the Purchaser Schedule attached hereto at 100% of such aggregate principal
amount. The Company will deliver to each Purchaser, at the offices of Sidley &
Austin, 875 Third Avenue, New York, New York 10022, one or more Series A Notes
and Series B Notes registered in such Purchaser's name, evidencing the aggregate
principal amount of Series A Notes and Series B Notes to be purchased by such
Purchaser and in the denomination or denominations specified with respect to
such Purchaser in the Purchaser Schedule against payment of the purchase price
thereof by wire transfer of immediately available funds on the date of closing,
which shall be April 12, 2001 or any other date on or before April 12, 2001,
upon which the Company and the Purchasers may mutually agree (herein called the
"Closing" or the "Closing Date"), for credit to the account or accounts as shall
be specified in a letter on the Company's letterhead, in form to be specified by
the Purchasers, from the Company to the Purchasers delivered on the day before
the Closing Date.

           2.1.  Purchase and Sale of PIK Notes.
                 ------------------------------

                 2.1.1   To the extent that (a) the Company defaults in the
           payment of interest on any Series A Note or Series A PIK Note for
           more than 5 Business Days after the date due, (b) the Company has
           insufficient funds to make such payment, and (c) Airways is not
           permitted under the Indenture to make a cash distribution to the
           Company for the payment of such interest, the Company shall pay such
           amount of semi-annual interest payment then due on the Series A Notes
           and Series A PIK Notes by issuing to each holder of such Series A
           Notes and/or Series A PIK Notes, a Series A PIK Note in the principal
           amount of interest then due and payable (but only to the extent not
           otherwise payable as set forth in subclauses (a), (b) and (c) hereof)
           on the Notes held by such holder.

                 2.1.2   To the extent that (a) the Company defaults in the
           payment of interest on any Series B Note or Series B PIK Note for
           more than 5 Business Days after the date due, (b) the Company has
           insufficient funds to make such payment, and (c) Airways is not
           permitted under the Indenture to make a cash distribution to the
           Company for the payment of such interest, the Company shall pay such
           amount of semi-annual interest payment then due on the Series B Notes
           and Series B PIK Notes by issuing to each holder of such Series B
           Notes and/or Series B PIK Notes, a Series B PIK Note in the principal
           amount of interest then due and payable (but only to the extent not
           otherwise payable as set forth in subclauses (a), (b) and (c) hereof)
           on the Notes held by such holder.

3.   CONDITIONS OF CLOSING. Each Purchaser's obligation to purchase and pay for
the Notes to be purchased by such Purchaser hereunder is subject to the
satisfaction, on or before the Closing Date, of the following conditions:

                                      -3-
<PAGE>

           3.1.  Documents. Such Purchaser shall have received original
                 ---------
counterparts or if satisfactory to such Purchaser certified or other copies of
all of the following, each duly executed and delivered by the party or parties
thereto, in form and substance reasonably satisfactory to such Purchaser, and on
the Closing Date in full force and effect with no event having occurred and
being then continuing that would constitute a default thereunder or constitute
or provide the basis for the termination thereof:

                 3.1.1   The Note(s) to be purchased by such Purchaser on the
           Closing Date.

                 3.1.2   A certificate of the Secretary of the Company and each
           Subsidiary certifying (a) and attaching (i) resolutions of the Board
           of Directors of the Company and such Subsidiary, as applicable,
           evidencing approval of the transactions contemplated by each of the
           Transaction Documents and the execution, delivery and performance
           thereof, and authorizing certain officers to execute and deliver the
           same, and certifying that such resolutions were duly and validly
           adopted and have not since been amended, revoked or rescinded, (ii)
           the Certificate of Incorporation (or equivalent document) of the
           Company and each Subsidiary, each certified as of a recent date by
           the Secretary of State (or equivalent entity) of their respective
           states (or jurisdictions) of incorporation, (iii) the Bylaws of the
           Company and each Subsidiary, (iv) an incumbency certificate signed by
           the Secretary or an Assistant Secretary and one other officer of each
           of the Company and each Subsidiary certifying as to the names, titles
           and true signatures of the officers of the Company or Subsidiary
           authorized to sign the Transaction Documents to which it is a party
           and the other documents to be delivered hereunder, (v) corporate
           existence, tax good standing, and/or other similar certificates as to
           the Company and each Subsidiary from their respective states of
           incorporation and from each jurisdiction where the Company and such
           Subsidiary is qualified to do business to the extent such
           certificates are issued by any such state or jurisdiction, and (b)
           that no dissolution or liquidation proceedings as to the Company or
           any Subsidiary have been commenced or are contemplated;

                 3.1.3   Certified copies of all documents evidencing other
           necessary corporate action and governmental approvals, if any, with
           respect to each of the Transaction Documents to which the Company or
           any Subsidiary is a party;

                 3.1.4   Copies of the Collateral Documents, each duly executed,
           acknowledged and delivered by the respective parties thereto,
           certified by an Officer's Certificate as true, correct and complete;

                 3.1.5   The Collateral Trust Agreement, in the form attached
           hereto as Exhibit C, duly executed and delivered by the respective
                     ---------
           parties thereto;

                                      -4-
<PAGE>

                 3.1.6   The Registration Rights Agreement, in the form attached
           hereto as Exhibit D (the "Registration Rights Agreement"), duly
                     ---------
           executed and delivered by the parties thereto;

                 3.1.7   A Collateral Support Agreement by Airways in favor of
           the holders of the Notes, in the form attached hereto as Exhibit E
                                                                    ---------
           (the "Collateral Support Agreement");

                 3.1.8   A certificate of solvency, dated the Closing Date,
           signed by the principal financial or accounting officer of the
           Company substantially in the form previously approved by the
           Purchasers;

                 3.1.9   Copies of duly executed payoff letters, UCC-3
           termination statements (subject to reasonable payoff and delivery
           requirements of each creditor), mortgage releases and other
           collateral releases and terminations, each in form and substance
           reasonably satisfactory to the Purchasers evidencing (a) the
           termination of each agreement and instrument relating to any
           indebtedness secured by the Collateral and (b) the release of each
           item of Collateral securing such indebtedness and the termination of
           all Liens created thereunder and each such payoff letter, release and
           termination shall be in full force and effect;

                 3.1.10  Such additional documents or certificates with respect
           to such legal matters or corporate or other proceedings related to
           the transactions contemplated hereby as may be reasonably requested
           by such Purchaser.

           3.2.  Representations and Warranties; No Default. The Company shall
                 ------------------------------------------
have delivered to such Purchaser an Officer's Certificate, dated the Closing
Date certifying that (a) the representations and warranties contained in
paragraph 9 hereof and in the other Transaction Documents shall be true on and
as of the Closing Date in all material respects; (b) there shall exist on the
Closing Date no Event of Default or Default; and (c) no "default" or "event of
default" relating to a payment obligation of Airways or the Company shall have
occurred and be continuing under any agreement between any of (i) Airways or the
Company on the one hand and (ii) any Affiliate of Boeing or Rolls-Royce PLC on
the other hand; provided, however, for the purposes of this Section 3.2(c), no
                                                            --------------
such default or event of default shall be deemed to exist if the payment
obligations giving rise to such event do not exceed $500,000 and all such
amounts are subject of current dispute between the parties.

           3.3. Purchase Permitted. Such Purchaser shall have received an
                -------------------
Officer's Certificate to the effect that:

                 3.3.1   The purchase of and payment for the Notes to be
           purchased by such Purchaser on the Closing Date on the terms and
           conditions herein provided (including the use of the proceeds of such
           Notes by the Company) shall not violate any applicable law or
           governmental regulation (including, without limitation, Section 5 of
           the Securities Act or Regulation T, U or X of the Board of Governors
           of the Federal Reserve System) and shall not subject such Purchaser
           to

                                      -6-
<PAGE>

           any tax, penalty, liability or other onerous condition under or
           pursuant to any applicable law or governmental regulation, and such
           Purchaser shall have received such certificates or other evidence as
           it may request to establish compliance with this condition;

                 3.3.2   No injunction, restraining order or order of any nature
           by a Governmental Authority shall have been issued as of the Closing
           Date that would prevent or materially interfere with the consummation
           of any of the Related Transactions; and no stop order suspending the
           qualification or exemption from qualification of any of the Notes in
           any jurisdiction shall have been issued and no Proceeding for that
           purpose shall have been commenced or, to the actual knowledge of the
           Company after reasonable inquiry, be pending or threatened as of the
           Closing Date.

                 3.3.3   No action shall have been taken that would, as of the
           Closing Date, prevent the consummation of any of the Related
           Transactions. No Proceeding shall be pending or, to the actual
           knowledge of the Company after reasonable inquiry, threatened other
           than Proceedings that (A) if adversely determined could not, singly
           or in the aggregate, adversely affect the issuance or marketability
           of the Notes, and (B) could not, singly or in the aggregate,
           reasonably be expected to have a Material Adverse Effect.

           3.4.  Opinion of Company's Counsel. Such Purchaser shall have
                 ----------------------------
received from (a) Smith, Gambrell & Russell, LLP, special counsel for the
Company, a favorable opinion reasonably satisfactory to such Purchaser and
substantially in the form of Exhibit F attached hereto, and (b) Crowe & Dunlevy,
special FAA counsel to the Company, dated as of the Closing Date, substantially
in the form of Exhibit F-1 attached hereto, and the Company, by its execution
               -----------
hereof, hereby requests and authorizes each such special counsel to render such
opinion.

           3.5.  Material Adverse Change. No material adverse change in the
                 -----------------------
business, condition (financial or otherwise), operations or prospects of the
Company and its Subsidiaries, taken as a whole, since December 31, 2000, shall
have occurred or be threatened, as determined by such Purchaser in its sole
judgment.

           3.6.  Related Proceedings; Consummation of Related Transactions. All
                 ---------------------------------------------------------
corporate and other proceedings taken or to be taken in connection with the
Senior Secured Notes, and the transactions contemplated thereby (collectively,
the "Related Transactions") shall be satisfactory in substance and form to such
Purchaser, and such Purchaser shall have received all such counterpart originals
or certified or other copies of such documents as such Purchaser may reasonably
request. In addition, such Purchaser shall have received satisfactory evidence
that the transactions contemplated by the Airways Note Purchase Agreement and
the Senior Secured Notes have been consummated prior to or concurrently with
issuance of the Notes, pursuant to and in accordance with the terms and
conditions thereof (no material terms thereof having been amended, supplemented,
waived or otherwise modified without such Purchaser's prior written consent).
Such Purchaser shall have received copies of the Indenture,

                                      -6-
<PAGE>

and all instruments, documents and agreements delivered with respect thereto,
certified by an Officer's Certificate, dated the Closing Date, as true, correct
and complete.

           3.7.  Fees and Expenses. Without limiting the provisions of paragraph
                 -----------------
12.2 hereof, the Company shall pay the reasonable fees, charges and
disbursements of counsel to the Purchasers, including, without limitation,
Sidley & Austin.

           3.8.  Proceedings. All corporate and other proceedings taken or to be
                 -----------
taken in connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in substance and form to such
Purchaser, and such Purchaser shall have received all such counterpart originals
or certified or other copies of such documents as it may reasonably request.

4.   PREPAYMENTS. The Notes shall be subject to prepayment with respect to the
required prepayments specified in paragraph 4.1 and 4.5 and the optional
prepayment specified in paragraph 4.2.

           4.1.  Required Prepayments of Series A Notes. Until the Series A
                 ---------------------------------------
Notes shall be paid in full, the Company shall apply to the prepayment of the
Series A Notes, without premium, an amount equal to the lesser of (i)
twenty-five percent (25%) of Airways' Consolidated Net Income for the
immediately preceding fiscal quarter and (ii) the amount of Restricted Payments
made by Airways to the Company pursuant to Section 5.3 of the Indenture.
                                           -----------

           4.2.  Prepayment of all of the Notes.
                 ------------------------------

                 4.2.1   The Company may prepay all, but not less than all, the
           Notes held by each Holder only in the event that twenty (20) Business
           Days after the date on which the Company delivers to each holder of
           Notes a written request (a "Waiver Request") for an amendment or
           waiver with respect to the terms of Section 6.1, 6.3, 6.5, 6.6, 6.7
                                                       -----------------------
           or 6.9 hereof in connection with a bona fide third party transaction,
              ---
           the Company and the Required Holders have not reached agreement
           regarding the terms of such amendment or waiver. The Waiver Request
           shall include (i) a brief description of the transaction giving rise
           to the request for an amendment or waiver including without
           limitation, the identity of the third party or parties and the other
           material terms of the proposed transaction, and (ii) the terms of the
           amendment or waiver being sought.

                 4.2.2   Following the expiration of such twenty (20) Business
           Day-period, and at least thirty (30) days but not more than sixty
           (60) days before the prepayment of all of the Notes pursuant to this
           Section 4.2, the Company may elect to prepay all of, but not less
           -----------
           than all the Notes held by each Holder by delivering a prepayment
           notice to each Holder at such Holder's registered address. The notice
           shall state:

           (a)   the prepayment date;

                                      -7-
<PAGE>

           (b)   the applicable prepayment price; and

           (c)   reference to this Section 4.2 pursuant to which the Notes are
                                   -----------
                 being repaid.

                 Once notice of prepayment has been sent to the Holders in
                 accordance with this Section 4.2(b), the Notes shall become due
                                      --------------
                 and payable on the prepayment date at the applicable prepayment
                 price, and upon prepayment of the Notes in full in accordance
                 with this paragraph 4.2, the Holders shall be deemed to have
                 consented to such Waiver Request.

                 4.2.3   In the event the Company elects to prepay the Notes in
           accordance with the terms of this Section 4.2, the Company shall pay
                                             -----------
           (i) with respect to the Series A Notes, a prepayment price (expressed
           as percentages of principal amount) of one hundred eight percent
           (108%) plus accrued and unpaid interest thereon, if any, to the
           applicable prepayment date, and (ii) with respect to the Series B
           Notes, a prepayment price (expressed as a percentage of principal
           amount) of one hundred twelve and twenty-seven hundredths percent
           (112.270%) plus accrued and unpaid interest thereon, if any, to the
           prepayment date.

                 4.2.4   Notwithstanding the foregoing, in no event shall
           prepayment occur later than the date on which the transaction that is
           the subject of the Waiver Request is consummated.

           4.3.  Partial Payments Pro Rata. Upon any required prepayment
                 -------------------------
pursuant to paragraph 4.1, such amounts prepaid shall be allocated first, to all
Series A PIK Notes at the time outstanding in proportion to the respective
amounts outstanding and second, to all Series A Notes at the time outstanding in
proportion to the respective amounts outstanding.

           4.4.  Offer to Prepay Notes in the Event of a Change in Control.
                 ---------------------------------------------------------

                 4.4.1   Notice of Impending Change in Control. The Company will
                         -------------------------------------
           not take any action that consummates or finalizes a Change in Control
           unless at least 30 days prior to such action it shall have given to
           each holder of any Notes written notice of such impending Change in
           Control. Such notice shall contain and constitute an offer to prepay
           all of such Notes as described in clause 4.4.3 and shall be
           accompanied by the certificate described in clause 4.4.4 hereof. The
           Company shall, on or before the day on which it gives such written
           notice of such impending Change in Control, give telephonic notice
           thereof to each holder which shall have designated a recipient of
           such notices in the Purchaser Schedule attached hereto or by notice
           in writing to the Company.

                 4.4.2   Notice of Occurrence of Change in Control. The Company
                         -----------------------------------------
           will, within 5 days after any Responsible Officer has knowledge of
           the occurrence of any Change in Control, give written notice of such
           Change in Control to each holder of any Notes. If a Change in Control
           has occurred, such notice shall contain and constitute an offer to
           prepay all of such Notes as described in

                                      -8-
<PAGE>

           clause 4.4.3 and shall be accompanied by the certificate described in
           4.4.4 hereof. The Company shall, on or before the day on which it
           gives such written notice of such Change in Control, give telephonic
           notice thereof to each holder which shall have designated a recipient
           of such notices in the Purchaser Schedule attached hereto or by
           notice in writing to the Company.

                 4.4.3   Offer to Prepay Notes. The offer to prepay Notes
                         ---------------------
           contemplated by the foregoing clauses 4.4.1 and 4.4.2 shall be an
           offer to prepay, in accordance with and subject to this paragraph
           4.4, all, but not less than all, the Notes held by each holder (in
           this case only, "holder" in respect of any Note registered in the
           name of a nominee for a disclosed beneficial owner shall mean such
           beneficial owner) (a) with respect to the circumstances described in
           clause 4.4.1, on the date of the Change in Control and (b) with
           respect to the circumstances described in clause 4.4.2, on the 15th
           day after the date of such offer (as applicable, the "Proposed
           Prepayment Date").

                 4.4.4   Rejection; Acceptance. The Company shall, on or before
                         ---------------------
           the seventh day prior to the Proposed Prepayment Date, give
           telephonic renotification and confirmation thereof to each holder
           which shall have designated a recipient of such notices in the
           Purchaser Schedule attached hereto or by notice in writing to the
           Company. A holder of Notes may accept the offer to prepay made
           pursuant to this paragraph 4.4 by causing a notice of such acceptance
           to be delivered to the Company on or before the 5th day prior to the
           Proposed Prepayment Date. A failure by a holder of Notes to respond
           to an offer to prepay made pursuant to this paragraph 4.6 on or
           before such date shall be deemed to constitute a rejection of such
           offer by such holder.

                 4.4.5   Prepayment. Prepayment of the Notes to be prepaid
                         ----------
           pursuant to this paragraph 4.4 shall be at 101% of the principal
           amount of such Notes, determined for the date of prepayment with
           respect to such principal amount, together with interest on such
           Notes accrued to the date of prepayment. Such prepayment shall be
           made on the Proposed Prepayment Date.

                 4.4.6   Officer's Certificate. Each offer to prepay the Notes
                         ----------------------
           pursuant to this paragraph 4.4 shall be accompanied by a certificate,
           executed by a Responsible Officer of the Company and dated the date
           of such offer, specifying: (a) the Proposed Prepayment Date; (b) that
           such offer is made pursuant to this paragraph 4.4; (c) the principal
           amount of each Note offered to be prepaid; (d) the interest, if any,
           that would be due on each Note offered to be prepaid and accrued to
           the Proposed Prepayment Date; (e) that the conditions of this
           paragraph 4.4 have been fulfilled; and (f) in reasonable detail, the
           nature and date of the Change in Control.

           4.5.  Retirement of Notes. The Company shall not, and shall not
                 -------------------
permit any of its Subsidiaries or Affiliates to, prepay or otherwise retire in
whole or in part prior to their stated final maturity (other than by prepayment
pursuant to paragraph 4.1, 4.2 or 4.4 or upon

                                      -9-
<PAGE>

acceleration of such final maturity pursuant to paragraph 8.1), or purchase or
otherwise acquire, directly or indirectly, Notes held by any holder.

           4.6.  Conversion. The principal amount outstanding of the Convertible
                 ----------
Notes shall be convertible into fully paid and nonassessable shares of common
stock of the Company (the "Conversion Shares") on the following basis:

                 4.6.1   Conversion at the Option of the Holder. The holders of
                         ---------------------------------------
           the Convertible Notes may convert some or all of outstanding
           principal balance of such Notes at any time.

                 4.6.2   Conversion at the Option of the Company. If in any
                         ---------------------------------------
           calendar month (a) after the calendar month the Resale Shelf has been
           declared effective by the Commission and (b) during which the Resale
           Shelf remains effective for all of the trading days of such month,
           the shares of common stock of the Company have an average Closing
           Price of $6.42 or greater on a national securities exchange or on the
           NASDAQ National Market for all of the trading days during such
           calendar month, the Company may on or prior to the fifth Business Day
           of the next calendar month, give written notice to the holders of the
           Convertible Notes, (x) requiring such holders to convert the
           Convertible Notes in an aggregate principal amount equal to the
           lesser of (i) $2,000,000 less the aggregate principal amount of
           Convertible Notes converted during such immediately preceding
           calendar month and (2) the outstanding principal amount of
           Convertible Notes, and (y) designating such holders and the
           applicable Notes to be converted either on a pro rata basis or by lot
           (the "Company Notice").

                 4.6.3   Conversion Price. The conversion price for such shares
                         ----------------
           shall be equal to $5.42 per share (the "Conversion Price"). The
           Convertible Notes may be converted at the option of the holders
           thereof in the case of a conversion pursuant to paragraph 4.6.1 in
           aggregate principal amounts of not less than $1,000,000 or an
           integral multiple thereof (or less if the aggregate principal amount
           outstanding of Convertible Notes then outstanding is less than
           $1,000,000).

                 4.6.4   Mechanics of Conversion. Any conversion under this
                         -----------------------
           paragraph 4.6 (each a "Conversion") shall be effectuated by the
           holder of a Convertible Note surrendering such Note(s) to the
           Company, together with (a) with respect to a Conversion under
           paragraph 4.6.1, a written notice by such holder of the name and
           address in which and to which the certificates representing the
           shares of Conversion Shares issuable upon such Conversion shall be
           issued or (b) with respect to a Conversion under paragraph 4.6.2, the
           Company Notice (in each case, the "Conversion Notice"). For purposes
           hereof, the "Conversion Date" means (x) with respect to Conversion
           under paragraph 4.6.1, the date upon which such Note(s) and the
           Conversion Notice have been received by the Company, and (y) with
           respect to Conversion under paragraph 4.6.2, the date upon which the
           Company shall have given the Company Notice (the Note(s) and the
           Conversion

                                     -10-
<PAGE>

           Notice, or the Company Notice, as applicable, the "Conversion
           Documents"). As promptly as reasonably practicable after the
           Conversion Date and receipt of the Conversion Documents but in no
           event later than the third Business Day after the Conversion Notice,
           the Company shall issue and deliver or cause to be issued and
           delivered, as specified in the Conversion Notice, certificates for
           the number of full shares of Conversion Shares issuable upon such
           Conversion together with any cash (i) instead of fractional shares as
           provided in paragraph 4.6.5 and (ii) for accrued but unpaid interest
           under such Note(s) with respect to the principal balance so
           converted. Such Conversion shall be deemed to have been effected
           immediately prior to the close of business on the Conversion Date,
           and subject to the receipt of the certificate(s) for shares of
           Conversion Shares and any cash due upon Conversion at such time the
           rights of the Holder of such Notes shall cease and the person or
           persons in whose name or names any certificate or certificates for
           shares of Conversion Shares shall be issuable upon such Conversion
           shall be deemed to have become the holder or holders of record of the
           shares of common stock of the Company represented thereby.

                 4.6.5   Fractional Shares. No fractional share of Common Stock
                         -----------------
           or scrip representing fractional shares shall be issued upon
           Conversion of the principal balance. Instead, the Company shall pay
           cash in an amount equal to the Closing Price of a share of Common
           Stock on the Conversion Date multiplied by the fraction of a full
           share represented by such fractional share.

                 4.6.6   Reservation of Securities. The Company shall at all
                         -------------------------
           times reserve and keep available out of its authorized but unissued
           shares of Common Stock solely for the purpose of effecting the
           conversion of the Convertible Notes such number of its shares of
           Common Stock as shall from time to time be sufficient to effect the
           conversion of such Note(s); and if at any time the number of
           authorized but unissued shares of the Common Stock shall not be
           sufficient to effect the conversion of the entire outstanding
           principal amount of the Convertible Notes in addition to such other
           remedies as shall be available to the holder of such Notes, the
           Company will use its best efforts to take such corporate action as
           may, in the opinion of its counsel, be necessary to increase its
           authorized but unissued shares of Common Stock to such number of
           shares as shall be sufficient for such purposes.

                 4.6.7   Registration Rights.
                         -------------------

           (a)   All shares of the Company's securities issued or issuable upon
conversion of the Convertible Notes shall have the registration rights and
related obligations set forth in the Registration Rights Agreement, and the
parties hereto shall each execute such agreements, documents and instruments in
connection therewith as reasonably requested to fulfill the purposes of this
paragraph 4.6.7.

           (b)   The Company covenants and agrees to (i) prepare and file with
the Commission promptly after the Issue Date, but in no event later than the
120/th/ day after the Issue

                                     -11-
<PAGE>

Date, a Resale Shelf , (ii) use its best efforts to cause such Resale Shelf to
be declared effective under the Securities Act as promptly as practicable after
the filing thereof, but in no event later than the 180/th/ day after the Issue
Date and (iii) use its best efforts to keep the Resale Shelf effective until
April 12, 2009 or such shorter period that will terminate when all of the
Conversion Shares have been sold pursuant to a registration statement filed
under the Securities Act covering the Conversion Shares.

          (c)  The Company covenants and agrees to (i) list all Conversion
Shares issued or issuable upon the conversion of the Convertible Notes on the
American Stock Exchange or any other securities exchange on which the Common
Stock is then listed or (ii) authorize for quotation on the NASDAQ or the
National Market System of NASDAQ all Common Stock issued or issuable upon
conversion of the Convertible Notes if the Common Stock is then so authorized
for quotation.

               4.6.8  Stock Dividends, Subdivisions and Combinations. In case
                      ----------------------------------------------
          the Company shall hereafter:

          (a)  pay a dividend or make a distribution in shares of Common Stock
or securities or rights convertible into, or entitling the holder thereof to
receive directly, or indirectly, additional shares of Common Stock,

          (b)  reclassify by subdivision its outstanding shares of Common Stock
into a greater number of shares, or

          (c)  reclassify by combination its outstanding shares of Common Stock
or into a smaller number of shares,

                      (i)  the number of Conversion Shares receivable upon
                      conversion of each Convertible Note immediately prior
                      thereto shall be adjusted so that the holder of each
                      Convertible Note thereafter converted shall be entitled to
                      receive the number of Conversion Shares which such holder
                      would have owned immediately following such action had
                      such Convertible Note been converted immediately prior
                      thereto, and

                      (ii) the Conversion Price shall be adjusted by multiplying
                      such Conversion Price immediately prior to such adjustment
                      by a fraction, the numerator of which shall be the number
                      of Conversion Shares purchasable upon the conversion of
                      each Convertible Note immediately prior to such
                      adjustment, and the denominator of which shall be the
                      number of Conversion Shares purchasable immediately
                      thereafter.

     An adjustment made pursuant to this Section 4.6.8 shall become effective
immediately after the record date, in the case of a dividend, and shall become
effective immediately after the effective date, in the case of a subdivision,
combination or reclassification. If, as a result of an

                                     -12-
<PAGE>

adjustment made pursuant to this Section 4.6, the holder of any Convertible Note
thereafter converted shall become entitled to receive shares of two or more
classes of capital stock of the Company, the Board of Directors of the Company
shall determine, in its reasonable discretion, the allocation of the adjusted
Conversion Price between or among shares of such classes of capital stock.

               4.6.9   Reclassification, Combinations, Mergers, etc. If:
                       --------------------------------------------

          (a)  any capital reorganization, reclassification or change of
outstanding shares of Common Stock (other than as set forth in paragraph 4.6.8
and other than a change in par value, or from par value to no par value, or from
no par value to par value provided that the Company shall not increase the par
value of the Common Stock to exceed the Conversion Price), or

          (b)  in case of any consolidation or merger of the Company with or
into another corporation or other entity (other than a merger in which the
Company is the continuing corporation and which does not result in any
reclassification or change of the then outstanding shares of Common Stock or
other capital stock of the Company (other than a change in par value, or from
par value to no par value, or from no par value to par value or as a result of a
subdivision or combination)) or

          (c)  in case of any sale or conveyance to another corporation or other
entity of all or substantially all of the assets of the Company shall be
effected in such a way that the holders of Common Stock shall be entitled to
receive shares of common stock, other securities or assets (whether such stock,
other securities or assets are issued or distributed by the Company or another
Person) with respect to or in exchange for Common Stock, then,

     as a condition of such reclassification, reorganization, change,
consolidation, merger, sale or conveyance, the Company or such a successor or
purchasing corporation or other entity, as the case may be, shall forthwith make
lawful and adequate provision whereby the holder of such Convertible Notes then
outstanding shall have the right thereafter to receive on conversion of such
Convertible Notes the kind and amount of shares of stock and other securities
and assets receivable upon such reclassification, reorganization, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock that such holders would have been entitled to receive upon
conversion of such Convertible Notes had such Convertible Notes been converted
immediately before such reclassification, reorganization, change, consolidation,
merger, sale or conveyance that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this paragraph 4.6.

     For purposes of this paragraph 4.6.9, "shares of stock and other securities
and property" receivable upon a reclassification, change, consolidation, merger,
sale or conveyance shall include stock of any successor or acquiring corporation
of any class which is not subject to redemption and shall also include any
evidence of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event including
any warrants or other rights to subscribe for or purchase any such stock.

                                     -13-
<PAGE>

     In case of any such reclassification, reorganization, merger, consolidation
or dispositions of assets, the successor or acquiring corporation or other
entity shall expressly assume the due and punctual observance and performance of
each and every covenant and condition of this Agreement and the Convertible
Notes to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of Directors
of the Company) in order to provide for adjustments of Conversion Shares into
which each Convertible Note may be converted, which shall be as nearly
equivalent as practicable to the adjustments provided for in this paragraph 4.6.

               4.6.10  Issuances of Common Stock or Rights. In the event that
                       -----------------------------------
          the Company shall, at any time or from time to time after the date
          hereof, issue, sell distribute or otherwise grant (in any such case, a
          "Distribution") shares of Common Stock or Rights, whether or not such
          Rights are immediately exercisable, convertible or exchangeable, at a
          Consideration Per Share lower than the per share Fair Market Value of
          the Common Stock on the date of such issuance or sale, or if the
          Company shall amend any of the provisions of any Rights, including,
          without limitation, a change in the purchase, conversion, exchange or
          exercise price per share of Common Stock, as the case may be, of any
          such Right, or the Aggregate Consideration Receivable applicable to
          any such Right (other than under or by reason of provisions designed
          to protect against dilution upon an event which results in an
          adjustment pursuant to this paragraph 4.6 which is no less favorable
          to the holders of the Convertible Notes than such adjustment is to the
          holder of such Rights), then, immediately after the date of such
          issuance or sale,

          (a)  the number of Conversion Shares purchasable upon conversion of
each Convertible Note shall be increased so that the holders of such Convertible
Notes thereafter will be entitled to receive the number of Conversion Shares
determined by multiplying:

                       (i)  the number of shares of Common Stock the holders of
                       Convertible Notes would have been entitled to receive
                       immediately before the date of such issuance or sale had
                       such holders converted their Convertible Notes
                       immediately prior thereto; by

                       (ii) a fraction, the numerator of which shall be the sum
                       of: (A) the number of shares of Common Stock outstanding
                       on such date plus (B) the number of additional shares of
                       Common Stock offered for subscription or purchase (or
                       into which the Rights so offered are initially
                       convertible or exchangeable or exercisable, as the case
                       may be), and the denominator of which shall be the sum
                       of: (x) the number of shares of Common Stock and
                       outstanding on such date plus (y) the number of shares of
                       Common Stock that the Aggregate Consideration Receivable
                       would purchase at such per share Fair Market Value of the
                       Common Stock on the date of such issuance or sale, and

                                     -14-
<PAGE>

          (b)  the Conversion Price in effect immediately after such
Distribution shall be adjusted by multiplying the Conversion Price in effect
immediately prior to such Distribution by the quotient of:

                       (i)  the sum of: (A) the number of shares of Common Stock
                       and outstanding immediately prior to such Distribution;
                       plus (B) the quotient of: (x) the Aggregate Consideration
                       Receivable; divided by (y) the per share Fair Market
                       Value of the Common Stock; in each case immediately prior
                       to such Distribution; divided by

                       (ii) the sum of: (A) the number of shares of Common Stock
                       and outstanding immediately prior to such Distribution;
                       plus (B) the number of shares of Common Stock so issued
                       or sold (or initially issuable pursuant to any Rights).

     No adjustment shall be made pursuant to subparagraph (a) above which would
decrease the number of shares of Common Stock upon for which a Convertible Note
may be converted. No adjustment shall be made pursuant to subparagraph (b) above
which would increase the Conversion Price.

     For purposes of the foregoing calculation, the total maximum number of
shares of Common Stock issuable upon exercise, conversion or exchange, as
applicable, of all Rights shall be deemed to have been issued as of the date of
such Distribution and thereafter shall be deemed to be outstanding and the
Company shall be deemed to have received as consideration therefor the Aggregate
Consideration Receivable applicable thereto after giving effect to such
exercise, conversion or exchange. Except as provided in paragraph 4.6.14, no
additional adjustments of the Conversion Price shall be made upon the actual
exercise, exchange or conversion, as applicable, of such Rights.

               4.6.11  Dividends and Distributions. In the event the Company
                       ---------------------------
          shall, at any time or from time to time after the date hereof, make or
          pay any dividend of, or distribute to holders of Common Stock (in any
          such case, a "Dividend"), shares of capital stock, any of its property
          or assets (other than cash but only to the extent that such cash
          dividends are issued in the Company's ordinary course of business
          consistent with past practice), evidences of its indebtedness, Rights
          or other securities (in each case, other than dividends payable in
          Common Stock or securities or rights convertible or exchangeable into
          Common Stock) (collectively, "Dividend Securities"), then, in each
          such case, the Company shall reserve shares or other units of such
          Dividend Securities for distribution to the holders upon conversion of
          the Convertible Notes so that, in addition to the Conversion Shares
          issuable upon exercise thereof, such holders will receive upon such
          exercise the amount and kind of such Dividend Securities that such
          holders would have received if the holders had, immediately prior to
          the record date for the distribution of the Dividend Securities,
          converted the Convertible Notes.

                                     -15-
<PAGE>

               4.6.12  Self-Tenders. If, at any time or from time to time after
                       ------------
          the date hereof, the Company or any subsidiary of the Company shall
          repurchase, by self-tender offer or otherwise, any shares of Common
          Stock of the Company or any Right at a weighted average purchase price
          in excess of the per share Fair Market Value of the Common Stock then
          on the Business Day immediately prior to the earliest of (i) the date
          of such repurchase, (ii) the commencement of an offer to repurchase or
          (iii) the public announcement of either (such date being referred to
          as the "Determination Date"), the Company shall offer to repurchase
          the Conversion Shares on the same terms and conditions on which it has
          offered to repurchase the shares of Common Stock.

               4.6.13  Fair Market Value of Consideration Received.
                       -------------------------------------------
          Notwithstanding any provision to the contrary herein, for purposes of
          this paragraph 4.6, if any Rights shall be issued in connection with
          the issuance and sale of other securities of the Company, together
          comprising one integral transaction in which no specific consideration
          is allocated to such Rights by the parties thereto, such Rights shall
          be deemed to have been issued without consideration, provided,
          however, that if any such Rights have an exercise price (to the extent
          applicable) equal to or greater than the per share Fair Market Value
          of the Common Stock on the date of issuance of such Rights, then such
          Rights shall be deemed to have been issued for consideration equal to
          such exercise price.

               4.6.14  Deferral of Certain Adjustments. No adjustment need be
                       -------------------------------
          made for a change in the par value of the Common Stock; provided,
          however, the Company shall not increase the par value of the Common
          Stock to exceed the Conversion Price. All calculations under this
          paragraph 4.6 shall be made to the nearest 1/1,000 of one cent or to
          the nearest 1/1,000th of a Conversion Share, as the case may be.

               4.6.15  Other Adjustments. In the event that at any time, as a
                       -----------------
          result of an adjustment made pursuant to this paragraph 4.6, holders
          of the Convertible Notes shall become entitled to receive any
          securities of the Company other than shares of Common Stock,
          thereafter the number of such other securities so receivable upon
          conversion of each Convertible Note and the Conversion Price
          applicable to such exercise shall be subject to adjustment from time
          to time in a manner and on terms as nearly equivalent as practicable
          to the provisions with respect to the Conversion Shares and the
          Conversion Price contained in this paragraph 4.6, and all other
          relevant provisions of this paragraph 4.6 that are applicable to
          shares of Common Stock shall be applicable to such other securities.
          In case at any time or from time to time the Company shall take any
          action in respect of its outstanding shares of Common Stock, other
          than any action described in this paragraph 4.6, or any event occurs
          as to which the provisions of this paragraph 4.6 are not strictly
          applicable, then the number of Conversion Shares into which each
          Convertible Note may be converted shall be adjusted in such manner as
          may be equitable in the circumstances and on terms as nearly
          equivalent as practicable to the provisions with respect to the
          Conversion Shares and the Conversion Price

                                     -16-
<PAGE>

          contained in this paragraph 4.6 and as shall be reasonably necessary,
          in the good faith opinion of the Board of Directors of the Company, to
          protect the exercise rights of the holders of the Convertible Notes,
          but in no event shall any such adjustment have the effect of adversely
          affecting the holders of the Convertible Notes. If the Company shall
          at any time or from time to time issue, sell or distribute any shares
          of capital stock (other than Common Stock), any evidences of
          indebtedness, any property or assets, Rights or other securities,
          then, in each such case, such issuance, sale or distribution shall be
          deemed to be of, or in respect of, Common Stock for purposes of this
          paragraph 4.6.

               4.6.16  Increased Conversion Shares or Reduced Conversion Price.
                       -------------------------------------------------------
          From time to time, the Company may, for a period of not less than
          twenty (20) Business Days, in its discretion, upon written notice to
          holders of Convertible Notes, increase the number of Conversion Shares
          purchasable upon the conversion of each Convertible Note, without
          making any adjustment to the Conversion Price, or reduce the
          Conversion Price, without making any adjustment to the number of
          Conversion Shares purchasable upon the conversion of each Convertible
          Note; provided that in the event that the Company elects to make any
          such adjustment, the Company shall make the same or proportional
          adjustment, as the case may be, with respect to all outstanding
          Convertible Notes.

               4.6.17  No Adjustments for Certain Incentive Compensation.
                       -------------------------------------------------
          Notwithstanding any other provision hereof, it is expressly understood
          that the Convertible Notes shall not be adjusted with respect to (a)
          Common Stock or Rights, in any case, that may be issued to any of the
          Company's officers or employees pursuant to the stock option plans or
          similar plans of the Company, including, without limitation, under the
          AirTran Holdings, Inc. 1995 Employee Stock Purchase Plan, 1993
          Incentive Stock Options Plan, 1994 and 1996 stock option plans,
          Airways Corporation's 1995 Stock Option Plan, and Airways
          Corporation's 1995 Director Stock Option Plan (collectively, the
          "Plans"), to the extent that shares of Common Stock or other
          securities issued or granted under such Plans are issued or granted at
          a price, or with an exercise price, that is no less than the per share
          Fair Market Value of the Common Stock at the date of grant or issuance
          and such grant or issuance, together with all previous grants and
          issuances under all such Plans, represents not more than 10% of the
          fully diluted Common Stock at the time of such grant or issuance, (b)
          the conversion or exchange (other than pursuant to a
          reclassification), in any case on a share-for-share basis, of Common
          Stock for non-voting Common Stock, or (c) the issuance of any
          Conversion Shares.

               4.6.18  No Impairment. The Company will not, by amendment of its
                       -------------
          certificate of incorporation or through any reorganization, transfer
          of assets, consolidation, merger, dissolution, liquidation, issue or
          sale of securities or any other voluntary action, avoid or seek to
          avoid the observance or performance of any of the terms to be observed
          or performed hereunder by the Company, but will at all times in good
          faith assist in the carrying out of all the provisions of this

                                     -17-
<PAGE>

          paragraph 4.6 and in the taking of all such action as may be necessary
          or appropriate in order to protect the rights of the holders of the
          Convertible Notes against impairment.

               4.6.19  Further Equitable Adjustments. If, after one or more
                       -----------------------------
          adjustments to the Conversion Price pursuant to this paragraph 4.6,
          the Conversion Price cannot be reduced further without falling below
          the greater of (i) the par value of the Common Stock or (ii) the
          lowest positive conversion price legally permissible for convertible
          notes to acquire shares of common stock, the Company shall make
          further adjustments to compensate the holders of the Convertible
          Notes, consistent with the foregoing principles, as the Board of
          Directors of the Company, acting in good faith, deems necessary,
          including an increase in the number of Conversion Shares issuable upon
          conversion of outstanding Convertible Notes and/or a cash payment to
          the holders of the Convertible Notes.

               4.6.20  Other Adjustments.
                       -----------------

          (a)  Adjustments shall be made pursuant to this paragraph 4.6
successively whenever any of the events referred to in subparagraphs 4.6.6,
4.6.8 through 4.6.19, inclusive shall occur.

          (b)  If any Convertible Note shall be converted subsequent to the
record date for any of the events referred to in this paragraph 4.6, but prior
to the effective date thereof, appropriate adjustments shall be made immediately
after such effective date so that the holder of such Convertible Note on such
record date shall have received, in the aggregate, the kind and number of shares
of Common Stock or other securities or property or assets that it would have
owned or been entitled to receive on such effective date had such Convertible
note been converted prior to such record date.

          (c)  Shares of Common Stock owned by or held for the account of the
Company shall not, for purposes of the adjustments set forth in this paragraph
4.6 be deemed outstanding.

               4.6.21  Expiration of Rights. Upon the expiration of any Rights
                       --------------------
          referred to in this paragraph 4.6, without the exercise, exchange or
          conversion, as applicable, thereof, the Conversion Price and the
          number of Conversion Shares shall, upon such expiration, be readjusted
          and shall thereafter be such Conversion Price and such number of
          Conversion Shares as would have been had such Conversion Price and
          such number of Conversion Shares originally been adjusted (or had the
          original adjustment not been required, as the case may be) as if:

          (a)  the only shares of Common Stock so issued were the shares of
Common Stock, if any, actually issued or sold upon the exercise of such Rights;
and

          (b)  such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
aggregate

                                     -18-
<PAGE>

consideration, if any, actually received by the Company for the issuance, sale
or grant of all such Rights, whether or not exercised; provided, however, that
no such readjustment shall have the effect of increasing the Conversion Price by
an amount in excess of the amount of the reduction initially made in respect of
the issuance, sale, or grant of such Rights.

               4.6.22  When Adjustment Not Required. If the Company shall take a
                       ----------------------------
          record of the holders of its Common Stock for the purpose of entitling
          them to receive a dividend or distribution or subscription or purchase
          rights and shall, thereafter and before the distribution to
          stockholders thereof, legally abandon its plan to pay or deliver such
          dividend, distribution, subscription or purchase rights, then
          thereafter no adjustment shall be required by reason of the taking of
          such record and any such adjustment previously made in respect thereof
          shall be rescinded and annulled.

               4.6.23  Treasury Stock. The sale or other disposition of any
                       --------------
          issued shares of Common Stock owned or held by or for the account of
          the Company shall be deemed an issuance thereof.

               4.6.24  Notices to Holders of Convertible Notes. Whenever the
                       ---------------------------------------
          number of Conversion Shares is adjusted or the Conversion Price in
          respect thereof is adjusted, as herein provided, the Company shall
          promptly give to each holder of Convertible Notes notice of such
          adjustment or adjustments and shall promptly deliver to each holder of
          Convertible Notes an Officer's Certificate (confirmed by a certificate
          from the Company's independent certified public accountants) setting
          forth: (i) the number of Conversion Shares issuable upon the exercise
          of each Convertible Note and the Conversion Price of such shares after
          such adjustment; (ii) a brief statement of the facts requiring such
          adjustment; and (iii) the computation by which such adjustment was
          made.

     So long as any Convertible Note is outstanding, within ninety (90) days
of the end of each fiscal year of the Company, the Company shall deliver to each
holder of Convertible Notes an Officer's Certificate setting forth: (i) the
number of Conversion Shares issuable upon the conversion of each Convertible
Note and the Conversion Price of such shares as of the end of such fiscal year;
(ii) a brief statement of the facts requiring each adjustment, if any, required
to be made in such fiscal year; and (iii) the computation by which each such
adjustment was made.

5.   AFFIRMATIVE COVENANTS. The Company covenants, during such time as there is
a commitment to purchase a Note or any of the Notes are outstanding, as follows:

          5.1. Financial Statements.  The Company will deliver to each
               --------------------
Significant Holder in duplicate:

               5.1.1 as soon as practicable and in any event within 45 days
          after the end of each quarterly period (other than the last quarterly
          period) in each fiscal year, consolidated statements of income,
          stockholders' equity and cash flows of the Company and its
          Subsidiaries for the period from the beginning of the current

                                     -19-
<PAGE>

          fiscal year to the end of such quarterly period, and a consolidated
          balance sheet of the Company and its Subsidiaries as at the end of
          such quarterly period, setting forth in each case in comparative form
          figures for the corresponding period in the preceding fiscal year, all
          in reasonable detail and satisfactory in form to the Required
          Holder(s) and certified by an authorized financial officer of the
          Company, subject to changes resulting from year-end adjustments;
          provided, however, that delivery pursuant to paragraph 5.1.3 below of
          --------  -------
          copies of the Quarterly Report on Form 10Q of the Company for such
          quarterly period filed with the Commission shall be deemed to satisfy
          the requirements of this clause (i) with respect to consolidated
          statements.

               5.1.2  as soon as practicable and in any event within 90 days
          after the end of each fiscal year, consolidating and consolidated
          statements of income and cash flows and a consolidated statement of
          stockholders' equity of the Company and its Subsidiaries for such
          year, and a consolidating and consolidated balance sheet of the
          Company and its Subsidiaries as at the end of such year, setting forth
          in each case in comparative form corresponding consolidated figures
          from the preceding annual audit, all in reasonable detail and
          satisfactory in form to the Required Holder(s) and, as to the
          consolidated statements, reported on by Ernst & Young LLP or other
          independent public accountants of recognized national standing
          selected by the Company whose report shall be without limitation as to
          the scope of the audit and satisfactory in substance to the Required
          Holder(s) and, as to the consolidating statements, certified by an
          authorized financial officer of the Company; provided, however, that
                                                       --------  -------
          delivery pursuant to paragraph 5.1.3 below of copies of the Annual
          Report 10K of the Company for such fiscal year filed with the
          Commission shall be deemed to satisfy the requirements of this clause
          (ii) with respect to consolidated statements;

               5.1.3  promptly upon transmission thereof, copies of all such
          financial statements, proxy statements, notices and reports, if any,
          as it shall send to its public stockholders and copies of all
          registration statements (without exhibits) and all reports, if any,
          which it files with the Commission (or any governmental body or agency
          succeeding to the functions of the Commission);

               5.1.4  promptly upon receipt thereof, a copy of each other report
          submitted to the Company or any Subsidiary by independent accountants
          in connection with any annual, interim or special audit made by them
          of the books of the Company or any Subsidiary; and

               5.1.5  with reasonable promptness, (i) such other information as
          such Significant Holder may reasonably request, and (ii) copies of
          other reports as are provided to the Collateral Trustee, any Bank
          Agent or the holders of the Senior Secured Notes.

               5.1.6  Together with each delivery of financial statements
          required by clauses (i) and (ii) above, the Company will deliver to
          each Holder an Officer's

                                     -20-
<PAGE>

          Certificate demonstrating (with computations in reasonable detail)
          compliance by the Company and its Subsidiaries with the provisions of
          Section 6, and stating that there exists no Event of Default or
          Default, or, if any Event of Default or Default exists, specifying the
          nature and period of existence thereof and what action the Company
          proposes to take with respect thereto. Together with each delivery of
          financial statements required by clause (ii) above, the Company will
          deliver to each Significant Holder a certificate of such accountants
          stating that, in making the audit necessary for their report on such
          financial statements, they have obtained no knowledge of any Event of
          Default or Default, or, if they have obtained knowledge of any Event
          of Default or Default, specifying the nature and period of existence
          thereof. Such accountants, however, shall not be liable to anyone by
          reason of their failure to obtain knowledge of any Event of Default or
          Default which would not be disclosed in the course of an audit
          conducted in accordance with generally accepted auditing standards.
          The Company also covenants that immediately after any Responsible
          Officer obtains knowledge of an Event of Default or Default, it will
          deliver to each Significant Holder an Officer's Certificate specifying
          the nature and period of existence thereof and what action the Company
          proposes to take with respect thereto.

          5.2.  Information Required by Rule 144A. The Company will, upon the
                ---------------------------------
request of the holder of any Note, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the
Securities Act in connection with the resale of Notes, except at such times as
the Company is subject to the reporting requirements of section 13 or 15(d) of
the Exchange Act. For the purpose of this paragraph 5.2, the term "qualified
institutional buyer" shall have the meaning specified in Rule 144A under the
Securities Act.

          5.3.  Covenant to Secure Notes Equally. The Company covenants that if
                --------------------------------
it or any Subsidiary shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired, other than Liens permitted by
the provisions of paragraph 6.3 (unless prior written consent to the creation or
assumption thereof shall have been obtained pursuant to paragraph 12.3), it will
make or cause to be made effective provision whereby the Notes will be secured
by such Lien equally and ratably with any and all other Indebtedness (subject
only to the provisions of the Collateral Trust Agreement) thereby secured so
long as any such other Indebtedness shall be so secured.

          5.4.  Compliance with Law. The Company will, and will cause each of
                -------------------
its Subsidiaries to, comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
environmental laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations

                                     -21-
<PAGE>

would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.

          5.5.  Maintenance of Properties and Insurance. The Company shall, and
                ---------------------------------------
shall cause its Subsidiaries to, maintain or cause to be maintained in good
repair, working order and condition all Collateral and properties used or useful
in their businesses; provided, however, that, subject to the requirements of the
                     --------  -------
Collateral Documents, neither the Company nor any such Subsidiary shall be
prevented from discontinuing those operations or suspending the maintenance of
that Collateral or those properties which, in the Company's reasonable judgment,
are no longer necessary or useful in the conduct of the Company's business or
that of its Subsidiaries. For so long as any Collateral or property is deemed to
be useful to the conduct of the Company's business or that of its Subsidiaries,
the Company shall, or shall cause such Subsidiaries to, maintain appropriate
insurance, generally in accordance with industry practices, on such Collateral
and properties and as required under the provisions of the Collateral Documents;
provided, notwithstanding the foregoing, the Company shall at all times carry
and maintain, or cause to be carried and maintained, insurance on and in respect
of the Aircraft, the Airframes and the Engines (in each case as defined in the
Aircraft Mortgage) in accordance with the provisions of Section 4.06 and Annex B
of the Aircraft Mortgage.

          5.6.  Payment of Taxes. The Company shall, and shall cause each
                ----------------
Subsidiary to, pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (a) all taxes, assessments and governmental
charges levied or imposed upon the Company and each Subsidiary or upon the
income, profits or Property of the Company and each Subsidiary or upon the
Collateral and (b) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a Lien upon the Collateral, or the other Property of
the Company or any Subsidiary; provided, however, that the Company or a
                               --------  -------
Subsidiary, as the case may be, shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim (i) the
amount, applicability or validity of which is being contested in good faith by
appropriate proceedings, and for which adequate reserves have been established
in accordance with GAAP, or (ii) if the Company delivers to the Significant
Holders an Officers' Certificate stating that such non-payment and non-discharge
is in the interest of the Company and not prejudicial in any material respect to
the Holders.

     Nothing contained herein or in the Notes shall be deemed to impose on the
Company any obligation to pay on behalf of the Holder of any Notes any tax,
assessment or governmental charge required by any present or future law of the
U.S. or of any state, county, municipality or other taxing authority thereof to
be paid on behalf of, or withheld from the amount payable to, the Holder of any
Notes; rather any tax, assessment or governmental charge shall, to the extent
required by law, be withheld from the amounts provided for herein.

     The Company shall treat the Notes as debt instruments issued at fair market
value for Tax purposes, shall treat the Notes as applicable high yield debt
obligations under Section 163(i) of the code bearing original issue discount
within the meaning of Section 1273(a)(1) of the Code, and shall treat the
appropriate amounts under the Code as the disqualified portion and the dividend
equivalent portion.

                                     -22-
<PAGE>

          5.7. Corporate Existence, etc. Except as otherwise provided in Section
               ------------------------
6, the Company shall do or cause to be done all things necessary to preserve and
keep in full force and effect the corporate existence, rights (charter and
statutory), licenses, permits, approvals and governmental franchises of the
Company and each Subsidiary necessary to the conduct of its respective business;
provided, however, that the Company shall not be required to preserve any such
--------  -------
right, license or franchise, or (other than with respect to the Restricted
Subsidiaries) to preserve the corporate existence of any such Subsidiary, if the
Board of Directors of the Company shall determine that the preservation thereof
is no longer in the interest of the Company and that termination of the
corporate existence is not disadvantageous to the Holders in any material
respect.

               5.7.1 The Company shall cause Airways to continue to be an air
          carrier certificated under Section 604(b) of the Federal Aviation Act.

               5.7.2 The Company is and, to the extent required to operate its
          business as presently conducted and to perform its obligations under
          this Agreement and the Collateral Documents, shall remain a "citizen
          of the United States" as defined in Section 101(16) of the Federal
          Aviation Act. To the extent required to operate Airways' business as
          presently conducted and to perform Airways' obligations under the
          Indenture, the Airways Note Purchase Agreement and the Collateral
          Documents, the Company shall cause Airways to remain a "citizen of the
          United States" as defined in Section 101(16) of the Federal Aviation
          Act.

          5.8. Lines of Business. The Company covenants that it will not, and it
               -----------------
will not permit any Subsidiary of the Company to, engage in any business if, as
a result thereof, the general nature of the businesses of the Company and its
Subsidiaries, taken as a whole, would be substantially changed from the
businesses of the Company as described in the Form 10-K filed April 2, 2001 by
the Company with the Commission for the fiscal year ending December 31, 2000, as
amended by the Form 10-K/A filed April 12, 2001 by the Company with the
Commission for the fiscal year ended December 31, 2000 (the "Company 10-K").

          5.9. ERISA Compliance. The Company shall comply, and shall cause each
               ----------------
ERISA Affiliate to comply, in all material respects, with the provisions of
ERISA and the Code applicable to each Plan. Each of the Company and its
Subsidiaries shall meet, and shall cause all ERISA Affiliates to meet, all
minimum funding requirements applicable to them with respect to any Plan
pursuant to section 302 of ERISA or section 412 of the Code, without giving
effect to any waivers of such requirements or extensions of the related
amortization periods which may be granted. At no time shall the accumulated
benefit obligations under any Plan subject to Title IV of ERISA that is not a
Multiemployer Plan exceed the fair market value of the assets of such Plan
allocable to such benefits by more than $1,000,000. The Company and its
Subsidiaries shall not withdraw, and shall cause all other ERISA Affiliates not
to withdraw, in whole or in part, from any Multiemployer Plan so as to give rise
to withdrawal liability exceeding $1,000,000 in the aggregate. At no time shall
the actuarial present value of unfunded liabilities for post-employment health
care benefits, whether or not provided under a Plan, calculated in a manner
consistent with Statement No. 106 of the Financial Accounting Standards Board,
exceed $1,000,000.

                                     -23-
<PAGE>

          5.10. Environmental Covenants. The Company will immediately notify
                -----------------------
each holder of Notes of, and provide such holder with copies of any
notifications of, discharges or releases or threatened releases or discharges of
a Polluting Substance on, upon, into or from the Collateral which are given or
required to be given by or on behalf of the Company or any of its Subsidiaries
to any Governmental Authority if any of the foregoing could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect,
and such copies of notifications shall be delivered to the holders at the same
time as they are delivered to such Governmental Authority. The Company further
agrees promptly to undertake and pursue diligently to completion, or to cause
its Subsidiaries to undertake and pursue diligently to completion, any
appropriate and legally required or authorized remedial containment and cleanup
action in the event of any release or discharge or threatened release or
discharge of a Polluting Substance on, upon, into or from the Collateral. At all
times while owning and operating the Collateral, the Company will maintain and
retain, or cause its Subsidiaries to maintain and retain, in each case as
required by applicable law, complete and accurate records of all releases,
discharges or other disposal of Polluting Substances on, onto, into or from the
Collateral, including, without limitation, records of the quantity and type of
any Polluting Substances disposed of on or off the Collateral.

          5.11. Environmental Indemnities. The Company hereby agrees to
                -------------------------
indemnify, defend and hold harmless each holder of Notes, the Collateral Trustee
and each of their respective officers, directors, employees, agents,
consultants, attorneys, contractors, affiliates, successors, assigns or
transferees from and against, and reimburse said Persons in full with respect
to, any and all loss, liability, damage, fines, penalties, costs and expenses,
of every kind and character, including reasonable attorneys' fees and court
costs, known or unknown, fixed or contingent, occasioned by or associated with
any claims, demands, causes of action, suits and/or enforcement actions,
including any administrative or judicial proceedings, and any remedial, removal
or response actions ever asserted, threatened, instituted or requested by any
Persons, including any Governmental Authority, arising out of or related to: (i)
the breach of any representation or warranty of the Company contained in
paragraph 9.31 or 9.32 set forth herein; (ii) the failure of the Company to
perform, or to cause its Subsidiaries to perform, any of the covenants contained
in paragraph 5.10; (iii) the ownership, construction, occupancy, operation, use
of the Collateral prior to the earlier of the date on which (a) the Notes, all
interest thereon have been paid in full, and the Collateral Documents have been
released, or (b) all Collateral has been sold by the Collateral Trustee or the
holders of the Notes pursuant to foreclosure of the Liens granted under the
Collateral Documents, deed in lieu of such foreclosure or otherwise (all of the
foregoing, collectively, the "Indemnified Liabilities"). THE FOREGOING INDEMNITY
OBLIGATIONS OF THE COMPANY SHALL EXTEND TO ALL INDEMNIFIED LIABILITIES,
INCLUDING, WITHOUT LIMITATION, ANY INDEMNIFIED LIABILITIES ARISING FROM OR
ATTRIBUTED, IN WHOLE OR IN PART, TO THE NEGLIGENCE OF ANY INDEMNIFIED PARTY. The
obligations of the Company under this paragraph 5.11 shall survive the transfer
of any Note or portion thereof or interest therein by any Purchaser or any
Transferee, the payment of any Note and the termination of this Agreement or any
of the other Transaction Documents.

                                     -24-
<PAGE>

          5.12.  Closing Fee. The Company shall pay to the holders of the Notes,
                 -----------
in proportion to their respective outstanding principal amounts outstanding and
held by such holders, a closing fee in the aggregate amount of $500,000, which
shall be payable on or before April 12, 2001.

          5.13.  Restricted Payments. The Company shall cause Airways and each
                 -------------------
Restricted Subsidiary to comply with the covenants set forth in Section 5.3 of
the Indenture.

          5.14.  Airways' Distributions. So long as no "Default" under the
                 ----------------------
Senior Secured Notes shall have occurred and be continuing (or would result
therefrom):

                 5.14.1  within forty-five days after the end of each fiscal
          quarter of Airways, commencing with the fiscal quarter ending June 30,
          2001, the Company shall cause Airways to pay cash dividends to the
          Company, to the extent permitted under the Indenture, in an amount
          equal to 50% of Airways' Consolidated Net Income for the immediately
          preceding fiscal quarter; and

                 5.14.2  on the date on which each semi-annual payment is due on
          the Notes hereunder, commencing October 15, 2001, the Company shall
          cause Airways to pay cash dividends to the Company, to the extent
          permitted under the Indenture, an amount equal to such payment.

          5.15.  Airways Collateral Support Agreement. The Company shall cause
                 -----------------------------------
Airways to execute the Collateral Support Agreement hereunder.

          5.16.  Security Interests. The Company shall, and shall cause Airways
                 ------------------
and its Subsidiaries to, execute the Collateral Documents and to perform any and
all acts and execute any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement or other statement) for filing under the provisions of
the Federal Aviation Act and the applicable Uniform Commercial Code and the
rules and regulations thereunder or any other statute, rule or regulation of any
applicable federal, state or local jurisdiction, which are necessary or
advisable, from time to time, in order to grant and maintain in favor of the
Collateral Trustee for the benefit of the Holders a valid, perfected Lien on the
Collateral.

          5.17.  Books and Records.
                 -----------------

                 5.17.1  The Company shall, and shall cause each of its
          Subsidiaries to, (i) maintain complete and accurate books and records
          in which full and correct entries in conformity with GAAP shall be
          made of all dealings and transactions in relation to its respective
          business and activities, (ii) permit authorized representatives of any
          Substantial Holder and/or the Collateral Trustee to visit and inspect
          the Properties of the Company or its Subsidiaries, and any or all
          books, records and documents in the possession of the Company or
          Airways relating to the Collateral, including the records, logs, and
          other similar materials and to make copies and take extracts therefrom
          and to visit and inspect the Collateral and to

                                     -25-
<PAGE>

          discuss the affairs, finances and accounts of any of such corporations
          with the principal officers of the Company and its independent public
          accountants, all upon reasonable notice and at such reasonable times
          during normal business hours and as often as may be reasonably
          requested, and (iii) permit the authorized representatives of any
          Substantial Holder to visit and inspect the Properties, books, records
          and documents described in clause (ii), at such times and to such
          extent as may be necessary to allow timely completion of any
          Independent Appraiser's Certificate to be prepared by such Trustee
          Appraiser or Third Party Appraiser.

                 5.17.2  Each Holder and its authorized representatives referred
          to in clause 5.17.1 above agree not to use any information obtained
          pursuant to this Section 5.17 for any purpose other than as required
          in order to discharge their respective duties hereunder and under the
          Collateral Documents and except as otherwise required for such purpose
          to keep confidential and not to disclose any such information to any
          person except that (i) the recipient of the information may disclose
          any information which becomes publicly available other than as a
          result of disclosure by such recipient, and (ii) the recipient of the
          information may disclose any information which its counsel reasonably
          concludes is necessary to be disclosed by law, pursuant to any court
          or administrative order or ruling or in any pending legal or
          administrative proceeding or investigation after notice to the Company
          adequate, subject to applicable laws, to allow the Company to obtain a
          protective order or other appropriate remedy, provided that the
          recipient of the information will (if not otherwise required in order
          to discharge its duties as aforesaid) cooperate with the Company's
          efforts to obtain a protective order or other reliable assurance that
          confidential treatment will be accorded any such information required
          to be so disclosed.

          5.18.  Use of Proceeds. The Company covenants to use the proceeds of
                 ---------------
the Notes hereof to make a $35.0 million equity contribution to Airways.

6.   NEGATIVE COVENANTS. The Company covenants, during such time as there is a
commitment to purchase a Note or any Note is outstanding, as follows:

          6.1.   Limitation on Restricted Payments. The Company shall not make a
                 ---------------------------------
Restricted Payment if at the time the Company makes such Restricted Payment: (1)
a Default shall have occurred and be continuing (or would result therefrom); (2)
the Company is not able to Incur an additional $1.00 of Indebtedness pursuant to
paragraph 6.5; or (3) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Closing Date (the amount of any such
Restricted Payment, if other than cash, as determined in good faith by the
Company, whose determination shall be conclusive and evidenced by a resolution
of the Board of Directors of the Company or an Officers' Certificate, available
on request by any Significant Holder) would exceed the sum of:

                 6.1.1 fifty percent (50%) of the Consolidated Net Income
          accrued during the period (treated as one accounting period) from the
          beginning of the fiscal

                                     -26-
<PAGE>

          quarter immediately following the fiscal quarter during which the
          Notes are originally issued to the end of the most recent fiscal
          quarter for which financial statements are publicly available prior to
          the date of such Restricted Payment (or, in case such Consolidated Net
          Income shall be a deficit, minus one hundred percent (100%) of such
          deficit) and

               6.1.2  the aggregate net proceeds (including fifty percent (50%)
          of the fair market value of property other than cash (as determined in
          good faith by the Company, whose determination shall be conclusive and
          evidenced by a resolution of the Board of Directors or an Officer's
          Certificate, available on request by any Significant Holder prior to
          the making of such Restricted Payment)) received by the Company or any
          Restricted Subsidiary from the issuance or sale, subsequent to the
          Closing Date, of its Capital Stock (other than Disqualified Stock) and
          Indebtedness of the Issuer or any Restricted Subsidiary that has been
          converted into or exchanged for its Capital Stock (other than
          Disqualified Stock) subsequent to the Closing Date (other than an
          issuance or sale to a Restricted Subsidiary and other than an issuance
          or sale to an employee stock ownership plan or to a trust established
          by the Company or any of its Subsidiaries for the benefit of their
          employees).

     So long as no Default shall have occurred and be continuing (or would
     result therefrom), the provisions of the foregoing paragraphs shall not
     prohibit:

               6.1.3  any Restricted Payment made by exchange for, or out of the
          net proceeds (including fifty percent (50%) of the fair market value
          of property other than cash (as determined in good faith by the
          Company, whose determination shall be conclusive and evidenced by a
          resolution of the Board of Directors or an Officers' Certificate,
          available on request by any Significant Holder prior to the making of
          such Restricted Payment) of the substantially concurrent sale of,
          Capital Stock of the Company (other than Disqualified Stock and other
          than Capital Stock issued or sold to a Subsidiary of the Company or an
          employee stock ownership plan or to a trust established by the Company
          or any of its Subsidiaries for the benefit of their employees);
          provided, however, that (A) such Restricted Payment shall be excluded
          --------  -------
          in the calculation of the amount of Restricted Payments and (B) to the
          extent used to make such Restricted Payment, the net proceeds from
          such sale shall be excluded from the calculation of amounts under
          clause paragraph 6.1.2 above;

               6.1.4  any purchase, repurchase, redemption, defeasance or other
          acquisition or retirement for value of Subordinated Obligations made
          by exchange for, or out of the proceeds of the substantially
          concurrent sale of, Capital Stock (other than Disqualified Stock);
          provided, however, that the liquidation value of any Preferred Stock
          --------  -------
          so exchanged or sold shall be included in the calculation of the
          amount of Restricted Payments, but only to the extent of the Net Cash
          Proceeds of such Preferred Stock after the Closing Date;

                                     -27-
<PAGE>

               6.1.5  dividends paid within sixty (60) days after the date of
          declaration thereof if at such date of declaration such dividend would
          have complied with this paragraph 6.1; provided, however, that such
                                                 --------  -------
          dividends shall be included in the calculation of the amount of
          Restricted Payments;

               6.1.6  the declaration or payment of dividends on or payment of
          liquidated damages with respect to (A) any Preferred Stock outstanding
          on the Issue Date or (B) any Preferred Stock (other than Disqualified
          Stock) issued after the Closing Date that ranks on parity with or
          junior to Preferred Stock outstanding on the Closing Date; provided,
                                                                     --------
          however, that any dividend referred to in the foregoing clause (A) or,
          -------
          subject to the following proviso, clause (B), shall be included in the
          calculation of the amount of Restricted Payments and provided further,
          that the Company may elect to exclude from the calculation of amounts
          under clause 6.1.2 above any Net Cash Proceeds received by the Company
          from the issue or sale of Preferred Stock pursuant to the foregoing
          clause (B) (which election must be made by written notice to each
          Significant Holder within ten (10) Business Days of the receipt of
          such Net Cash Proceeds) and, if such election is made, any dividend,
          distribution, purchase, redemption, acquisition or retirement on or of
          the Preferred Stock for which such election is made shall not be a
          Restricted Payment;

               6.1.7  (A) the payment of cash in lieu of issuing fractional
          shares of Capital Stock of the Company in connection with the exercise
          of options or warrants, the conversion of convertible securities or
          the redemption of interests in employee stock ownership or benefits
          plans, (B) the purchase or redemption of its Capital Stock by the
          Company from employee stock ownership or benefit plans subject to
          ERISA to the extent required by ERISA, (C) repurchases of its Capital
          Stock which occur upon the exercise of stock options if such Capital
          Stock represents a portion of the exercise price of such options, (D)
          the purchase, redemption, acquisition, cancellation or other
          retirement for value of shares of Capital Stock of the Company or any
          Restricted Subsidiary, options on any such shares or related stock
          appreciation rights or similar securities held by officers or
          employees or former officers or employees (or their estates or
          beneficiaries under their estates), upon their death, disability,
          retirement, termination of employment or pursuant to any agreement
          under which such shares of stock or related rights were issued;
          provided that the aggregate cash consideration paid pursuant to this
          clause (D) for such purchase, redemption, acquisition, cancellation or
          other retirement of such shares of Capital Stock or related rights
          after the Closing Date does not exceed an aggregate amount of
          $7,500,000; provided further that the amount of any payment, purchase,
          redemption, repurchase, acquisition, cancellation or other retirement
          paid pursuant to this clause (D) shall be included in the amount of
          Restricted Payments;

               6.1.8  any purchase or redemption of Capital Stock of the Company
          resulting from the consolidation or merger with or into any Person or
          conveyance, transfer or lease of all or substantially all of the
          Company's or any Restricted

                                     -28-
<PAGE>

          Subsidiary's property to one or more Persons substantially as an
          entirety not otherwise prohibited herein (other than any
          consolidation, merger or other transactions involving only the Issuer
          and a Restricted Subsidiary of the Issuer or involving only Restricted
          Subsidiaries of the Company); provided that the amount of such
          purchase or redemption shall be excluded in the calculation of the
          amount of Restricted Payments; or

               6.1.9  payments of fees, expenses and indemnities to the
          directors of the Company and the Restricted Subsidiaries.

          6.2. Waiver of Stay, Extension or Usury Laws. The Company covenants
               ---------------------------------------
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim, and will resist any and all
efforts to be compelled to take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company from paying all or any portion of the principal of or interest on the
Notes as contemplated herein, wherever enacted, now or at any time hereafter in
force, or which may affect the covenants or the performance of this Agreement
and the Transaction Documents; and (to the extent that it may lawfully do so)
the Company hereby expressly waives all benefit or advantage of any such law,
and covenants that it will not hinder, delay or impede the execution of any
power granted to the Collateral Trustee in the Collateral Documents, but will
suffer and permit the execution of every such power as though no such law had
been enacted.

          6.3. Title to Collateral; Limitation on Liens. The Company represents
               ----------------------------------------
and warrants that Airways has, and covenants that it shall cause Airways to
continue to have, full power and lawful authority to grant, release, convey,
assign, transfer, mortgage, pledge, hypothecate and otherwise create the
security interests in the Collateral as set forth in the Collateral Documents;
the Company shall warrant, preserve and defend the interest and title of the
Collateral Trustee to the Collateral, against the claims of all persons and will
maintain and preserve the Security Interests; and the Company shall not, and
shall not permit any of its Restricted Subsidiaries to, directly or indirectly,
Incur or suffer to exist any Lien of any nature whatsoever upon or with respect
to (i) any of its properties other than the Collateral (including Capital Stock
of a Restricted Subsidiary), whether owned at the Closing Date or thereafter
acquired, other than Permitted Liens, without effectively providing that the
Notes shall be secured equally and ratably with (or prior to) the obligations so
secured for so long as such obligations are so secured or (ii) any Collateral
other than Permitted Liens and the Identified Liens.

          6.4. Restrictions on Becoming an Investment Company. The Company shall
               ----------------------------------------------
not become, nor shall it permit Airways to become, an investment company within
the meaning of the Investment Company Act of 1940 as such statute and the
regulations thereunder and any successor statute or regulations thereto may from
time to time be in effect.

          6.5. Limitation on Indebtedness.
               --------------------------

                                     -29-
<PAGE>

               6.5.1  Neither the Company nor the Restricted Subsidiaries shall
          Incur, directly or indirectly, any Indebtedness; provided, however,
                                                           --------  -------
          that Airways and its Subsidiaries may Incur Indebtedness to the extent
          permitted under the Indenture.

               6.5.2  Notwithstanding the foregoing paragraph 6.5.1, the Company
          may Incur any or all of the following Indebtedness:

          (a)  Indebtedness of the Company owed to and held by a Restricted
Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by the
Company or a Restricted Subsidiary; provided, however, that any subsequent
                                    --------  -------
issuance or transfer of any Capital Stock which results in any such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of
such Indebtedness (other than to the Company or another Restricted Subsidiary)
shall be deemed in each case, to constitute the Incurrence of such Indebtedness
by the Company;

          (b)  the Indebtedness evidenced by the Notes;

          (c)  Indebtedness outstanding on the Closing Date (other than
Indebtedness described in clause (a) above;

          (d)  Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to clause (a), (b) or (c) above;

          (e)  Indebtedness (A) in respect of performance, surety, appeal or
similar bonds provided in the ordinary course of business, and (B) arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of the
Restricted Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets of the Company or any of
the Restricted Subsidiaries, including all or any interest in any Restricted
Subsidiary, and not exceeding the gross proceeds therefrom, other than
Guarantees of Indebtedness Incurred by any Person acquiring all or any portion
of such business, assets or Restricted Subsidiary or any of the Restricted
Subsidiaries for the purpose of financing such acquisition;

               6.5.3  Notwithstanding the foregoing, the Company shall not Incur
          any Indebtedness pursuant to the foregoing paragraph 6.5.2(a) through
          (e) if the proceeds thereof are used, directly or indirectly, to
          Refinance any Subordinated Obligations unless the Indebtedness so
          Incurred shall be subordinated to the Notes, to at least the same
          extent as such Subordinated Obligations.

               6.5.4  For purposes of determining compliance with this paragraph
          6.5, in the event that an item of Indebtedness meets the criteria of
          more than one of the types of Indebtedness described above, the
          Company, in its sole discretion, will classify such item of
          Indebtedness and only be required to include the amount and type of
          such Indebtedness in one of the above clauses.

                                     -30-
<PAGE>

          6.6. Limitation on Distributions from Restricted Subsidiaries. The
               --------------------------------------------------------
Company shall not, and shall not permit any Restricted Subsidiary to create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions on its Capital Stock to the
Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company,
(b) make any loans or advances to the Company or (c) transfer any of its
property or assets to the Company except:

               6.6.1 any encumbrance or restriction pursuant to an agreement in
          effect at or entered into on the Closing Date;

               6.6.2 any encumbrance or restriction with respect to a Restricted
          Subsidiary or its property or assets pursuant to an agreement relating
          to any Indebtedness or Preferred Stock Incurred by such Restricted
          Subsidiary on or prior to the date on which such Restricted Subsidiary
          became a Restricted Subsidiary or was acquired by the Company (other
          than Indebtedness or Preferred Stock Incurred as consideration in, or
          to provide all or any portion of the funds or credit support utilized
          to consummate, the transaction or series of related transactions
          pursuant to which such Restricted Subsidiary became a Restricted
          Subsidiary or was acquired by the Company) and outstanding on such
          date;

               6.6.3 any encumbrance or restriction pursuant to an agreement
          effecting a Refinancing of Indebtedness or Preferred Stock Incurred
          pursuant to an agreement referred to in clause 6.6.1 or 6.6.2 or this
          clause 6.6.3 or contained in any amendment to an agreement referred to
          in clause 6.6.1 or 6.6.2 or this clause 6.6.3; provided, however, that
                                                         --------  -------
          the encumbrances and restrictions with respect to such Restricted
          Subsidiary contained in any such refinancing agreement or amendment
          are in the aggregate no less favorable to the Holders than
          encumbrances and restrictions with respect to such Restricted
          Subsidiary contained in such predecessor agreements;

               6.6.4 any restriction with respect to a Restricted Subsidiary
          imposed pursuant to an agreement entered into for a sale or
          disposition which is not prohibited under paragraph 6.7 of all or
          substantially all the Capital Stock or assets of such Restricted
          Subsidiary pending the closing of such sale or disposition;

               6.6.5 any encumbrances and restrictions existing under or by
          reason of applicable law or regulation;

               6.6.6 any encumbrances and restrictions (A) that restrict in a
          customary manner the subletting, assignment or transfer of any
          property or asset that is a lease, license, conveyance or contract,
          (B) existing by virtue of any transfer of, agreement to transfer,
          option or right with respect to, or Lien on, any property or assets of
          the Company or any Restricted Subsidiary not otherwise prohibited by
          the Indenture or the other Collateral Documents or (C) arising or
          agreed to in the

                                     -31-
<PAGE>

          ordinary course of business not relating to any Indebtedness, and that
          do not (as determined by the Company and certified in a resolution of
          the Board of Directors or an Officer's Certificate delivered to the
          Substantial Holders prior to or promptly following such encumbrance or
          restriction becoming effective), individually or in the aggregate, (1)
          detract from the value of property or assets of the Company or any
          Restricted Subsidiary in any manner material to the Company or any
          Restricted Subsidiary or (2) materially adversely affect the Company's
          ability to make principal (and premium, if any) or interest payments
          on the Notes; and

               6.6.7 any encumbrance or restriction contained in the terms of
          any Indebtedness or any agreement pursuant to which such Indebtedness
          was issued if (A) the encumbrance or restriction applies only in the
          event of a payment default or default with respect to a financial
          covenant contained in such Indebtedness or agreement, (B) the
          encumbrance or restriction is not materially more disadvantageous to
          the Holders of the Notes than is customary in comparable financings
          (as determined by the Company and certified in a resolution of the
          Board of Directors or an Officers' Certificate delivered to the
          Substantial Holders prior to or promptly following such encumbrance or
          restriction becoming effective), and (C) such encumbrance or
          restriction will not materially adversely affect the Company's ability
          to make principal (and premium, if any) or interest payments on the
          Notes (as determined by the Company and certified in a resolution of
          the Board of Directors or an Officer's Certificate delivered to the
          Substantial Holders prior to or promptly following such encumbrance or
          restriction becoming effective).

     Nothing contained in this Section 6.6 shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in paragraph 6.13 or (2) restricting the
sale or other disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any of its
Restricted Subsidiaries.

          6.7. Asset Dispositions. The Company shall not permit any Restricted
               ------------------
Subsidiary to, directly or indirectly, consummate any Asset Disposition except
as otherwise permitted under the Indenture. The Company will not consummate any
Asset disposition except disposals of inventory and obsolete equipment in the
ordinary course of business.

          6.8. Limitation on Affiliate Transactions.
               ------------------------------------

               6.8.1 The Company shall not, and shall not permit any Restricted
          Subsidiary to, enter into or permit to exist any transaction
          (including the purchase, sale, lease or exchange of any property or
          employee compensation arrangements) with any Affiliate of the Company
          (an "Affiliate Transaction") unless the terms thereof (1) are no less
          favorable to the Company or such Restricted Subsidiary than those that
          could be obtained at the time of such transaction in arm's- length
          dealings with a Person who is not such an Affiliate and (2) if such
          Affiliate

                                     -32-
<PAGE>

          Transaction involves an amount in excess of $5,000,000 (i) are set
          forth in writing and (ii) have been approved by a majority of the
          members of the Board of Directors having no personal stake in such
          Affiliate Transaction. If such Affiliate Transaction involves an
          amount in excess of $10,000,000, a fairness opinion must be obtained
          from a nationally recognized investment banking firm, appraisal firm
          or auditing firm with respect to the financial terms of such Affiliate
          Transaction.

               6.8.2 The provisions of the foregoing paragraph (a) shall not
          prohibit or apply to (i) any Restricted Payment permitted to be paid
          pursuant to paragraph 6.1, (ii) loans or advances to employees in the
          ordinary course of business and in an amount that does not exceed
          $1,000,000 in the aggregate outstanding at any one time, (iii) the
          payment of reasonable fees to directors of the Company and its
          Restricted Subsidiaries who are not employees of the Company or its
          Restricted Subsidiaries, (iv) any Affiliate Transaction between the
          Company and a Restricted Subsidiary or between Restricted
          Subsidiaries, (v) any issuance of securities, or other payments,
          awards or grants in cash, securities or otherwise pursuant to, or the
          funding of, employment arrangements, stock options and stock ownership
          plans approved by the Board of Directors, (vi) the grant of stock
          options or similar rights to employees and directors of the Company
          pursuant to plans approved by the Board of Directors of the Company.

          6.9.  Limitation on the Sale or Issuance of Capital Stock of
                ------------------------------------------------------
Restricted Subsidiaries. The Company shall not sell or otherwise dispose of any
-----------------------
Capital Stock of a Restricted Subsidiary, and shall not permit any such
Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any of its Capital Stock except as otherwise permitted under the
Indenture.

          6.10. Limitation on Sale/Leaseback Transactions. The Company shall
                -----------------------------------------
not, and shall not permit any Restricted Subsidiary to, enter into any
Sale/Leaseback Transaction with respect to any property unless (i) the Company
or such Restricted Subsidiary would be entitled to (A) Incur Indebtedness in an
amount equal to the Attributable Debt with respect to such Sale/Leaseback
Transaction pursuant to paragraph 6.5 and (B) create a Lien on such property
securing such Attributable Debt without equally and ratably securing the Notes
pursuant to paragraph 6.3, or (ii) the Sale/Leaseback Transaction is treated as
an Asset Disposition and the Company applies the proceeds of such transaction in
compliance with paragraph 6.7; provided, however, the Company and the Restricted
                               --------  -------
Subsidiaries may, notwithstanding the foregoing, sell and leaseback existing DC-
9 or B737 aircraft or other non-aircraft flight equipment owned by Airways or
any Restricted Subsidiary as of the Closing Date in any period of twelve
consecutive months not exceeding $10,000,000 in aggregate book value so long as
Airways and the Restricted Subsidiaries have sufficient remaining aircraft and
other flight equipment to operate Airways' business in the ordinary course
substantially consistent with past practices thereafter.

7.   Intentionally Omitted.

8.   EVENTS OF DEFAULT.

                                     -33-
<PAGE>

          8.1. Acceleration. If any of the following events shall occur and be
               ------------
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):

               8.1.1 the Company defaults in the payment of any principal of any
          Note when the same shall become due, either by the terms thereof or
          otherwise as herein provided; or

               8.1.2 the Company defaults in the payment of any interest on any
          Note for more than 5 Business Days after the date due and on or before
          such fifth Business Day, the Company fails to deliver Series A PIK
          Notes or Series B PIK Notes, as applicable, to the holders of each
          such Note, in accordance with the terms set forth in paragraphs 2.1.1
          and 2.1.2, as applicable; or

               8.1.3 the Company or any Restricted Subsidiary defaults in the
          observance or performance of its covenants or agreements in the
          Agreement or any of the Transaction Documents that continues for the
          relevant period specified therein which is not cured within a 30-day
          period or the applicable grace period set forth in such Transaction
          Document;

               8.1.4 any of the representations or warranties made by the
          Company or any Restricted Subsidiary in the Agreement or any of the
          Transaction Documents or by any of its respective officers in any
          writing furnished in connection with or pursuant to this Agreement or
          any other Transaction Document shall prove to have been untrue in any
          material respect when made and such Default continues uncured for a
          period of thirty (30) days, or a Default in any material respect in
          the observance or performance of any other of the Company's covenants
          or agreements in the Notes, this Agreement or any of the other
          Transaction Documents, in each case that continues for a period of
          thirty (30) days;

               8.1.5 an event of default shall have occurred and be continuing
          under any other evidence of outstanding Indebtedness of the Company or
          any Restricted Subsidiary, whether such Indebtedness now exists or is
          created hereafter, which event of default (A) consists of a payment
          default in the case of any Indebtedness outstanding under any Senior
          Credit Facility which default continues beyond any applicable cure or
          grace period set forth therein, (B) consists of a payment default in
          the case of any other Indebtedness outstanding under Senior Secured
          Notes which default continues beyond any applicable cure or grace
          period set forth therein, or (C) results in the acceleration of any
          Indebtedness and the principal amount of such accelerated Indebtedness
          which with the principal amount of any such other Indebtedness then so
          accelerated, aggregates more than $20 million;

               8.1.6 a final non-appealable judgment or judgments for the
          payment of money is or are entered by a court or courts of competent
          jurisdiction against the Company or any Restricted Subsidiary and such
          judgment or judgments remain unsatisfied, undischarged, unbonded or
          unstayed for a period of thirty (30) days

                                     -34-
<PAGE>

          after entry, provided that the aggregate amount of all such judgments
                       --------
          exceeds $10 million;

               8.1.7 (a) the Collateral Trustee fails to have a first-priority
          perfected security interest in any of the Collateral other than
          "Equipment" or "Inventory" (each as defined in the Security Agreement)
          (subject to Permitted Liens) or (b) the Collateral Trustee fails to
          have a first-priority perfected security interest in any of the
          Collateral consisting of "Equipment" or "Inventory" (each as defined
          in the Security Agreement) (subject to Permitted Liens and Identified
          Liens), and in the case of clause (b) only, such failure continues for
          30 days after receipt of written notice by the Company of such failure
          from any Holder;

               8.1.8 the Company or any Restricted Subsidiary, pursuant to or
          within the meaning of any Bankruptcy Law:

          (a)  commences a voluntary case,

          (b)  consents to the entry of an order for relief against it in an
involuntary case,

          (c)  consents to the appointment of a Custodian of it or for all or
substantially all of its property, makes a general assignment for the benefit of
its creditors,

          (d)  admits in writing its inability to pay debts as the same become
due; and

          (e)  a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:

                     (i)   is for relief against the Company or any Restricted
                     Subsidiary in an involuntary case,

                     (ii)  appoints a Custodian of the Company or any Restricted
                     Subsidiary or for all or substantially all of their
                     property,

                     (iii) orders the liquidation of the Company or any
                     Restricted Subsidiary,

          and the order or decree remains unstayed and in effect for sixty (60)
days;

               8.1.9  an "Event of Default" under any Senior Credit Facility
          shall have occurred and be continuing;

               8.1.10 Boeing, Rolls-Royce PLC and their respective Affiliates
          hold a majority in principal amount of the Notes then outstanding, and
          an "Event of Default" has occurred and is continuing under any lease,
          purchase or other agreement (whether now existing or hereafter entered
          into) between (A) Boeing or Rolls-Royce PLC or any of their respective
          Affiliates, as the case may be, and (B) the Company, any of its
          Subsidiaries or Affiliates, and as a consequence

                                     -35-
<PAGE>

          thereof Boeing or Rolls-Royce PLC or any of their respective
          Affiliates, as the case may be, has commenced the exercising any of
          its remedies under such agreement (each an "Accelerated Agreement");
          provided that the amount of all obligations under such Accelerated
          Agreements then exceeds $20,000,000 in the aggregate.

               8.1.11 No "Default" under the Senior Secured Notes or the Senior
          Credit Facility shall have occurred and be continuing (or would result
          therefrom), and (i) Airways fails to pay cash dividends to the Company
          to the extent mandated in Section 6.2.1 hereof, or (ii) on the
          Business Day prior to the date on which semi-annual payments are due
          on the Notes hereunder, Airways fails to pay cash dividends to the
          Company in an amount equal to such payment; or

then (a) if such event is an Event of Default specified in paragraph 8.1.1 or
8.1.2, the holder of any Note (other than the Company or any of its Subsidiaries
or Affiliates) may at its option, by notice in writing to the Company, declare
such Note to be, and such Note shall thereupon be and become, immediately due
and payable at par together with interest accrued thereon, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Company, (b) if such event is an Event of Default specified in paragraph
8.1.6 or 8.1.8 with respect to the Company, all of the Notes at the time
outstanding shall automatically become immediately due and payable at par
together with interest accrued thereon, if any, with respect to each Note,
without presentment, demand, protest or notice of any kind, all of which are
hereby waived by the Company, and (c) if such event is an Event of Default
specified in paragraph 8.1.6 or 8.1.8 but not with respect to the Company, the
Required Holder(s) may at its or their option, by notice in writing to the
Company, declare all of the Notes to be, and all of the Notes shall thereupon be
and become, immediately due and payable together with interest accrued thereon,
if any, with respect to each Note, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Company.

          8.2. Rescission of Acceleration. At any time after any or all of the
               --------------------------
Notes shall have been declared immediately due and payable pursuant to paragraph
8.1, the Required Holder(s) may, by notice in writing to the Company, rescind
and annul such declaration and its consequences if (i) the Company shall have
paid all overdue interest on the Notes and the principal of, if any, payable
with respect to any Notes which have become due otherwise than by reason of such
declaration, and interest on such overdue interest and overdue principal at the
rate specified in the Notes, (ii) the Company shall not have paid any amounts
which have become due solely by reason of such declaration, (iii) all Events of
Default and Defaults, other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or waived pursuant
to paragraph 12.3, and (iv) no judgment or decree shall have been entered for
the payment of any amounts due pursuant to the Notes or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom.

          8.3. Notice of Acceleration or Rescission. Whenever any Note shall be
               ------------------------------------
declared immediately due and payable pursuant to paragraph 8.1 or any such
declaration shall be

                                     -36-
<PAGE>

rescinded and annulled pursuant to paragraph 8.2, the Company shall forthwith
give written notice thereof to the holder of each Note at the time outstanding.

          8.4. Other Remedies. If any Event of Default or Default shall occur
               --------------
and be continuing, the holder of any Note may proceed to protect and enforce its
rights under this Agreement, the other Transaction Documents and such Note by
exercising such remedies as are available to such holder in respect thereof
under applicable law, either by suit in equity or by action at law, or both,
whether for specific performance of any covenant or other agreement contained in
this Agreement or the other Transaction Documents or in aid of the exercise of
any power granted in this Agreement or any Transaction Document. No remedy
conferred in this Agreement or the other Transaction Documents upon the holder
of any Note or the Collateral Trustee is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise.

9.   REPRESENTATIONS AND WARRANTIES.  The Company represents, covenants and
warrants as follows:

          9.1. Organization. Each of the Company and its Subsidiaries (i) has
               ------------
been duly organized, is validly existing and is in good standing under the laws
of its jurisdiction of organization, (ii) has all requisite power and authority
to carry on its business and to own, lease and operate its properties and assets
described in the Holdings SEC Documents, and (iii) is duly qualified or licensed
to do business and is in good standing as a foreign corporation, as the case may
be, authorized to do business in each jurisdiction in which the nature of such
businesses or the ownership or leasing of such properties requires such
qualification, except where the failure to be so qualified could not, singly or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
Schedule 9.1.1 hereto sets forth a correct list of each Subsidiary, its
--------------
jurisdiction of incorporation, ownership and designation.

          9.2. Power and Authority. The Company and each Subsidiary has all
               -------------------
requisite corporate power to own and operate their respective properties and to
conduct its business as currently conducted and as currently proposed to be
conducted. The Company and each Subsidiary has all requisite corporate power to
execute, deliver and perform its obligations under this Agreement, the Notes and
the other Transaction Documents to which it is a party. The execution, delivery
and performance of this Agreement, the Notes and the other Transaction Documents
has been duly authorized by all requisite corporate action, and this Agreement,
the Notes and the other Transaction Documents have been duly executed and
delivered by authorized officers of the Company and each Subsidiary which is a
party thereto and are valid obligations of the Company and each such Subsidiary,
legally binding upon and enforceable against the Company and each such
Subsidiary in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). Except as provided in the Collateral Trust
Agreement, the Notes rank and will rank on a parity with all senior indebtedness
of Holdings that is outstanding on the date hereof or that may be incurred
hereafter, and senior to all other indebtedness of Company that is outstanding
on the

                                     -37-
<PAGE>

date hereof or that may be incurred hereafter. The shares of Common Stock
issuable upon conversion of the Convertible Notes have been duly authorized and,
when issued upon such conversion, will be validly issued, fully paid and
nonassessable, and will not be issued in violation of, and will not be subject
to, any preemptive or similar rights.

          9.3. Establishment of Security Interest. As of the Closing Date, all
               ----------------------------------
filings, assignments, pledges and deposits of documents or instruments will have
been made and all other actions have been taken, that are necessary or advisable
under applicable law and are required to be made or taken on or prior to the
Closing Date under the provisions of this Agreement and the other Transaction
Documents to establish the Collateral Trustee's security interest in the
Collateral. As of the Closing Date, the Collateral and the Collateral Trustee's
rights with respect to the Collateral will not be subject to any setoff, claims,
withholdings or other defenses (except any such setoff, claim or defense which
could not, individually or in the aggregate, materially impair the rights of the
Collateral Trustee with respect to the Collateral). The Company is the owner of
the Collateral described in the Collateral Documents, subject to no Lien of any
kind which is not permitted by paragraph 6.3.

          9.4. Disclosure. No injunction or order has been issued that either
               ----------
(a) asserts that any of the transactions related to this Agreement or the
Transaction Documents is subject to the registration requirements of the Act, or
(ii) would prevent or suspend the issuance or sale of any of the Notes, in any
jurisdiction. As of the Closing Date, the Transaction Documents and the Holdings
SEC Documents (x) will not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (y) will contain all the information specified in, and meet the
requirements of, Rule 144A(d)(4) under the Act. Except as disclosed in the
Holdings SEC Documents or on Schedule 9.4, there are no related party
                             ------------
transactions that would be required to be disclosed in a registration statement
on Form S-1 filed under the Act.

          9.5. Subsidiaries. As of the Closing, (i) the Company will have no
               ------------
direct or indirect subsidiaries other than Airways and AirTran Investments
Corporation, each of which is a wholly-owned subsidiary of the Company, and
AirTran Airways 717 Leasing Corporation, which is a wholly-owned subsidiary of
Airways. All of the shares of outstanding common stock of Airways and AirTran
Investments Corporation are owned, directly or indirectly, by Company, free and
clear of all liens, security interests, mortgages, pledges, charges, claims or
restrictions on transferability or encumbrance of any kind. All of the shares of
outstanding common stock of AirTran Airways 717 Leasing Corporation, are owned,
directly or indirectly, by Airways, free and clear of all liens, security
interests, mortgages, pledges, charges, claims or restrictions on
transferability or encumbrance of any kind other than those created by the
Transaction Documents. Except as disclosed in the Company 10-K or Schedule 9.5,
                                                                  ------------
there are no outstanding (A) securities convertible into or exchangeable for any
capital stock of either of the Company or Airways, (B) options, warrants or
other rights to purchase or subscribe for capital stock of either of the Company
or Airways, or (C) contracts, commitments, agreements, understandings,
arrangements, calls or claims of any kind relating to the issuance of any
capital stock of either of the Company or Airways, any such convertible or
exchangeable securities or any such options, warrants or rights. Except as
disclosed in the Holdings SEC Documents, immediately following

                                     -38-
<PAGE>

the Closing, neither of the Company or Airways will directly or indirectly own
any capital stock or other equity interest in any person.

          9.6. Capitalization. All of the outstanding shares of capital stock of
               --------------
each of the Company and Airways have been duly authorized and validly issued,
are fully paid and nonassessable, and were not issued in violation of, and are
not subject to, any preemptive or similar rights. Schedule 9.6 sets forth (a)
                                                  ------------
the Capitalization of each of Airways and the Company as of the Closing Date and
(b) the pro forma Capitalization of each of Airways and the Company after giving
effect to the Transactions. "Capitalization" shall mean (a) the number of
authorized and outstanding shares of Common Stock, (b) the number of authorized
and outstanding shares of each series of preferred stock, (c) a description of
outstanding securities convertible into or exchangeable for Common Stock and the
maximum number of shares of Common Stock issuable upon exercise of all such
outstanding rights, (d) a description of any option plans and the number of
authorized options and the number of outstanding options, and (e) the number of
any other outstanding shares or securities. Except as set forth in such Schedule
                                                                        --------
9.6, immediately following the Closing, neither of the Company nor Airways will
---
have any liabilities, absolute, accrued, contingent or otherwise other than (A)
liabilities that are reflected in the Financial Statements (defined below), or
(B) liabilities incurred subsequent to the date thereof in the ordinary course
of business, consistent with past practice, that could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

          9.7. Registration. Except for this Agreement, the Registration Rights
               ------------
Agreement, the Senior Note Purchase Agreement, the Indenture and the Senior
Notes Registration Rights Agreement, one or more other agreements between the
Company and Purchasers or their Affiliates granting to such parties certain
registration rights as disclosed in the Holdings SEC Documents, neither the
Company nor any of its Subsidiaries has entered into any agreement (i) to
register any of its securities under the Act, or (ii) to purchase or offer to
purchase any securities of either of the Company, Airways or any of their
respective Affiliates.

          9.8. No Violation. Neither the Company nor any of its Subsidiaries is
               ------------
in violation of its respective certificate of incorporation or bylaws (the
"Charter Documents"). Neither the Company nor any of its Subsidiaries is in
violation of (i) any Applicable Law of any Governmental Authority, or (ii) in
breach of or default under any bond, debenture, note or other evidence of
indebtedness, indenture, mortgage, deed of trust, lease or any other agreement
or instrument to which any of them is a party or by which any of them or their
respective property is bound (collectively, "Applicable Agreements"), other than
in the case of clauses (i) or (ii) as disclosed in the Holdings SEC Documents or
violations, breaches or defaults that could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. There exists no
condition that, with the passage of time or otherwise, would (i) constitute a
violation of such Charter Documents or Applicable Laws, (ii) constitute a breach
of or default under any Applicable Agreement, or (iii) result in the imposition
of any penalty or the acceleration of any indebtedness other than, with respect
to this clause (iii) only, breaches, penalties or defaults that could not,
singly or in the aggregate, reasonably be expected to have a Material Adverse
Effect. All Applicable Agreements are in full force and effect and are legal,
valid and binding obligations, and no default has occurred or is continuing
thereunder, other than such defaults that could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

                                     -39-
<PAGE>

          9.9. No Consents. Neither the execution, delivery or performance of
               -----------
the Transaction Documents nor the consummation of the Transactions shall
conflict with, violate, constitute a breach of or a default (with the passage of
time or otherwise) under, require the consent of any person (other than consents
already obtained) under, result in the imposition of a Lien on any assets of the
Company or its Subsidiaries (except pursuant to the Transaction Documents), or
result in an acceleration of indebtedness under or pursuant to (i) the Charter
Documents, (ii) any Applicable Agreement, other than, with respect to this
clause (ii) only, such breaches, violations or defaults as disclosed in the
Holdings SEC Documents or that could not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect, or (iii) any Applicable Law.
After giving effect to the Transactions, no Default or Event of Default will
exist.

          9.10. No permit, certificate, authorization, approval, consent,
license or order of, or filing, registration, declaration or qualification with,
any Governmental Authority (collectively, "Permits") and no approval or consent
of any other person, is required in connection with, or as a condition to, the
execution, delivery or performance of any of the Transaction Documents or the
consummation of any of the Transactions, other than such Permits (i) as have
been made or obtained on or prior to the Closing Date, (ii) as are not required
to be made or obtained on or prior to the Closing Date that will be made or
obtained when required, or (iii) the failure of which to make or obtain could
not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

          9.11. Except as disclosed in the Holdings SEC Documents, there is no
Proceeding pending or to the actual knowledge of the Company after reasonable
inquiry, threatened, that either (i) seeks to restrain, enjoin, prevent the
consummation of, or otherwise challenge any of the Transaction Documents or any
of the Transactions, or (ii) could, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Neither of the Company or its
Subsidiaries is subject to any judgment, order, decree, rule or regulation of
any Governmental Authority that could, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

          9.12. Immediately following the Closing, each of the Company, Airways
and each of their respective directors, members, managers, officers, employees
and agents (collectively, the "Regulated Persons") shall have, and will be in
compliance with the terms and conditions of, all Permits (including, without
limitation, Permits with respect to engaging in aviation activities or
operations) necessary or advisable to own, lease and operate the properties and
to conduct the businesses described in the Holdings SEC Documents other than
those the failure of which to have could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Immediately following
the Closing, all such Permits will be valid and in full force and effect. To the
actual knowledge of the Company, after reasonable inquiry, no event has occurred
which allows, or after notice or lapse of time would allow, the imposition of
any material penalty, revocation or termination by the issuer thereof or which
results, or after notice or lapse of time would result, in any material
impairment of the rights of the holder of any such Permits. The Company does not
have actual knowledge, after reasonable inquiry, that either of the Company or
Airways is considering limiting, conditioning, suspending, modifying, revoking
or not renewing any such Permit.

                                     -40-
<PAGE>

          9.13. To the actual knowledge of the Company, after reasonable
inquiry, (i) no Governmental Authority is investigating any Regulated Person
(other than ordinary course reviews by one or more Governmental Authorities
having jurisdiction over matters relating to the Company, its Subsidiaries or
their respective business affairs), incident to the aviation activities or
operations of the Company or Airways), and (ii) there is no basis for the
Federal Aviation Administration (the "FAA") or any other Governmental Authority
to deny the renewal of the current Permits held by either of the Company or
Airways.

          9.14. Airways is an "air carrier" within the meaning of the
Transportation Code that is a "citizen of the United States" within the meaning
of the Transportation Code and holds both a certificate under Section
41102(a)(1) of the Transportation Code and an air carrier operating certificate
issued pursuant to Chapter 447 under the Transportation Code for aircraft
capable of carrying ten or more individuals or 6,000 pounds or more of cargo.
Neither the Company nor Airways has received notice from the United States
Department of Transportation or the Federal Aviation Administration of any loss
of such certification or that any investigation by such Governmental Authority
has been commenced in relation to the potential revocation thereof.

          9.15. Immediately following the Closing, each of the Company and
Airways (i) will have good and marketable title, free and clear of all Liens
(other than Permitted Liens and the Liens identified on Schedule 9.15 hereto
                                                        --------------------
(the "Identified Liens")), to the Collateral, and to all property and assets
described in the Holdings SEC Documents as being owned by it, and (ii) will
enjoy peaceful and undisturbed possession under all leases to which it is a
party as lessee.

          9.16. Immediately following the Closing, the assets of each of the
Company and the Restricted Subsidiaries will include all of the assets and
properties that will be used in, or are otherwise material to, the conduct of
the respective businesses of each of the Company and each Restricted
Subsidiaries as proposed to be conducted, and such assets are in working
condition, except where the failure of such assets to be in working condition
could not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

          9.17. Immediately following the Closing, each of the Company and each
Restricted Subsidiary shall maintain appropriate insurance covering its
properties, operations, personnel and businesses against such losses and risks
substantially in accordance with customary industry practice.

          9.18. All material Tax returns required to be filed by each of the
Company and Airways has been filed and all such returns are true, complete, and
correct in all material respects. All Taxes that are due or claimed from each of
the Company and Airways have been paid other than those (i) currently payable
without penalty or interest or (ii) being contested in good faith and by
appropriate proceedings and for which adequate reserves have been established in
accordance with GAAP. To the actual knowledge of the Company, after reasonable
inquiry, there are no proposed Tax assessments against either of the Company or
Airways that could singly or in the aggregate have a Material Adverse Effect.
The accruals and reserves on the books and records of each of the Company and
Airways in respect of any material Tax liability for any Taxable period not
finally determined are adequate to meet any

                                     -41-
<PAGE>

assessments of Tax for any such period. For purposes of this Agreement, the term
"Tax" and "Taxes" shall mean all federal, state, local and foreign taxes, and
other assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.

          9.19. Each of the Company and Airways owns, or is licensed under, and
has the right to use, all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, "Intellectual
Property") necessary for the conduct of, its businesses, free and clear of all
Liens, other than Permitted Liens and other than where the failure to own or
license such property could not, singly or, together with such Permitted Liens,
in the aggregate, reasonably be expected to have a Material Adverse Effect. To
the actual knowledge of the Company, after reasonable inquiry, (i) no claims
have been asserted by any person challenging the use of any such Intellectual
Property by either of the Company or Airways or questioning the validity or
effectiveness of any license or agreement related thereto, (ii) there is no
valid basis for any such claim (other than any claims that could not, singly or
in the aggregate, reasonably be expected to have a Material Adverse Effect), and
(iii) the use of such Intellectual Property by either of the Company or Airways
will not infringe on the Intellectual Property rights of any other person.

          9.20. Each of the Company and Airways maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i) material
transactions are executed in accordance with management's general or specific
authorization, (ii) material transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles of the United States, consistently applied ("GAAP"), and
to maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
material differences.

          9.21. The audited consolidated combined financial statements and
related notes of the Company contained in the Company 10-K (the "Financial
Statements") present fairly the combined financial position, results of
operations and cash flows of the Company, as of the respective dates and for the
respective periods to which they apply, and have been prepared in accordance
with GAAP and the requirements of Regulation S-X.

          9.22. Subsequent to the respective dates as of which information is
given in the Company 10-K, except as adequately disclosed in the Company 10-K or
in Schedule 9.22 hereof, (i) the Company has not incurred any liabilities,
   -------------
direct or contingent, that are material, singly or in the aggregate, to the
Company, or has entered into any material transactions not in the ordinary
course of business, (ii) there has not been any decrease in the capital stock or
membership interests, as the case may be, or any increase in long-term
indebtedness or any material increase in short-term indebtedness of either of
the Company any of its Restricted Subsidiaries, or any payment of or declaration
to pay any dividends or any other distribution with respect to either of the
Company or any Restricted Subsidiary, and (iii) there has not been any material
adverse change in the properties, business, prospects, operations, earnings,
assets,

                                     -42-
<PAGE>

liabilities or condition (financial or otherwise) of either of the Company or
any Restricted Subsidiary (each of clauses (i), (ii) and (iii), a "Material
Adverse Change"). To the actual knowledge of the Company after reasonable
inquiry, there is no event that is reasonably likely to occur, which if it were
to occur, could, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect, except such events that have been adequately disclosed
in the Company 10-K or in Schedule 9.22 hereof.
                          -------------

          9.23. No "nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed either of the Company or Airways that it is considering
imposing) any condition (financial or otherwise) on either of the Company's or
Airways' retaining any rating assigned to such Person or to any securities of
such Person, or (ii) has indicated to either of the Company or Airways that it
is considering (A) the downgrading, suspension, or withdrawal of, or any review
for a possible change that does not indicate the direction of the possible
change in, any rating so assigned, or (B) any change in the outlook for any
rating of either of the Company or Airways or any securities of either of the
Company or Airways.

          9.24. All indebtedness represented by the Notes is being incurred for
proper purposes and in good faith. On the Closing Date (after giving effect to
the Transactions), each of the Company and the Restricted Subsidiaries will be
solvent, and will have on the Closing Date (after giving effect to the
Transactions) sufficient capital for carrying on its business and will be on the
Closing Date (after giving effect to the Transactions) able to pay its debts as
they mature.

          9.25. Neither the Company nor Airways and, to the Company's actual
knowledge after reasonable inquiry, no one acting on their behalf has (i) taken,
directly or indirectly, any action designed to cause or to result in, or that
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of either of the
Company or Airways to facilitate the sale or resale of any of the Notes, (ii)
sold, bid for, purchased, or paid anyone any compensation for soliciting
purchases of, any of the Notes, or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of either
of the Company or Airways.

          9.26. Without limiting any of the foregoing, no registration under the
Act is required for the sale of the Notes to the Purchasers as contemplated
hereby, assuming the accuracy of the Purchaser's representations contained
herein regarding the absence of general solicitation in connection with the sale
of the Notes to the Purchaser. No form of general solicitation or general
advertising was used by the Company or any of its Affiliates or, to the actual
knowledge of the Company after, reasonable inquiry, any of their respective
representatives in connection with the offer and sale of any of the Notes.
Except as disclosed in the Company 10-K, no securities of the same class as any
of the Notes have been offered, issued or sold by the Company or any of its
Affiliates within the six-month period immediately prior to the date hereof.

          9.27. Neither the Company nor any of its "Affiliates" is a "party in
interest" or a "disqualified person" with respect to any employee benefit plans.
To the actual knowledge of the Company, after reasonable inquiry, no condition
exists or event or transaction has occurred in

                                     -43-
<PAGE>

connection with any employee benefit plan that could result in either the
Company or any of its "Affiliates" incurring any liability, fine or penalty that
could, singly or in the aggregate, have a Material Adverse Effect. Neither the
Company nor any trade or business under common control with the Company (for
purposes of Section 414(c) of the Code) maintain any employee pension benefit
plan that is subject to ERISA. The terms "employee benefit plan," "employee
pension benefit plan," and "party in interest" shall have the meanings assigned
to such terms in Section 3 of ERISA. The term "Affiliate" shall have the meaning
assigned to such term in Section 407(d)(7) of ERISA, and the term "disqualified
person" shall have the meaning assigned to such term in the Code.

          9.28. None of the Transactions will violate or result in a violation
of Section 7 of the Exchange Act (including, without limitation, Regulation T
(12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12
C.F.R. Part 224) of the Board of Governors of the Federal Reserve System).
Neither the Company nor any Restricted Subsidiary is subject to regulation, nor
shall either of the Company or any Restricted Subsidiary become subject to
regulation upon the consummation of the Transactions, under the Investment
Company Act of 1940, as amended, and the rules and regulations and
interpretations promulgated thereunder, or the Public Utility Holding Company
Act of 1935, as amended.

          9.29. Except as set forth on Schedule 9.29, neither the Company nor
                                       -------------
any Restricted Subsidiary has dealt with any broker, finder, commission agent or
other person (other than the Purchaser) in connection with the Transactions, and
neither of the Company nor Airways is under any obligation to pay any broker's
fee or commission in connection with such transactions.

          9.30. Neither the Company nor any Restricted Subsidiary is engaged in
any unfair labor practice. Except as disclosed in the Holdings SEC Documents,
there is (i) no unfair labor practice complaint or other proceeding pending or,
to the actual knowledge of the Company, after reasonable inquiry, threatened
against either the Company or any Restricted Subsidiary before the National
Labor Relations Board or any state, local or foreign labor relations board or
any industrial tribunal, and no grievance or arbitration proceeding arising out
of or under any collective bargaining agreement is so pending or threatened,
(ii) no strike, labor dispute, slowdown or stoppage is pending or, to the actual
knowledge of the Company or any Restricted Subsidiary after reasonable inquiry,
threatened against either of the Company or Airways, and (iii) no union
representation question existing with respect to the employees of either of the
Company or any Restricted Subsidiary, and, to the actual knowledge of the
Company after reasonable inquiry, no union organizing activities are taking
place that, could, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

          9.31. Except as would not have a Material Adverse Effect or as
disclosed in the Holdings SEC Documents, (i) neither the Company nor any
Restricted Subsidiary in violation of any federal, state or local laws and
regulations (collectively, "Environmental Laws") relating to pollution or
protection of human health or the environment or the use, treatment, storage,
disposal, transport or handling, emission, discharge, release or threatened
release of toxic or hazardous substances, materials or wastes, or petroleum and
petroleum products ("Materials of Environmental Concern"), including, without
limitation, noncompliance with or lack of any

                                     -44-
<PAGE>

permits or other environmental authorizations; (ii) there are no past, present
or reasonably foreseeable circumstances that would be reasonably expected to
lead to any such violation in the future; (iii) neither the Company nor any
Restricted Subsidiary has received any communication from any person or entity
alleging any such violation; (iv) there is no pending or, to the actual
knowledge of the Company after reasonable inquiry, threatened claim, action,
investigation or notice by any person or entity against the Company or any
Restricted Subsidiary or against any person or entity for whose acts or
omissions the Company or any Restricted Subsidiary is or may reasonably be
expected to be liable, either contractually or by operation of law, alleging
liability for investigatory, cleanup, or other response costs, natural resources
or property damages, personal injuries, attorney's fees or penalties relating to
any Materials of Environmental Concern or any violation or potential violation
of any Environmental Law (collectively, "Environmental Claims"), and (v) to the
actual knowledge of the Company after reasonable inquiry, there are no actions,
activities, circumstances, conditions, events or incidents that could form the
basis of any such Environmental Claim.

          9.32. In the ordinary course of business, the Company (i) conducts a
periodic review of the effect of Environmental Laws on its business, operations
and properties, and the Company has identified and evaluated associated costs
and liabilities, and any capital or operating expenditures, required for
cleanup, closure of properties or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating activities,
and any potential liabilities to third parties; and (ii) has conducted
environmental investigations of, and has reviewed information regarding, its
business, properties and operations, and those of other properties within the
vicinity of its businesses, properties and operations; on the basis of such
reviews, investigations and inquiries, the Company has reasonably concluded
that, except as disclosed in the Holdings SEC Documents, any costs and
liabilities associated with such matters would not have a Material Adverse
Effect on either of the Company or Airways.

          9.33. No statement, representation or warranty made by either of the
Company or any Restricted Subsidiary or, to the actual knowledge of the Company
after reasonable inquiry, any other person (other than the Purchasers) in any of
the Transaction Documents or in any certificate or document required to be
delivered was or will be, when made, inaccurate, untrue or incorrect in any
material respect. Each certificate signed by any officer of the Company or any
Restricted Subsidiary and delivered to the Purchasers or counsel for the
Purchasers in connection with the Transactions shall be deemed to be a
representation and warranty by the Company or such Restricted Subsidiary to the
Purchasers as to the matters covered thereby.

          9.34. The Company is subject to the reporting requirements of Section
13 or Section 15(d) of the Exchange Act.

          9.35. No other securities of the Company or Airways are of the same
class (within the meaning of Rule 144A under the Act) as the Notes, are listed
on a national securities exchange registered under Section 6 of the Exchange
Act, or quoted in a U.S. automated inter-dealer quotation system. The Notes are
eligible for resale under Rule 144A.

                                     -45-
<PAGE>

          9.36. Each of the Company and the Company's Subsidiaries operates all
real and personal property leased by it under valid and enforceable leases and
has performed in all material respects the obligations required to be performed
by it with respect to each such lease except for such leases and obligations
which, in the aggregate, would not have a Material Adverse Effect. As to leases
with respect to which any of the Company or the Company's Subsidiaries is the
lessor, the lessees and other parties under such leases are in compliance with
all material terms and conditions thereunder and such leases are in full force
and effect except for such leases which, if not in full force and effect, would
not, in the aggregate, have a Material Adverse Affect.

          9.37. There are no legal or governmental proceedings involving or, to
the Company's knowledge, affecting the Company or any Subsidiary of the Company
or any of their respective properties or assets which would be required to be
described in a filing with the Commission that are not described in the Holdings
SEC Documents, nor are there any material contracts or other documents which
would be required to be described in a filing with the Commission that are not
described in the Holdings SEC Documents.

          9.38. Except as described in the Holdings SEC Documents, there are no
consensual encumbrances or restrictions on the ability of any Subsidiary of the
Company (x) to pay dividends on such subsidiary's capital stock or to pay any
indebtedness to the Company or any Subsidiary of the Company, (y) to make loans
or advances to, or investments in, the Company or any Subsidiary of the Company
or (z) to transfer any of its property or assets to the Company or any
Subsidiary of the Company.

          9.39. Neither the Company nor any person acting on behalf of either of
the Company has offered or sold the Notes be means of any general solicitation
or general advertising within the meaning of Rule 502(c) under the Act or, with
respect to Notes sold outside the United States to non-U.S. persons (as defined
in Rule 902 under the Act), by means of any directed selling efforts within the
meaning of Rule 902 under the Act, and the Company and any Affiliate of either
and any person acting on behalf of either have complied with and will implement
the "offering restrictions" within the meaning of such Rule 902; provided, that
                                                                 --------
no representation is made in this subsection with respect to the actions of the
Purchasers.

          9.40. Except as disclosed in the Holdings SEC Documents, neither the
Company nor any person acting on behalf of the Company has solicited offers to
buy or offered or sold or otherwise negotiated in respect of any security (as
defined in the Act) that is or could be integrated with the sale of the Notes in
a manner that would require the registration under the Act of any of the Notes;
and the Company will, and will cause each of its Restricted Subsidiaries to,
take reasonable precautions designed to ensure that any offer or sale, direct or
indirect, in the United States or to any U.S. person (as defined in Rule 902
under the Act) of any Note or any substantially similar security issued by the
Company or any of its Restricted Subsidiaries, within six months subsequent to
the date on which the distribution of the Notes has been completed, is made
under restrictions and other circumstances reasonably designed not to affect the
status of the offer and sale of the Notes in the United States and to U.S.
persons contemplated by this Agreement as transactions exempt from the
registration requirements of the Act.

                                     -46-
<PAGE>

10.  REPRESENTATIONS OF EACH PURCHASER. Each Purchaser represents such Purchaser
(i) is an "accredited investor" within the meaning of Rule 501 promulgated under
the Securities Act and was not organized for the specific purpose of acquiring
the Notes; (ii) is acquiring the Notes being purchased by it for its own account
for the purpose of investment and not with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act, provided
                                                                        --------
that the disposition of such Purchaser's property shall at all times be and
remain within its control; (iii) understands that (a) the Notes have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof, (b) the Notes must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, (c) the Notes will bear a legend to such effect
and (d) the Company will make a notation on its transfer books to such effect;
and (iv) has total assets in excess of $5,000,000.

11.  DEFINITIONS. For the purpose of this Agreement, the terms defined in the
introductory sentence and in paragraphs 1, 2 and 3 shall have the respective
meanings specified therein, and the following terms shall have the meanings
specified with respect thereto below:

     "Act" means the Securities Act of 1933, as amended.

     "Accelerated Agreements" has the meaning set forth in paragraph 8.1.10
hereof.

     "Additional Assets" means (i) any property or assets utilized in the
airline business or any business that is substantially related, ancillary or
complementary thereto (including an Investment in any Person engaged in any such
business), (ii) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by the Company
or another Restricted Subsidiary or (iii) Capital Stock constituting a minority
interest in any Person that at such time is a Restricted Subsidiary.

     "Affiliate" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company,
except a Subsidiary. A Person shall be deemed to control a corporation or other
entity if such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such corporation or
entity, whether through the ownership of voting securities, by contract or
otherwise.

     "Affiliate Transaction" shall have the meaning set forth in paragraph
6.8.1.

     "Aggregate Consideration Receivable" means, in the case of a sale, issuance
or other distribution of shares of Common Stock, the aggregate amount paid to
the Company in connection therewith and, in the case of an issuance, sale or
other distribution of Rights, or any amendment thereto, the sum of: (a) the
aggregate amount paid to the Company for such Rights; plus (b) the aggregate
consideration or premium stated in such Rights to be payable for the shares of
Common Stock covered thereby, in each case, without deduction for any fees,
expenses or underwriters discounts; provided, further, that if all or any
portion of the aggregate amount paid to the Company for such Rights was not paid
in cash, the amount of such consideration

                                     -47-
<PAGE>

other than cash received by the Company shall be deemed to be the then Fair
Market Value of such consideration.

         "Aircraft Mortgage" shall mean that certain Aircraft Mortgage dated as
of April 12, 2001 in the form attached hereto as Exhibit G, by and between the
                                                 ---------
Company, Airways and the Collateral Trustee, as amended, restated, supplemented
or otherwise modified from time to time.

         "Airways" shall mean AirTran Airways, Inc., a Delaware corporation.

         "Airways' Consolidated Net Income" for any period shall mean the net
income of Airways and its Subsidiaries for such period, determined on a
consolidated basis with generally accepted accounting principles.

         "Airways Note Purchase Agreement" shall mean that certain Purchase
Agreement, dated as of the Closing Date, by and among Airways, Company, the
Senior Secured Notes Purchasers, as such agreement may be amended, modified or
supplemented from time to time.

         "Airways Restricted Payments" shall mean "Restricted Payments" as
defined in the Indenture, made to the Company by Airways.

         "Aircraft Acquisition Debt" means Indebtedness or Attributable Debt
Incurred by the Company or any of the Restricted Subsidiaries in connection with
an acquisition (either directly or as lessee in respect of a Sale/Leaseback
Transaction) of aircraft, related engines or spare engines, spare parts or other
related equipment (including ground equipment and simulators) which in the case
of Indebtedness either constitutes all or part of the purchase price thereof, or
is Incurred prior to, at the time of or within one year after the acquisition
thereof for the purpose of financing or refinancing part of the purchase price
thereof, and which equipment was not owned by the Issuer or a Restricted
Subsidiary of the Issuer prior to such acquisition provided, however, that in
                                                   --------  -------
either case the proportion (expressed as a percentage) of such Indebtedness to
the greater of the purchase price or Appraised Value of such aircraft, engines,
parts or equipment at the time of such financing does not exceed ninety percent
(90%).

         "Applicable Agreements" shall have the meaning set forth in paragraph
9.8.

         "Applicable Law" shall mean any Federal, state, local or foreign
statute, law (including, without limitation, common law) or ordinance, or any
judgment, decree, rule, regulation or order.

         "Appraised Value" shall have the meaning set forth in the Indenture.

         "Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition") in one transaction or a series
of related transactions, of (i) any shares of Capital Stock of a Restricted
Subsidiary (other than directors' qualifying shares or shares required by
applicable law to be held by a Person other than the Company or a Restricted
Subsidiary), (ii) all or substantially all the assets of any

                                     -48-
<PAGE>

division or line of business of the Company or any Restricted Subsidiary or
(iii) sales of aircraft, engines and related equipment (and leasehold interests
therein) and any other assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or such Restricted
Subsidiary; provided that "Asset Disposition" shall not include (A) any sale,
            --------
lease, transfer or other disposition by a Restricted Subsidiary to the Company,
(B) any sale, lease, transfer or other disposition that constitutes a Restricted
Payment permitted by paragraph 6.1, (C) any sale, transfer or other disposition
of assets in the ordinary course of business, or (D) any sale, lease, transfer
or any exchange of take-off and landing rights, airport gates or similar
property for other take-off and landing rights, airport gates or similar
property.

         "Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by Notes) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).

         "Bank Agent" means an agent or agents under any Senior Credit Facility.

         "Bankruptcy Law" shall mean title 11 of the U.S. Code or any similar
federal, state or foreign law for the relief of debtors.

         "Board of Directors" means the Board of Directors of the Company or
Airways, as applicable, or any committee of such board duly authorized to act in
respect of any particular matter.

         "Boeing" means The Boeing Company and its Affiliates.

         "Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which commercial banks in New York City are required or authorized to be
closed.

         "Capital Lease" shall mean any lease or other agreement the obligations
under which constitute Capitalized Lease Obligations.

         "Capital Stock" of any Person means any and all shares interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any preferred
stock, but excluding any debt securities convertible into such equity.

         "Capitalization" shall have the meaning set forth in paragraph 9.6.

         "Capitalized Lease Obligation" shall mean any rental obligation which,
under generally accepted accounting principles, would be required to be
capitalized on the books of the Company or any Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in accordance
with such principles.

         "Charter Documents" shall have the meaning set forth in paragraph 9.8.

                                     -49-
<PAGE>

         "Closing Prices" means, per share of Common Stock or any other
security, on any date specified herein:

               (a)  the last sale price, regular way, on such date or, if
                    no such sale takes place on such date, the average of
                    the closing bid and asked prices on such date, in each
                    case as officially reported on the principal national
                    securities exchange on which the Common Stock or other
                    security is then listed or admitted to trading; and

               (b)  if the Common Stock or other security is not then listed
                    or admitted to trading on any national securities
                    exchange, but is designated as a national market system
                    security by the National Association of Securities Dealers,
                    Inc. ("NASD"), the last trading price of the Common Stock
                    or such other security on such date, or if there shall have
                    been no trading on such date or if the Common Stock or such
                    other security is not so designated, the average of the
                    reported closing bid and asked prices on such date as shown
                    by NASDAQ.

         "Code" shall mean the Internal Revenue Code of 1986, as amended.

         "Collateral" shall mean the property covered by the Collateral
Documents.

         "Collateral Documents" shall mean the Security Agreement, the Aircraft
Mortgage, the Mortgage, the Collateral Trust Agreement, the security agreements,
the mortgages or leasehold mortgages, and any other agreement, document or
instrument in effect on the Closing Date or executed by the Company or any
Subsidiary after the Closing Date under which the Company or any Subsidiary has
granted a lien upon or security interest in any property or assets to the
Collateral Trustee to secure all or any part of the obligations of the Company
under this Agreement or the Notes, and all financing statements, certificates,
certificates of insurance, documents and instruments relating thereto or
executed or provided in connection therewith, each as amended, restated,
supplemented or otherwise modified from time to time.

         "Collateral Support Agreement" shall have the meaning given in
paragraph 3.17 hereof.

         "Collateral Trustee" shall mean Wilmington Trust Company, in its
capacity as collateral trustee hereunder and under the terms of the Collateral
Trust Agreement, and its successors and assigns in that capacity.

         "Collateral Trust Agreement" shall mean that certain Collateral Trust
Agreement dated as of April 12, 2001, in the form attached hereto as Exhibit C,
                                                                     ---------
among the Collateral Trustee and Airways, as amended, restated, supplemented or
otherwise modified from time to time.

         "Commission" shall mean the United States Securities and Exchange
Commission.

         "Common Stock" shall mean the common stock of the Company.

                                     -50-
<PAGE>

         "Common Stock Equivalents" shall have the meaning given such term in
paragraph 4.6.6 hereof.

         "Company" shall have the meaning set forth in the first paragraph
hereof.

         "Company Notice" shall have the meaning given to such term in paragraph
4.6.2.

         "Company 10-K" shall have the meaning given to such term in paragraph
5.8.

         "Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and the Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, plus, (a) to the extent not included
in such total interest expense, and to the extent incurred by the Company or the
Restricted Subsidiaries, without duplication, (i) interest expense attributable
to capital leases, (ii) amortization of debt discount, (iii) capitalized
interest, (iv) non-cash interest expense, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Hedging Obligations (including
amortization of fees), and (vii) interest accruing on any Indebtedness of any
other Person to the extent such Indebtedness is Guaranteed by (or secured by the
assets of) the Company or any Restricted Subsidiary, less (b) amortization
expense or write-off of deferred financing costs.

         "Consolidated Net Income" shall mean, for any period, an amount equal
to (a) the aggregate amount of cash actually distributed to the Company from
each Subsidiary of the Company during such period as a dividend or other
distribution less (b) payments made to the Company with respect to (i) payments
of fees, expenses and indemnities to the directors of the Company and (ii) the
fees and expenses payable to Boeing in connection with the issuance of the
Notes, (iii) accounting, legal or other professional or administrative expenses
or reimbursements or franchise or similar taxes and governmental charges
incurred by it relating to the business, operations or finances of the Company
and its Subsidiaries, and (iv) interest payments on the Notes, (v) fees and
related expenses associated with any registration statements relating to the
securities pursuant to the Senior Notes Registration Rights Agreement filed with
the Commission and subsequent ongoing public reporting requirements.

         "Conversion" shall have the meaning given such term in paragraph 4.6.4
hereof.

         "Conversion Date" shall have the meaning given such term in paragraph
4.6.4 hereof.

         "Conversion Documents" shall have the meaning given such term in
paragraph 4.6.4 hereof.

         "Conversion Notice" shall have the meaning given such term in paragraph
4.6.4 hereof.

         "Conversion Price" shall have the meaning given such term in paragraph
4.6.3 hereof.

         "Conversion Shares" shall have the meaning given such term in paragraph
4.6 hereof.

         "Convertible Notes" shall mean the Series B Notes and the Series B PIK
Notes.

                                     -51-
<PAGE>

         "Convertible Rate" shall have the meaning given such term in paragraph
1.2.

         "Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary designed to protect such Person against
fluctuations in currency values and not for the purpose of speculation.

         "Default Notice" shall have the meaning set forth in paragraph 7.2.1.

         "Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise on or prior to the stated maturity of the Notes, (ii) is
convertible or exchangeable for Indebtedness with a stated maturity prior to the
stated maturity of the Notes or Disqualified Stock or (iii) is redeemable at the
option of the holder thereof, in whole or in part, in each case on or prior to
the stated maturity of the Notes, provided, however, that any Capital Stock that
                                  --------  -------
would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of an Asset Disposition or Change in Control
occurring prior to the first anniversary of the stated maturity of the Notes
shall not be deemed to be "Disqualified Stock".

         "Distribution" shall have the meaning set forth in paragraph 4.6.10.

         "Dividend" shall have the meaning set forth in paragraph 4.6.11.

         "Dividend Securities" shall have the meaning set forth in paragraph
4.6.11.

         "EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense and the following, in each case to the extent
deducted in calculating such Consolidated Net Income and not included in
Consolidated Interest Expense: (a) all income tax expense of the Company and its
consolidated Restricted Subsidiaries, (b) depreciation expense of the Company
and its Consolidated Restricted Subsidiaries, (c) amortization expense of the
Company and its Restricted Subsidiaries (excluding amortization expense
attributable to a prepaid cash item that was paid in a prior period) and (d) all
other non-cash charges of the Company and its Consolidated Restricted
Subsidiaries (excluding any such non-cash charge to the extent that it
represents an accrual of or reserve for cash expenditures in any future period),
in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and non-cash charges of, a Restricted Subsidiary shall be added to Consolidated
Net Income to compute EBITDA only to the extent (and in the same proportion)
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.

                                     -52-
<PAGE>

         "Eligibility Event" shall have the meaning set forth in paragraph 1.2.

         "Environmental Claims" shall have the meaning set forth in paragraph
9.31.

         "Environmental Laws" shall have the meaning set forth in paragraph
9.31.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.

         "ERISA Affiliate" shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.

         "Event of Default" shall mean any of the events specified in paragraph
8.1, provided that there has been satisfied any requirement in connection with
     --------
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act, and "Default" shall mean any of such
events, whether or not any such requirement has been satisfied.

         "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         "FAA" shall have the meaning set forth in paragraph 9.13.

         "Fair Market Value" means, per share of Common Stock or any other
security, as of any date of determination, the arithmetic mean of the daily
Closing Prices for the 30 consecutive trading days before such date of
determination; provided, however, that if the Common Stock or such other
security is then neither listed or admitted to trading on any national
securities exchange, designated as a national market system security by the NASD
or quoted by NASDAQ, then "Fair Market Value" means the fair market value of one
                           -----------------
share of Common Stock or such other security as determined by an Independent
Financial Advisor as of the date of determination. Any such valuation by an
Independent Financial Advisor shall be based on a sale of the Company, and such
valuation shall not be discounted based on a lack of liquidity or voting rights,
with respect to any such shares, or based on a lack of control of the Company or
by the minority position of the holders of any such shares.

         "Federal Aviation Act" means Title 49 of the United States Code,
"Transportation," as amended from time to time, or any similar legislation of
the United States enacted in substitution or replacement thereof. In the event
there is enacted any legislation replacing, modifying or repealing, in whole or
in part, the Federal Aviation Act, then the term "certificated," when used with
reference to the Federal Aviation Act or any particular provision thereof, shall
mean authorized to provide, or not prohibited from providing, air transportation
services.

         "Financial Statements" shall have the meaning set forth in paragraph
9.21.

                                     -53-
<PAGE>

         "Fuel Protection Agreements" means in respect to a Person any fuel
protection agreement or other financial agreement or arrangement designed to
protect such Person against fluctuations in market prices or indices of aircraft
fuels and not for the purpose of speculation.

         "GAAP" shall have the meaning set forth in paragraph 9.20.

         "Governmental Authority" shall mean any municipal, state, commonwealth,
federal, foreign, territorial or other sovereign, governmental entity,
governmental department, court, commission, board, bureau, agency or
instrumentality.

         "Grantors" shall have the meaning set forth in paragraph 1.5 hereof.

         "Guarantee" shall mean, with respect to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
Indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable, including, without
limitation, any such obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation or services regardless of the non-delivery or non-furbishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected against loss in respect thereof. The amount of any
Guarantee shall be equal to the outstanding principal amount of the obligation
guaranteed or such lesser amount to which the maximum exposure of the guarantor
shall have been specifically limited.

         "Guarantor" shall mean each Person which may from time to time execute
a guarantee agreement in favor of the holders of the Notes.

         "Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement, Fuel Protection Agreement or
Currency Agreement.

         "Holders" means the holders of the Notes from time to time outstanding.

         "Holdings SEC Documents" means (i) the Company 10-K, (ii) that certain
Current Report on Form 8-K of the Company dated April 3, 2001, (iii) that
certain Current Report on Form 8-K of Company dated March 14, 2001, (iv) that
certain Current Report on Form 8-K of Company dated January 23, 2001, and (v)
each and every other form, schedule, report, registration statement, definitive
proxy statement and other document (together with all amendments thereof and
supplements thereto) filed by Company with the Commission after January 1, 2001,
and on or before April 12, 2001.

                                     -54-
<PAGE>

         "Identified Liens" has the meaning set forth in paragraph 9.15 hereof.

         "Incur" or "incur" means issue, assume, guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or Capital Stock of
                   --------  -------
a Person existing at the time such Person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence"
when used as a noun shall have a correlative meaning. The accretion of principal
of a non-interest bearing or other discount security shall be deemed the
Incurrence of Indebtedness. Neither the accrual of interest, the accretion of
original issue discount or fluctuations in exchange rates of currencies shall be
considered an Incurrence of Indebtedness.

         "Indebtedness" means, with respect to any Person on any date of
determination (without duplication):

               (i)   the principal of and premium (if any) in respect of (A)
         indebtedness of such Person for money borrowed and (B) indebtedness
         evidenced by notes, debentures, bonds or other similar instruments for
         the payment of which such Person is responsible or liable, including,
         in each case, any premium on such indebtedness to the extent such
         premium has become due and payable,

               (ii)  all Capital Lease Obligations of such Person;

               (iii) all Obligations of such Person issued or assumed as the
         deferred purchase price of property, all conditional sale obligations
         of such Person and all obligations of such Person under any title
         retention agreement (but excluding trade accounts payable arising in
         the ordinary course of business);

               (iv)  all Obligations of such Person for the reimbursement of any
         obligor on any letter of credit, banker's acceptance or similar credit
         transaction (other than Obligations with respect to letters of credit
         securing obligations (other than Obligations described in clauses (i)
         through (iii) above) entered into in the ordinary course of business of
         such Person to the extent such letters of credit are not drawn upon or,
         if and to the extent drawn upon, such drawing is reimbursed no later
         than the tenth Business Day following receipt by such Person of a
         demand for reimbursement following payment on the letter of credit);

               (v)   the amount of all obligations of such Person with respect
         to the redemption, repayment or other repurchase of any Disqualified
         Stock;.

               (vi)  all Obligations of the type referred to in clauses (i)
         through (v) above of other Persons and all dividends of other Persons
         for the payment of which, in either case, such Person is responsible or
         liable, directly or indirectly, as obligor, guarantor or otherwise,
         including by means of any Guarantee;

               (vii) all Obligations of the type referred to in clauses (i)
         through (vi) above of other Persons secured by any Lien on any property
         or asset of such Person

                                     -55-
<PAGE>

         (whether or not such obligation is assumed by such Person), the amount
         of such Obligation being deemed to be the lesser of the value of such
         property or assets or the amount of the obligation so secured; and

               (viii) to the extent not otherwise included in this definition,
         Hedging Obligations of such Person.

         The "amount" or "principal amount" of Indebtedness at any time of
determination as used herein represented by (a) any contingent Indebtedness,
shall be the maximum principal amount thereof, (b) any Indebtedness issued at a
price that is less than the principal amount at maturity thereof, shall be the
amount of the liability in respect thereof determined in accordance with GAAP
and (c) any Disqualified Stock, shall be the maximum fixed redemption or
repurchase price in respect thereof.

         "Indenture" shall mean that certain Indenture dated as of April 12,
2001 between Airways, certain subsidiary guarantors signatory thereto from time
to time, and Wilmington Trust Company, as trustee.

         "Independent Financial Advisor" means a firm of independent certified
public accountants, an investment banking or appraisal firm (which firm shall
own no equity interest of, and shall not be an affiliate, subsidiary or related
party of the Company) of recognized national standing to be retained by the
Company and acceptable to the Required Holders.

         "Intellectual Property" shall have the meaning set forth in paragraph
9.19.

         "Interest Expense" for any period shall mean the interest expense of
the Company and its Subsidiaries for such period (including capitalized interest
and the interest component of capitalized leases), determined on a consolidated
basis in accordance with generally accepted accounting principles.

         "Interest Rate Agreement" means in respect of a Person any interest
rate swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates and not for the purpose of speculation.

         "Issue Date" means the date on which the Series A Notes and Series B
Notes were originally issued.

         "Investment" in any Person means any direct or indirect advance, loan
or other extensions of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of transfer of cash or other
property to others or any payment for property or other services for the account
or use of others), or any purchase or acquisition of Capital Stock, Indebtedness
or other similar instruments issued by such Person. For purposes of the
definition of "Unrestricted Subsidiary", the definition of "Restricted Payment"
and paragraph 6.1 hereof, (i) "Investment" shall include the portion
(proportionate to the Issuer equity interest in such Subsidiary) of the fair
market value of the net assets of any Subsidiary of the Company at the time that
such Subsidiary is designated an Unrestricted Subsidiary; provided, however,
                                                          --------  -------
that

                                     -56-
<PAGE>

upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company
shall be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.

         "Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien (statutory or otherwise) or charge of any kind (including any agreement to
give any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof (including, without limitation, any
Capital Lease), and the filing of or agreement to give any financing statement
under the Uniform Commercial Code of any jurisdiction) or any other type of
preferential arrangement for the purpose, or having the effect, of protecting a
creditor against loss or securing the payment or performance of an obligation.

         "Material Adverse Change" shall have the meaning set forth in paragraph
9.22.

         "Material Adverse Effect" shall mean a material adverse effect on (A)
the properties, business, prospects, operations, earnings, assets, liabilities
or condition (financial or otherwise) of either of the Company or Airways, taken
as a whole, (B) the ability of either of the Company or Airways to perform their
obligations in all material respects under any of the Transaction Documents, (C)
the enforceability of any of the Collateral Documents or the attachment,
perfection or priority of any of the Security Interests intended to be created
thereby in any portion of the Collateral or (D) the validity of any of the
Transaction Documents or the consummation of any of the Transactions.

         "Materials of Environmental Concern" shall have the meaning set forth
in paragraph 9.31.

         "Mortgage" shall mean that certain Mortgage dated as of April 12, 2001,
in the form attached as Exhibit H hereto, by and between the Company, Airways
                        ---------
and the Collateral Trustee, as amended, restated, supplemented or otherwise
modified from time to time.

         "Multiemployer Plan" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).

         "NASDAQ" shall have the meaning set forth in paragraph 1.2.

         "Notes" shall mean shall mean the Series A Notes, the Series B Notes,
the Series A PIK Notes and the Series B PIK Notes.

         "Obligations" shall mean all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.

                                     -57-
<PAGE>

         "Officer's Certificate" shall mean a certificate signed in the name of
the Company by its President, one of its Vice Presidents, its Treasurer or its
Chief Financial Officer.

         "Permits" shall have the meaning set forth in paragraph 9.10.

         "Permitted Collateral Liens" means the Liens permitted under the terms
of the Collateral Documents.

         "Permitted Investment" means the Investment by the Company in Airways
of the $35.0 million of proceeds from the issuance of the Notes.

         "Permitted Liens" means, with respect to any Person,

               (a)  Liens existing or securing Indebtedness existing (or for
which a written commitment has been made on or prior to the Closing Date) on the
Closing Date;

               (b)  Liens granted on or after the Closing Date in favor of the
holders of the Notes or the holders of the Senior Secured Notes;

               (c)  Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company to secure Indebtedness
owing to the Company by such Restricted Subsidiary;

               (d)  Liens for employee wages and pledges or deposits by such
Person under worker's compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids, tenders, contracts
(other than for the payment of Indebtedness) or leases to which such Person is a
party, or deposits to secure public or statutory obligations of such Person or
deposits of cash or United States government bonds to secure surety or appeal
bonds to which such Person is a party, or deposits as security for contested
taxes or import duties or for the payment of rent, in each case Incurred in the
ordinary course of business;

               (e)  Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens, in each case for sums not past due or being contested in good
faith by appropriate proceedings or other Liens arising out of judgments or
awards against such Person with respect to which such Person shall then be
proceeding with an appeal or other proceedings for review;

               (f)  Liens (other than Liens arising under ERISA) for taxes,
assessments or other governmental charges not yet delinquent or that are being
contested in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the Issuer's books in accordance with GAAP;

               (g)  Liens in favor of issuers of surety bonds or letters of
credit issued pursuant to the request of and for the account of such Person in
the ordinary course of business; provided, however, that such letters of credit
                                 --------  -------
do not constitute Indebtedness;

               (h)  minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses, rights-of-way, sewers,
electric lines, telegraph and telephone

                                     -58-
<PAGE>

lines and other similar purposes, or zoning or other restrictions as to the use
of real property or Liens incidental to the conduct of the business of such
Person or to the ownership of its properties which were not Incurred in
connection with Indebtedness and which do not in the aggregate materially
adversely affect the value of said properties or materially impair their use in
the operation of the business of such Person;.

               (i)  any Lien securing Aircraft Acquisition Debt, which Lien is
Incurred when such Indebtedness is Incurred and which Lien does not extend to
property other than the property financed thereby and/or purchase contracts in
respect thereof;

               (j)  Liens on property or shares of Capital Stock of another
Person at the time such other Person becomes a Subsidiary of such Person;
provided, however, that such Liens are not created, incurred or assumed in
--------  -------
connection with, or in contemplation of, such other Person becoming such a
Subsidiary; provided further, however, that such Lien may not extend to any
            ----------------  -------
other property owned by such Person or any of its Subsidiaries;

               (k)  Liens on property at the time such Person or any of its
Subsidiaries acquires the property, including any acquisition by means of a
merger or consolidation with or into such Person or a Subsidiary of such Person;
provided, however, that such Liens are not created, incurred or assumed in
--------  -------
connection with, or in contemplation of, such acquisition; provided further,
                                                           -------- -------
however, that the Liens may not extend to any other property owned by such
-------
Person or any of its Subsidiaries;

               (l)  Liens securing Hedging Obligations permitted under the
Indenture;

               (m)  any Lien or pledge created or subsisting in the ordinary
course of business over documents of title, insurance policies or sale contracts
in relation to commercial goods to secure the purchase price thereof;

               (n)  Liens to secure any Refinancing (or successive Refinancings)
as a whole, or in part, of any Indebtedness secured by any Lien referred to in
clauses (a), (i), (j), (k), (q) or (s); provided, however, that (x) such new
                                        --------  -------
Lien shall be limited to all or part of the same property that secured the
original Lien (plus improvements to or on such property) and (y) the
Indebtedness secured by such Lien at such time is not increased to any amount
greater than the sum of (A) the outstanding principal amount, or, if greater,
committed amount of the Indebtedness described under clause (a), (i), (j), (k),
(q) and (s) at the time the original Lien became a Permitted Lien and (B) an
amount necessary to pay any fees and expenses related to such Refinancing;

               (o)  Liens securing Indebtedness or other obligations of a
Subsidiary of such Person owing to such Person or a Wholly-Owned Subsidiary of
such Person;

               (p)  any judgment Lien, unless the judgment it secures shall not,
within sixty (60) days after the entry thereof, have been discharged, vacated or
reversed or the execution thereof stayed pending appeal, or shall not have been
discharged, vacated or reversed within sixty (60) days after the expiration of
any such stay;

                                     -59-
<PAGE>

               (q)  Liens securing Indebtedness permitted pursuant to paragraph
6.5 hereof;

               (r)  Liens consisting of leases by the Issuer as lessor or
sublessor to lessees or sublessees of any aircraft or other flight equipment in
accordance with the Aircraft Mortgage;

               (s)  Liens in favor of Boeing on the Collateral which are (A)
junior and subordinate to the Lien securing the Notes, (B) granted by Airways as
security on any loan to Airways or the Company and (C) remedies of which may not
be exercised until the Liens granted pursuant to the Collateral Documents are
released; and

               (t)  Liens in favor of credit card processors relating to the
holdback rights of such credit card processors for purchased but unused tickets.

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

         "Plan" shall mean any "employee pension benefit plan" (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.

         "Polluting Substance" shall mean all pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes and shall
include, without limitation, any flammable explosives, radioactive materials,
oil, hazardous materials, hazardous or solid wastes, hazardous or toxic
substances or related materials defined in applicable federal Environmental
Laws; provided, that in the event any applicable federal Environmental Law is
      --------
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and,
provided further, to the extent that the Environmental Laws of any state or
other Governmental Authority establish a meaning for "hazardous substance,"
"hazardous waste," "hazardous material," "solid waste" or "toxic substance"
which is broader than that specified in any applicable Federal law, such broader
meaning shall apply.

         "Preferred Stock" as applied to the Capital Stock of any Person means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or, involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.

         "Proceeding" shall mean an action, claim, suit, demand, hearing, notice
of violation or deficiency, or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), domestic or foreign.

         "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, present or future, or tangible or intangible.

         "Purchasers" shall have the meaning set forth in the first paragraph
hereof.

                                     -60-
<PAGE>

         "Reasonable inquiries" shall mean reasonable inquiries by senior
officers of the Company.

         "Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange for, such indebtedness. "Refinanced" or
"Refinancing" shall have correlative meanings.

         "Registration Rights Agreement" shall have the meaning set forth in
paragraph 3.1.6 hereof.

         "Regulated Persons" shall have the meaning set forth in paragraph
9.12.hereof.

         "Related Party" shall mean (i) any Significant Stockholder, (ii) all
persons to whom any Significant Stockholder is related by blood, adoption or
marriage and (iii) all Affiliates of the foregoing persons.

         "Related Transactions" shall have the meaning given such term in
paragraph 3.6 hereof.

         "Representative" means the collateral trustee, or other trustee, agent
or representative in respect of any Senior Indebtedness; provided, that if, and
                                                         --------
for so long as, any Senior Indebtedness lacks such a representative, then the
Representative for such Senior Indebtedness shall at all times constitute the
holders of a majority in outstanding principal amount of such Senior
Indebtedness in respect of any Senior Indebtedness.

         "Required Holder(s)" shall mean the holder or holders of at least 75%
of the aggregate principal amount of the Notes from time to time outstanding.

         "Resale Shelf" shall mean a "shelf" registration statement pursuant to
Rule 415 promulgated under The Securities Act of 1933, as amended, covering
resales of the Conversion Shares.

         "Responsible Officer" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
Company or any other officer of the Company involved principally in its
financial administration or its controllership function.

         "Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly-Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company held by any Person
or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary

                                     -61-
<PAGE>

and other than pro rata purchases, redemptions, acquisitions or retirements made
by a Subsidiary that is not a Wholly-Owned Subsidiary), including the exercise
of any option to exchange any Capital Stock (other than into Capital Stock of
the Company that is not Disqualified Stock), (iii) the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition) or (iv) the making of any
Investment in any Person (other than a Permitted Investment). Any purchase or
redemption of Capital Stock by an employee stock ownership or benefit plan shall
not constitute a Restricted Payment except to the extent, if any, that such
purchase or redemption is financed by the Company or its Restricted
Subsidiaries.

         "Restricted Subsidiary" shall mean AirTran Investments Corporation,
Airways, AirTran Airways 717 Leasing Corporation and any Subsidiary of the
Company that is not (i) any Subsidiary of the Company that at the time of
determination shall be, or have been, designated an "Unrestricted Subsidiary" by
the Board of Directors of Company in the manner provided below and (ii) any
Subsidiary of an "Unrestricted Subsidiary". The Board of Directors of the
Company may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, the Company or any other
Subsidiary that is not a Subsidiary of the Subsidiary to be so designated:
provided, however, that either (A) the Subsidiary to be so designated has total
--------  -------
assets of $1,000 or less or (B) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under paragraph 6.1 hereof. The
Board of Directors of the Company may designate any Unrestricted Subsidiary as a
Restricted Subsidiary; provided, however, that immediately after giving effect
                       --------  -------
to such designation no Default shall have occurred and be continuing. Any such
designation by the Board of Directors of the Company shall be made by the
Company to the Holders by promptly notifying the Holders in writing of such
designation and attaching a copy of the resolution of such Board of Directors
giving effect to such designation and an of Officers' Certificate certifying
that such designation complied with the foregoing provisions.

         "Right" means and includes:

               (a)  any warrant or any option (including, without limitation,
                    employee stock options) to acquire directly or indirectly
                    Capital Stock;

               (b)  any right issued to holders of the Common Stock, or any
                    class thereof, permitting the holders thereof to subscribe
                    directly or indirectly for shares of additional Common Stock
                    (pursuant to a rights offering or otherwise);

               (c)  any right to acquire Common Stock pursuant to the provisions
                    of any security convertible directly or indirectly or
                    exchangeable directly or indirectly into Common Stock; and

                                     -62-
<PAGE>

               (d)  any similar right permitting the holder thereof directly or
                    indirectly to subscribe for or purchase shares of Common
                    Stock.

         "Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.

         "Securities Act" shall mean the Securities Act of 1933, as amended.

         "Security Agreement" shall mean that certain Security Agreement dated
as of April 12, 2001, in the form attached as Exhibit I hereto, by and between
                                              ---------
the Company, Airways and the Collateral Trustee, as amended, restated,
supplemented or otherwise modified from time to time.

         "Security Interests" shall have the meaning given in paragraph 1.5
hereof.

         "Senior Credit Facilities" means one or more credit facilities between
Airways and one or more financial institutions named therein as lenders
providing for term borrowings and/or revolving borrowings, including all related
notes, collateral documents, instruments and agreements executed in connection
therewith, in each case as may be amended, supplemented, restated or otherwise
modified from time to time and including any replacement, extension,
modification or renewal thereof, provided, that, a credit facility shall not be
a "Senior Credit Facility" unless (a) the lenders and/or agent for the lenders
of such credit facility have entered into an amended and restated Collateral
Trust Agreement subject to the provisions of Section 8.13 of the Collateral
Trust Agreement and (b) counsel to the Company has delivered a non-contravention
opinion to the Substantial Holders reasonably satisfactory to the Substantial
Holders.

         "Senior Credit Facility Limit" means, as of any date of determination,
the principal amount equal to the lesser of (a) $30 million and (b) the
aggregate principal amount of Receivables of Airways outstanding at such time.

         "Senior Note Purchase Agreement" shall mean that certain Purchase
Agreement dated as of April 12, 2001, among the Company, Airways and the Senior
Secured Notes Purchasers.

         "Senior Notes Registration Rights Agreement" shall mean that certain
Registration Rights Agreement dated as of April 12, 2001, between Airways and
the Senior Secured Notes Purchasers with respect to the Senior Secured Notes.

         "Senior Secured Notes" shall mean those certain 11.27% Series A Senior
Secured Notes 11.27% Series B Senior Secured Notes, 11.27% Series C Senior
Secured Notes, and 11.27% Series D Senior Secured Notes issued by Airways, due
April 12, 2008, as amended, restated or supplemented from time to time, and any
renewals or replacements thereof.

         "Senior Secured Notes Purchasers" shall mean the original purchasers of
Senior Secured Notes under the Indenture.

         "Series A Notes" shall have the meaning given in paragraph 1.1.1
hereof.

                                     -63-
<PAGE>

         "Series A PIK Notes" shall have the meaning given in paragraph 1.3
hereof.

         "Series B Notes" shall have the meaning given in paragraph 1.1.2
hereof.

         "Series B PIK Notes" shall have the meaning given in paragraph 1.4
hereof.

         "Significant Holder" shall mean (i) each Purchaser, so long as such
Purchaser shall hold (or be committed under this Agreement to purchase) any
Note, or (ii) any other holder of at least 5% of the aggregate principal amount
of the Notes from time to time outstanding.

         "Significant Stockholder" shall mean and include any Person who owns,
beneficially or of record, directly or indirectly, either individually or
together with all Persons to whom such person is related by blood, adoption or
marriage, 5% or more of the outstanding Voting Stock of the Company.

         "Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Closing Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement to that effect.

         "Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than fifty
percent (50%) of the total voting; power of shares of Capital Stock or other
interests (including membership or partnership interests) entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person or (iii), one or more Subsidiaries of such Person.

         "Substantial Holder" shall mean (i) each Purchaser, so long as such
Purchaser shall hold (or be committed under this Agreement to purchase) any
Note, or (ii) any other holder of at least 25% of the aggregate principal amount
of the Notes from time to time outstanding.

         "Tax" and "Taxes" shall have the meaning set forth in paragraph 9.18.

         "Total Assets" shall mean at any date the total assets of the Company
and its Subsidiaries determined on a consolidated basis in accordance with
generally accepted accounting principles.

         "Trading Day" shall mean (i) if the Common Stock is listed or admitted
for trading on any national securities exchange, days on which such national
securities exchange is open for business, (ii) if the Common Stock is quoted on
the NASDAQ National Market or any other system of automated dissemination of
quotations of security prices, days on which trades may be effected through such
system, or (iii) if the Common Stock is not listed on any national securities
exchange or quoted on the NASDAQ National Market or any other system of
automated dissemination of quotations of security prices, days on which the
Common Stock is traded regular way in the over-the-counter market and for which
a closing bid and a closing asked price for the Common Stock are available.

                                     -64-
<PAGE>

         "Transaction Documents" shall mean this Agreement, the Notes, the
Collateral Trust Agreement, the Collateral Documents, the Registration Rights
Agreement, the Collateral Support Agreement, and the other agreements,
documents, certificates and instruments now or hereafter executed or delivered
by the Company or any Subsidiary or Affiliate in connection with this Agreement.

         "Transactions" shall mean the transactions contemplated by the Senior
Note Purchase Agreement, the Indenture, this Agreement, and the Transaction
Documents.

         "Transferee" shall mean any direct or indirect transferee of all or any
part of any Note purchased by any Purchaser under this Agreement.

         "Voting Stock" shall mean, with respect to any corporation, any shares
of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).

         "Wholly-Owned Subsidiary" shall mean any Subsidiary all of the
outstanding Voting Stock of which is owned by the Company or another
Wholly-Owned Subsidiary.

               11.2. Accounting Principles, Terms and Determinations. All
                     -----------------------------------------------
references in this Agreement to "generally accepted accounting principles" shall
be deemed to refer to generally accepted accounting principles in effect in the
United States from time to time. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial matters
required to be furnished hereunder shall be prepared, in accordance with
generally accepted accounting principles, applied on a basis consistent with the
most recent audited consolidated financial statements of the Company and its
Subsidiaries delivered pursuant to clause 5.1.2 or, if no such statements have
been so delivered, the most recent audited financial statements referred to in
clause 9.2.1.

12.  MISCELLANEOUS.

               12.1. Note Payments. The Company agrees that, so long as any
                     -------------
Purchaser shall hold any Note, it will make payments of principal of, interest
on, such Note, which comply with the terms of this Agreement, by wire transfer
of immediately available funds for credit (not later than 12:00 noon, New York
City time, on the date due) to such Purchaser's account or accounts as specified
in the Purchaser Schedule attached hereto, or such other account or accounts in
the United States as such Purchaser may designate in writing, notwithstanding
any contrary provision herein or in any Note with respect to the place of
payment. Each Purchaser agrees that, before disposing of any Note, such
Purchaser will make a notation thereon (or on a schedule attached thereto) of
all principal payments previously made thereon and of the date to which interest
thereon has been paid. The Company agrees to afford the benefits of this
paragraph 12.1 to any Transferee which shall have made the same agreement as
each Purchaser has made in this paragraph 12.1.

                                     -65-
<PAGE>

               12.2. Expenses. The Company agrees, whether or not the
                     --------
transactions contemplated hereby shall be consummated, to pay, and save each
Purchaser and any Transferee harmless against liability for the payment of, all
reasonable out-of-pocket expenses arising in connection with such transactions,
including (i) all document production and duplication charges and the fees and
expenses of any special counsel engaged by such Purchaser or such Transferee in
connection with this Agreement, any of the other Transaction Documents, the
transactions contemplated hereby or thereby and any subsequent proposed
modification of, or proposed consent under, this Agreement or any other
Transaction Documents, whether or not such proposed modification shall be
effected or proposed consent granted, (ii) the costs and expenses, including
reasonable attorneys' fees, incurred by such Purchaser or such Transferee in
enforcing (or determining whether or how to enforce or cause the Collateral
Trustee to enforce) any rights under this Agreement, the Notes or any of the
Transaction Documents (including without limitation to protect, collect, lease,
sell, take possession of, release or liquidate any of the Collateral), or in
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement or any of the other Transaction
Documents or the transactions contemplated hereby or thereby or by reason of
such Purchaser's or such Transferee's having acquired any Note, including
without limitation costs and expenses incurred in any bankruptcy case and (iii)
all costs and expenses, including without limitation reasonable attorneys' fees,
and of preparing, recording and filing all financing statements, instruments and
other documents to create, perfect and fully preserve and protect the Liens
granted in the Collateral Documents and the rights of the holders of the Notes
or of the Collateral Trustee for the benefit of the holders of the Notes. The
obligations of the Company under this paragraph 12.2 shall survive the transfer
of any Note or portion thereof or interest therein by any Purchaser or any
Transferee and the payment of any Note.

               12.3. Consent to Amendments. This Agreement may be amended, and
                     ---------------------
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Company shall obtain the written
consent to such amendment, action or omission to act, of the Required Holder(s)
except that, without the written consent of the holder or holders of all Notes
at the time outstanding, no amendment to this Agreement shall change the
maturity of any Note, or change the principal of, or the rate or time of payment
of interest on, any Note, or affect the time, amount or allocation of any
prepayments, or change the proportion of the principal amount of the Notes
required with respect to any consent, amendment, waiver or declaration. Each
holder of any Note at the time or thereafter outstanding shall be bound by any
consent authorized by this paragraph 12.3, whether or not such Note shall have
been marked to indicate such consent, but any Notes issued thereafter may bear a
notation referring to any such consent. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein and in the Notes, the term "this Agreement" and references
thereto shall mean this Agreement as it may from time to time be amended or
supplemented.

               12.4. Form, Registration, Transfer and Exchange of Notes; Lost
                     --------------------------------------------------------
Notes. The Notes are issuable as registered notes without coupons in
-----
denominations of at least $1,000, except as may be necessary to reflect any
principal amount not evenly divisible by $1,000. The

                                     -66-
<PAGE>

Company shall keep at its principal office a register in which the Company shall
provide for the registration of Notes and of transfers of Notes. Inasmuch as the
issue and sale of the Notes by the Company has not been registered under the
Securities Act or any applicable state securities or "Blue Sky" laws, each
Purchaser and Transferee agrees that the Notes may not be offered or sold by
them in the absence of either an effective registration statement under the
Securities Act and such state securities laws or the availability of exemptions
from registration thereunder. The Notes will bear a legend to the foregoing
effect. Subject to compliance with the foregoing requirements, upon surrender
for registration of transfer of any Note at the principal office of the Company,
the Company shall, at its expense, execute and deliver one or more new Notes of
like tenor and of a like aggregate principal amount, registered in the name of
such transferee or transferees. At the option of the holder of any Note, such
Note may be exchanged for other Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender of the Note
to be exchanged at the principal office of the Company. Whenever any Notes are
so surrendered for exchange, the Company shall, at its expense, execute and
deliver the Notes which the holder making the exchange is entitled to receive.
Every Note surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon transfer thereof shall
carry the rights to unpaid interest and interest to accrue which were carried by
the Note so exchanged or transferred, so that neither gain nor loss of interest
shall result from any such transfer or exchange. Upon receipt of written notice
from the holder of any Note of the loss, theft, destruction or mutilation of
such Note and, in the case of any such loss, theft or destruction, upon receipt
of such holder's unsecured indemnity agreement, or in the case of any such
mutilation upon surrender and cancellation of such Note, the Company will make
and deliver a new Note, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Note.

               12.5. Persons Deemed Owners; Participations. Prior to due
                     -------------------------------------
presentment for registration of transfer, the Company may treat the Person in
whose name any Note is registered as the owner and holder of such Note for the
purpose of receiving payment of principal of, interest on, such Note and for all
other purposes whatsoever, whether or not such Note shall be overdue, and the
Company shall not be affected by notice to the contrary. Subject to the
preceding sentence, and to the restrictions on transfer described in paragraph
12.4, the holder of any Note may from time to time grant participations in such
Note to any Person on such terms and conditions as may be determined by such
holder in its sole and absolute discretion, provided that any such participation
                                            --------
shall be in a principal amount of at least $100,000.

               12.6. Survival of Representations and Warranties; Entire
                     --------------------------------------------------
Agreement. All representations and warranties contained herein or in any other
---------
Transaction Documents or made in writing by or on behalf of the Company or any
Guarantor in connection herewith or therewith shall survive the execution and
delivery of this Agreement, the other Transaction Documents and the Notes, the
transfer by any Purchaser of any Note or portion thereof or interest therein and
the payment of any Note, and may be relied upon by any Transferee, regardless of
any investigation made at any time by or on behalf of any Purchaser or any
Transferee. Subject to the preceding sentence, this Agreement, the other
Transaction Documents and the Notes embody the entire

                                     -67-
<PAGE>

agreement and understanding between the Purchasers and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.

               12.7. Successors and Assigns. All covenants and other agreements
                     ----------------------
in this Agreement contained by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any Transferee) whether so
expressed or not.

               12.8. Disclosure to Other Persons; Transfer Restrictions. So
                     --------------------------------------------------
long as no Event of Default under paragraph 8.1.1 or 8.1.2 is continuing, each
holder of a Note agrees to use its best efforts to hold in confidence and not
disclose any written information delivered or made available by or on behalf of
the Company or any Subsidiary to such holder in connection with or pursuant to
this Agreement that is clearly marked or labeled as being confidential
information, other than information (a) that was publicly known or otherwise
known to such holder, at the time of disclosure (except pursuant to disclosure
in connection with this Agreement), (b) that subsequently becomes publicly known
through no act or omission by such holder, or (c) that otherwise becomes known
to such holder, other than through disclosure by the Company, and provided, that
                                                                  ---------
nothing in this Agreement shall prevent the holder of any Note from delivering
copies of any financial statements and other documents delivered to such holder,
or from disclosing any other information disclosed to such holder, by or on
behalf of the Company or any Subsidiary in connection with or pursuant to this
Agreement, to any of the following: (i) such holder's directors, officers,
employees, agents and professional consultants, (ii) any other holder of any
Note, (iii) any Person to which such holder offers to sell such Note or any part
thereof, (iv) any Person to which such holder sells or offers to sell a
participation in all or any part of such Note, (v) any Person from which such
holder offers to purchase any security of the Company, (vi) any federal or state
regulatory authority having jurisdiction over such holder or (vii) any other
Person to which such delivery or disclosure may be necessary or appropriate (1)
in compliance with any law, rule, regulation or order applicable to such holder,
(2) in response to any subpoena or other legal process or informal investigative
demand, (3) in connection with any litigation to which such holder is a party,
or (4) in order to protect such holder's investment in such Note.

               12.9. Notices. All written communications provided for hereunder
                     -------
shall be sent by first class mail or nationwide overnight delivery service (with
charges prepaid) and (i) if to any Purchaser, addressed to such Purchaser at the
address specified for such communications in the Purchaser Schedule attached
hereto, or at such other address as such Purchaser shall have specified to the
Company in writing, (ii) if to any other holder of any Note, addressed to such
other holder at such address as such other holder shall have specified to the
Company in writing or, if any such other holder shall not have so specified an
address to the Company, then addressed to such other holder in care of the last
holder of such Note which shall have so specified an address to the Company, and
(iii) if to the Company, addressed to it at 9955 AirTran Boulevard, Orlando,
Florida 32827, Attention: Chief Financial Officer, or at such other address as
the Company shall have specified to the holder of each Note in writing;
provided, however, that any such communication to the Company may also, at the
--------  -------
option of the holder of any Note, be delivered by any other means either to the
Company at its address specified above or to any officer of the Company.

                                     -68-
<PAGE>

               12.10. Payments Due on Non-Business Days. Anything in this
                      ---------------------------------
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of, or interest on any Note that is due on a date other than a Business Day
shall be made on the next succeeding Business Day without including the
additional days elapsed in the computation of the interest payable on such next
succeeding Business Day.

               12.11. Satisfaction Requirement. If any agreement, certificate
                      ------------------------
or other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to any Purchaser or to the Required
Holder(s), the determination of such satisfaction shall be made by such
Purchaser or the Required Holder(s), as the case may be, in the sole and
exclusive judgment (exercised in good faith) of the Person or Persons making
such determination.

               12.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
                      -------------
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE LAW OF THE STATE OF NEW YORK.

               12.13. Severability. Any provision of this Agreement 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, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

               12.14. Descriptive Headings. The descriptive headings of the
                      --------------------
several paragraphs of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.

               12.15. Counterparts. This Agreement may be executed in any number
                      ------------
of counterparts, each of which shall be an original but all of which together
shall constitute one instrument.

               12.16. Severalty of Obligations. The sales of Notes to the
                      ------------------------
Purchasers are to be several sales, and the obligations of the Purchasers under
this Agreement are several obligations. Except as provided in paragraph 3.3, no
failure by any Purchaser to perform its obligations under this Agreement shall
relieve any other Purchaser or the Company of any of its obligations hereunder,
and no Purchaser shall be responsible for the obligations of, or any action
taken or omitted by, any other Purchaser hereunder.

                                     -69-
<PAGE>

         If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterparts of this letter and return the same to
the Company, whereupon this letter shall become a binding agreement among the
Company and the Purchasers.

                                            Very truly yours,

                                            AIRTRAN HOLDINGS, INC.

                                               /s/ Steven A. Rossum
                                            ------------------------------------
                                            By:  Steven A. Rossum
                                            Title: Vice President-Treasurer

The foregoing Agreement is
hereby accepted as of the
date first above written.

BOEING CAPITAL LOAN CORPORATION

   /s/ J. S. Weltman
---------------------------

By: J. S. Weltman

Title: Authorized Signatory

                                     -70-
<PAGE>

                              PURCHASER SCHEDULE

<TABLE>
<S>                                                                                   <C>
                                                                                            Aggregate
                                                                                            ---------
                                                                                            Principal
                                                                                            ---------
                                                                                            Amount of
                                                                                            ---------
                                                                                           Notes to be
                                                                                           -----------
BOEING CAPITAL LOAN CORPORATION                                                             Purchased
                                                                                            ---------
(1)    All payments on account of Notes held by such Purchaser                        $17,500,000 Series A Notes
       shall be made by wire transfer of immediately available
       funds for credit to:                                                           $17,500,000 Convertible Notes
       Account No. [____________]
</TABLE>

_______________________
       (ABA No.:_______)
       Each such wire transfer shall set forth the name of the
       Company, a reference to "13.00% Series A Senior Secured
       Notes due April 12, 2009 and 12.27% Series B Senior Secured
       Convertible Notes due April 12, 2009," and the due date and
       application (as among principal and interest of the payment
       being made.

                                     EX-1
<PAGE>

(2)  Address for all notices relating to payments:

     Boeing Capital Loan Corporation
     c/o Entity Services
     2325-B Renaissance Drive, Suite 8
     Las Vegas, Nevada 89119
     Attention: Ms. Kristine Epps
     Telephone: (702) 740-4244
     Facsimile: (702) 966-4247

     with copies to:

     Boeing Capital Loan Corporation
     500 Naches Ave. S.W., 3/rd/ Floor
     MC 6Y-11
     Renton, Washington 98055
     Attention: Legal Department
     Facsimile: (425) 393-2903

     with copies to:

     Sidley & Austin
     555 West Fifth Street
     Los Angeles, California 90013
     Attention: Robert W. Kadlec, Esq.
     Telephone: (213) 896-6000
     Facsimile: (213) 896-6600

     __________________________________________

(4)  Recipient of telephonic prepayment notices:

     ___________________________
     Telephone:_________________
     Telecopier:________________
(5)  Tax Identification No.:___________________

                                     EX-2
<PAGE>

THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS OR THE
AVAILABILITY OF EXEMPTIONS FROM REGISTRATION THEREUNDER.

                                                                     EXHIBIT A-1

                             FORM OF SERIES A NOTE

                            AIRTRAN HOLDINGS, INC.

                      13.00% SERIES A SENIOR SECURED NOTE
                              DUE APRIL 12, 2009

No._____                                                          April 12, 2001
$_______________

     FOR VALUE RECEIVED, the undersigned, AIRTRAN HOLDINGS, INC. (herein called
the "Company"), a corporation organized and existing under the laws of the State
of Nevada hereby promises to pay to ___________________________________________
__________, or registered assigns, the principal sum of________________ DOLLARS
on April 12, 2009, with interest (computed on the basis of a 360-day year--30-
day month) (a) on the unpaid balance thereof at the rate of 13.00% per annum
from the date hereof, payable semiannually on the fifteenth day of April and
October in each year, commencing with October 15, 2001, until the principal
hereof shall have become due and payable, and (b) on any overdue payment
(including any overdue prepayment) of principal and any overdue payment of
interest, payable monthly as aforesaid (or, at the option of the registered
holder hereof, on demand), at a rate per annum from time to time equal to
15.00%.

     Payments of principal of, and interest on, this Note are to be made at ___
_____________ or at such other place as the holder hereof shall designate to the
Company in writing, in lawful money of the United States of America.

     This Note is one of a series of Senior Secured  Notes (herein called the
"Notes") issued pursuant to a Note Agreement, dated as of April 12, 2001 (herein
called the "Agreement"), among the Company and the original purchasers of the
Notes named in the Purchaser Schedule attached thereto and is entitled to the
benefits thereof.  Certain additional terms and provisions applicable to this
Note are set forth in the Agreement.

     This Note is a registered Note and, as provided and subject to the
conditions stated in the Agreement, upon surrender of this Note for registration
of transfer, duly endorsed, or accompanied by a written instrument of transfer
duly executed, by the registered holder hereof or

                                     EX-3
<PAGE>

such holder's attorney duly authorized in writing, a new Note for a like
principal amount will be issued to, and registered in the name of, the
transferee. Prior to due presentment for registration of transfer, the Company
may treat the person in whose name this Note is registered as the owner hereof
for the purpose of receiving payment and for all other purposes, and the Company
shall not be affected by any notice to the contrary.

     The Company agrees to make required prepayments of principal on the dates
and in the amounts specified in the Agreement.  This Note is also subject to
optional prepayment, in whole or from time to time in part, on the terms
specified in the Agreement.

     This Note is secured by, and entitled to the benefits of, the Collateral
Documents (as defined in the Agreement) and is entitled to the benefits of one
or more Collateral Support Agreements executed by one or more parties.
Reference is made to the Collateral Documents for a statement concerning the
terms and conditions governing the collateral security for the obligations of
the Company hereunder.

     In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.

     THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.

                                    AIRTRAN HOLDINGS, INC.

                                    ____________________________
                                    By:
                                    Title:

                                     EX-4
<PAGE>

THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS OR THE
AVAILABILITY OF EXEMPTIONS FROM REGISTRATION THEREUNDER.

                                                                     EXHIBIT A-2

                             FORM OF SERIES B NOTE

                            AIRTRAN HOLDINGS, INC.

                12.27% SERIES B SENIOR SECURED CONVERTIBLE NOTE
                              DUE APRIL 12, 2009

No._____                                                          April 12, 2001
$_________

     FOR VALUE RECEIVED, the undersigned, AIRTRAN HOLDINGS, INC. (herein called
the "Company"), a corporation organized and existing under the laws of the State
of Nevada hereby promises to pay to ___________________________________________
__________, or registered assigns, the principal sum of _______________ DOLLARS
on April 12, 2009, with interest (computed on the basis of a 360-day year--30-
day month) (a) on the unpaid balance thereof at the rate of 12.27% per annum
(the "Convertible Rate") from the date hereof, payable semiannually on the
fifteenth day of April and October in each year, commencing with October 15,
2001, until the principal hereof shall have become due and payable, and (b) on
any overdue payment (including any overdue prepayment) of principal and
interest, payable monthly as aforesaid (or, at the option of the registered
holder hereof, on demand), at a rate per annum from time to time equal to the
sum of the Convertible Rate plus 2.00%. Notwithstanding the foregoing, the
Convertible Rate shall fluctuate from time to time as set forth in Section 1.2
                                                                   -----------
of the Agreement.

     Payments of principal of and interest on this Note are to be made at_______
__________________ or at such other place as the holder hereof shall designate
to the Company in writing, in lawful money of the United States of America.

     This Note is one of a series of Senior Secured Convertible Notes (herein
called the "Notes") issued pursuant to a Note Agreement, dated as of April 12,
2001 (herein called the "Agreement"), among the Company and the original
purchasers of the Notes named in the Purchaser Schedule attached thereto and is
entitled to the benefits thereof.  Certain additional terms and provisions
applicable to this Note are set forth in the Agreement.

     This Note is a registered Note and, as provided and subject to the
conditions stated in the Agreement, upon surrender of this Note for registration
of transfer, duly endorsed, or

                                     EX-5
<PAGE>

accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.

     The Company agrees to make required prepayments of principal on the dates
and in the amounts specified in the Agreement.  This Note is also subject to
optional prepayment, in whole or from time to time in part, on the terms
specified in the Agreement.  This Note shall be convertible into Conversion
Shares in accordance with paragraph 4.6 of the Agreement.

     This Note is secured by, and entitled to the benefits of, the Collateral
Documents (as defined in the Agreement)  and is entitled to the benefits of one
or more Collateral Support Agreements executed by one or more parties.
Reference is made to the Collateral Documents for a statement concerning the
terms and conditions governing the collateral security for the obligations of
the Company hereunder.

     In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.

     THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.

                                    AIRTRAN HOLDINGS, INC.

                                    _____________________________
                                    By:
                                    Title:

                                     EX-6
<PAGE>

THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS OR THE
AVAILABILITY OF EXEMPTIONS FROM REGISTRATION THEREUNDER.

                                                                     EXHIBIT B-1

                           FORM OF SERIES A PIK NOTE

                            AIRTRAN HOLDINGS, INC.

                      15.00% SERIES A SENIOR SECURED NOTE
                              DUE APRIL 12, 2009

No._____                                                          April 12, 2001
$_________

     FOR VALUE RECEIVED, the undersigned, AIRTRAN HOLDINGS, INC. (herein called
the "Company"), a corporation organized and existing under the laws of the State
of  Nevada hereby promises to pay to ___________________________________________
_________, or registered assigns, the principal sum of _______________ DOLLARS,
on April 12, 2001, with interest (computed on the basis of a 360-day year--30-
day month) on the unpaid balance and any overdue payment of interest thereof at
the rate of 15.25% per annum from the date hereof, payable semiannually on the
fifteenth day of April and October in each year, commencing with October 15,
2001, until the principal hereof shall have become due and payable.

     Payments of principal of and interest on this Note are to be made at ______
__________ or at such other place as the holder hereof shall designate to the
Company in writing, in lawful money of the United States of America.

     This Note is one of a series of Senior Secured Notes (herein called the
"Notes") issued pursuant to a Note Agreement, dated as of April 12, 2001 (herein
called the "Agreement"), among the Company and the original purchasers of the
Notes named in the Purchaser Schedule attached thereto and is entitled to the
benefits thereof.  Certain additional terms and provisions applicable to this
Note are set forth in the Agreement.

     This Note is a registered Note and, as provided and subject to the
conditions stated in the Agreement, upon surrender of this Note for registration
of transfer, duly endorsed, or accompanied by a written instrument of transfer
duly executed, by the registered holder hereof or such holder's attorney duly
authorized in writing, a new Note for a like principal amount will be issued to,
and registered in the name of, the transferee.  Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner

                                     EX-7
<PAGE>

hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.

     The Company agrees to make required prepayments of principal on the dates
and in the amounts specified in the Agreement.  This Note is also subject to
optional prepayment, in whole or from time to time in part, on the terms
specified in the Agreement.

     This Note is secured by, and entitled to the benefits of, the Collateral
Documents (as defined in the Agreement) and is entitled to the benefits of one
or more Collateral Support Agreements executed by one or more parties.
Reference is made to the Collateral Documents for a statement concerning the
terms and conditions governing the collateral security for the obligations of
the Company hereunder.

     In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.

     THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.

                                    AIRTRAN HOLDINGS, INC.

                                    _____________________________
                                    By:
                                    Title:

                                     EX-8
<PAGE>

THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS,
AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS OR THE
AVAILABILITY OF EXEMPTIONS FROM REGISTRATION THEREUNDER.

                                                                     EXHIBIT B-2

                           FORM OF SERIES B PIK NOTE

                            AIRTRAN HOLDINGS, INC.

                14.27% SERIES B SENIOR SECURED CONVERTIBLE NOTE
                              DUE APRIL 12, 2009

No._____                                                          April 12, 2001
$_________

     FOR VALUE RECEIVED, the undersigned, AIRTRAN HOLDINGS, INC. (herein called
the "Company"), a corporation organized and existing under the laws of the State
of  Nevada hereby promises to pay to ___________________________________________
____________, or registered assigns, the principal sum of ____________ DOLLARS,
on April 12, 2009 with interest (computed on the basis of a 360-day year--30-day
month) on the unpaid balance and any overdue payment of interest thereof at the
rate of 14.27% per annum (the "Series B PIK Rate") from the date hereof, payable
semiannually on the fifteenth day of April and October in each year, commencing
with October 15, 2001, until the principal hereof shall have become due and
payable. Notwithstanding the foregoing, the Series B PIK Rate shall fluctuate
from time to time as set forth in Section 1.4 of the Agreement.
                                  -----------

     Payments of principal of and interest on this Note are to be made at ______
_______ or at such other place as the holder hereof shall designate to the
Company in writing, in lawful money of the United States of America.

     This Note is one of a series of Senior Secured Convertible Notes (herein
called the "Notes") issued pursuant to a Note Agreement, dated as of April 12,
2001 (herein called the "Agreement"), among the Company and the original
purchasers of the Notes named in the Purchaser Schedule attached thereto and is
entitled to the benefits thereof.  Certain additional terms and provisions
applicable to this Note are set forth in the Agreement.

     This Note is a registered Note and, as provided and subject to the
conditions stated in the Agreement, upon surrender of this Note for registration
of transfer, duly endorsed, or accompanied by a written instrument of transfer
duly executed, by the registered holder hereof or such holder's attorney duly
authorized in writing, a new Note for a like principal amount will be issued to,
and registered in the name of, the transferee.  Prior to due presentment for
registration

                                     EX-9
<PAGE>

of transfer, the Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.

     The Company agrees to make required prepayments of principal on the dates
and in the amounts specified in the Agreement.  This Note is also subject to
optional prepayment, in whole or from time to time in part, on the terms
specified in the Agreement.  This Note shall be convertible into Conversion
Shares in accordance with paragraph 4.6 of the Agreement.

     This Note is secured by, and entitled to the benefits of, the Collateral
Documents (as defined in the Agreement) and is entitled to the benefits of one
or more Collateral Support Agreements executed by one or more parties.
Reference is made to the Collateral Documents for a statement concerning the
terms and conditions governing the collateral security for the obligations of
the Company hereunder.

     In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.

     THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.

                                    AIRTRAN HOLDINGS, INC.

                                    _____________________________
                                    By:
                                    Title:

                                     EX-10
<PAGE>

                                   EXHIBIT C

                      FORM OF COLLATERAL TRUST AGREEMENT
<PAGE>

                          COLLATERAL TRUST AGREEMENT

          This COLLATERAL TRUST AGREEMENT (as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms hereof, this "Agreement") dated as of April 12, 2001 by and among AIRTRAN
AIRWAYS, INC., a Delaware corporation (the "Company," and, together with any
other entity that becomes a Subsidiary Grantor under Section 2.3(b), the
                                                     --------------
"Subsidiary Grantors;" the Company, the Subsidiary Grantors and any other entity
that becomes an Additional Grantor under Section 8.1(c) are collectively
                                         --------------
referred to herein as the "Grantors" and individually as "Grantor"), and
WILMINGTON TRUST COMPANY, a Delaware banking corporation, acting not in its
individual capacity except as expressly provided herein but otherwise solely as
Collateral Trustee (together with its successors and assigns in such capacity,
the "Collateral Trustee") under this Agreement for the Holders of the Secured
Debt referred to below.

                             W I T N E S S E T H:

          WHEREAS, the Company, the Subsidiary Grantors and the Indenture
Trustee are parties to the Indenture;

          WHEREAS, the Company, AirTran Holdings, Inc., a Nevada corporation
("Holdings"), and Boeing Capital Loan Corporation, as initial purchaser, are
parties to the Company Note Purchase Agreement;

          WHEREAS, Holdings, the Collateral Trustee and the purchasers named in
the purchaser schedule attached thereto are parties to the Holdings Note
Purchase Agreement;

          WHEREAS, in connection with the Indenture, the Company Note Purchase
Agreement and the Holdings Note Purchase Agreement, the Grantors will
concurrently with the execution of this Agreement enter into the Security
Documents to secure the Secured Debt on the terms and conditions set forth
therein;

          WHEREAS, the parties hereto have entered into this Agreement to
evidence the creation of the Trust Estate;

                             DECLARATION OF TRUST:

          NOW THEREFORE, to secure the payment, observance and performance of
the Secured Debt (subject to the priority of payment set forth herein) and in
consideration of the premises and the mutual agreements set forth herein, the
Collateral Trustee does hereby declare that it holds as Collateral Trustee in
trust under this Agreement all of its right, title and interest in, to and under
all of the following (and the Grantors hereby consent thereto):

          (A)  the Company Pledge and Security Agreement and the Collateral
     granted to the Collateral Trustee thereunder;

          (B)  the Company Aircraft Mortgage and the Collateral granted to the
     Collateral Trustee thereunder;

                                       1
<PAGE>

          (C)  the Company Hangar Mortgage and the Collateral granted to the
     Collateral Trustee thereunder;

          (D)  each agreement entered into and delivered, from time to time,
     pursuant to Section 2.3, Section 5.7 or Section 8.1 or pursuant to the
                 -----------  -----------    -----------
     terms of the Security Documents, and the Collateral granted to the
     Collateral Trustee in each case thereunder;

          (E)  the Trust Agreement Collateral; and

          (F)  the Proceeds of each of the foregoing.

          TO HAVE AND TO HOLD the foregoing Security Documents, the Collateral
and the Proceeds of any and all thereof (the right, title and interest of the
Collateral Trustee in the Security Documents, the Collateral and such Proceeds
being hereinafter referred to as the "Trust Estate") unto the Collateral Trustee
and its successors in trust under this Agreement and its assigns and the assigns
of its successors in trust forever.

          IN TRUST NEVERTHELESS, under and subject to the terms and conditions
set forth herein and in the Security Documents, and for the benefit of the
Holders and for the enforcement of the payment of all Secured Debt, and for the
performance of and compliance with the covenants and conditions of this
Agreement, the Indenture, the Company Note Purchase Agreement, the Holdings Note
Purchase Agreement and each of the Security Documents.

          PROVIDED, HOWEVER, that these presents are upon the condition that if
the Grantors, or their respective successors or assigns, shall satisfy all of
the conditions set forth in Article VII with respect to all or any part of the
                            -----------
Collateral, as the case may be, then (if with respect to all of the Collateral)
this Agreement, and the estates and rights assigned in the Security Documents,
shall cease, terminate and be void or (if with respect to part of the
Collateral) this Agreement, and the estates and rights assigned in the Security
Documents, shall cease, terminate and be void with respect to such part of the
Collateral; otherwise they shall remain and be in full force and effect.

          IT IS HEREBY FURTHER COVENANTED AND DECLARED that the Trust Estate is
to be held and applied by the Collateral Trustee, subject to the further
covenants, conditions and trust hereinafter set forth.

                                   ARTICLE I
                         DEFINITIONS AND OTHER MATTERS

          Section 1.1.  Defined Terms.
                        -------------

          As used in this Agreement, including the introductory provisions
hereof, the following terms shall have the following meanings:

          "Actionable Default" means (i) until the Company Note Obligations
           ------------------
shall have been Satisfied, an Event of Default shall have occurred under any of
the Indenture and the required Holders thereunder shall have accelerated the
Secured Debt thereunder in accordance

                                       2
<PAGE>

with the terms thereof and (ii) on and after the date the Company Note
Obligations shall have been Satisfied, an Event of Default shall have occurred
under the Holdings Note Purchase Agreement and the required Holders thereunder
shall have accelerated the Secured Debt thereunder in accordance with the terms
thereof.

          "Additional Grantors" is defined in Section 8.1(c).
           -------------------                --------------

          "Affiliate" of any specified Person means any other Person, directly
           ---------
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person.  For the purposes of this definition,
"control" when used with respect to any Person means (a) 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 or (b) beneficial
ownership of such Person's Capital Stock representing ten percent (10%) or more
of the total voting power of the Voting Stock (on a fully diluted basis) or of
rights or warrants to purchase such Capital Stock (whether or not currently
exercisable); and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.  Notwithstanding the foregoing, the Initial
Purchasers shall be deemed not to be Affiliates of any Grantor or any Subsidiary
of any Grantor.

          "Agreement" is defined in the preamble.
           ---------

          "Authorized Officer" means, with respect to any Person, the chief
           ------------------
executive officer, president or a vice president in the disciplines of finance,
accounting, or law of such Person.

          "Bankruptcy Code" means Title 11 of the United States Code, 11 U.S.C.
           ---------------
(S) 101 et seq., as the same may be amended from time to time, and any successor
        -- ---
statute thereto.

          "Business Day" means each day which is not a Saturday, Sunday or any
           ------------
other day on which banks located in The City of New York or Wilmington, Delaware
are authorized or obligated by law to remain closed.

          "Capital Stock" of any Person means any and all shares interests,
           -------------
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.

          "Collateral" means all property in which the Collateral Trustee has,
           ----------
or purportedly has, an interest (including, without limitation, a Lien) from
time to time under this Agreement or one or more of the Security Documents.

          "Collateral Account" is defined in Section 4.1.
           ------------------                -----------

          "Collateral Trustee" is defined in the preamble.
           ------------------

          "Collateral Trustee's Fees" means all fees, costs and expenses of the
           -------------------------
Collateral Trustee of the types described in Sections 5.3, 5.4, 5.5 and 5.6.
                                             ------------  ---  ---     ---

                                       3
<PAGE>

          "Company" is defined in the preamble.
           -------

          "Company Aircraft Mortgage" means the Aircraft Mortgage and Security
           -------------------------
Agreement dated as of the date hereof between the Company and the Collateral
Trustee, as the same may be amended, restated, supplemented or otherwise
modified from time to time in accordance with the terms thereof.

          "Company Hangar Mortgage" means the Mortgage, Assignment of Rents and
           -----------------------
Security Agreement dated as of the date hereof between the Company and the
Collateral Trustee, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof.

          "Company Note Obligations" means all obligations owing to the
           ------------------------
Indenture Trustee or any Company Noteholder (in their respective capacities as
such) by the Company, Holdings or any Subsidiary Grantor under the Indenture,
the Company Note Purchase Agreement or any Debt Instrument executed in
connection with any of the foregoing.

          "Company Noteholder" means, as of any date, any "Holder" (as defined
           ------------------
in the Indenture) on such date.

          "Company Note Purchase Agreement" means the Purchase Agreement dated
           -------------------------------
as of the date hereof among the Company, Holdings and the Initial Purchaser, as
the same may be amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms thereof.

          "Company Pledge and Security Agreement" means that certain Issuer
           -------------------------------------
Pledge and Security Agreement dated as of the date hereof between the Company
and the Collateral Trustee, as the same may be amended, restated, supplemented
or otherwise modified from time to time in accordance with the terms thereof.

          "Debt Instruments" means the Indenture, the Company Note Purchase
           ----------------
Agreement, the Holdings Note Purchase Agreement, the notes or other instruments
issued pursuant to any of the foregoing, any guaranties evidenced by, or entered
into in connection with, any of the foregoing, and the other agreements,
documents and instruments executed in connection with any of the foregoing.

          "Default" means any event or condition that, with the giving of notice
           -------
or the lapse of time, would become an Event of Default.

          "Discharge Notice" means a written notice, signed by an Authorized
           ----------------
Officer of the Company, which requests a discharge of the Security Documents in
accordance with the provisions of Section 7.2 and which certifies to the
                                  -----------
Collateral Trustee that (i) one of the events enumerated in Section 7.1 has
                                                            -----------
occurred (specifying which event), and (ii) all Collateral Trustee's Fees have
been Satisfied.

          "Distribution Dates" means the Business Days fixed by the Collateral
           ------------------
Trustee for the distribution of all moneys held by the Collateral Trustee in the
Collateral Account, the first of

                                       4
<PAGE>

which shall occur within ninety (90) days after the giving of a Notice of
Actionable Default which has not theretofore been withdrawn and the balance of
which shall, so long as such Notice of Actionable Default shall not have been
withdrawn, be on the corresponding date or, if the corresponding date is not a
Business Day, the next succeeding Business Day, in each calendar month
thereafter.

          "Event of Default" means (i) an "Event of Default" under (and as
           ----------------
defined in) the Indenture, and (ii) an "Event of Default" under (and as defined
in) Holdings Note Purchase Agreement; provided, that in each case any required
                                      --------
notice thereof has been given and any grace periods provided for therein have
expired.

          "Government Securities" means (i) direct obligations of the United
           ---------------------
States of America for the timely payment of which its full faith and credit is
pledged or (ii) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended), as custodian with respect to any such
Government Securities or a specific payment of principal of or interest on any
such Government Securities held by such custodian for the account of the holder
of such depository receipt; provided, that (except as required by law) such
                            --------
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the Government Securities or the specific payment of principal of or
interest on the Government Securities evidenced by such depository receipt.

          "Governmental Authority" means any agency, authority, board, bureau,
           ----------------------
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, province or any city or
other political subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof, and any maritime authority.

          "Grantor Representative" means (i) for so long as the Company Note
           ----------------------
Obligations are not Satisfied, the Company, or (ii) on and after the date the
Company Note Obligations have been satisfied, Holdings.

          "Grantors" is defined in the preamble.
           --------

          "Holders" means, as of any date, any holder of Secured Debt on such
           -------
date, including, without limitation, any Company Noteholder, the Indenture
Trustee, any Holdings Noteholder and the Collateral Trustee.

          "Holdings" means AirTran Holdings, Inc., a Nevada corporation.
           --------

          "Holdings Note Obligations" means all obligations owing to any
           -------------------------
Holdings Noteholder (in its capacity as such) by Holdings, the Company or any
Subsidiary Grantor under

                                       5
<PAGE>

the Holdings Note Purchase Agreement or any Debt Instrument executed in
connection with any of the foregoing.

          "Holdings Noteholder" means, as of any date, any "Purchaser" (as
           -------------------
defined in the Holdings Note Purchase Agreement) on such date.

          "Holdings Note Purchase Agreement" means the Note Agreement dated as
           --------------------------------
of the date hereof among Holdings and the Holdings Noteholders, as the same may
be amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof.

          "Indenture" means that certain Indenture dated as of the date hereof
           ---------
among the Company, the Subsidiary Grantors and the Indenture Trustee, as the
same may be amended, supplemented, restated or otherwise modified from time to
time in accordance with the terms thereof.

          "Indenture Paying Agent" means the "Paying Agent" as defined in the
           ----------------------
Indenture.

          "Indenture Trustee" means the "Trustee" as defined in the Indenture.
           -----------------

          "Initial Purchaser" means Boeing Capital Loan Corporation.
           -----------------

          "Issuance Date" means April 12, 2001.
           -------------

          "Lien" means any mortgage, pledge, security interest, encumbrance,
           ----
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).

          "Notice of Actionable Default" means a written certification to the
           ----------------------------
Collateral Trustee and the Company from (i) until the Company Note Obligations
have been Satisfied, the Indenture Trustee or from or on behalf of the requisite
Company Noteholders under the Indenture (to be determined by reference to the
Indenture) or (ii) on and after the date the Company Note Obligations have been
Satisfied, from or on behalf of the requisite Holdings Noteholders under the
Holdings Note Purchase Agreement (to be determined by reference to the Holdings
Note Purchase Agreement), in each case certifying that an Actionable Default has
occurred.

          "Officer's Certificate" means, with respect to any Person, a
           ---------------------
certificate signed by the chief executive officer, president or a vice president
in the disciplines of finance, accounting or law, of such Person, and attested
to by another such officer, in form and substance reasonably satisfactory to the
Collateral Trustee.

          "Person" means any individual, corporation, partnership, limited
           ------
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.

          "Preferred Stock" as applied to the Capital Stock of any Person means
           ---------------
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of

                                       6
<PAGE>

dividends or distributions, or as to the distribution of assets upon any
voluntary or, involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.

          "Proceeds" means "proceeds" as defined in the Uniform Commercial Code
           --------
and, whether or not the following constitute proceeds thereunder, any and all
amounts from time to time paid or payable to any of the Grantors upon the sale,
exchange, lease, license, collection or other disposition of any part of the
Collateral.

          "Requisite Holders" means (i) until the Company Note Obligations have
           -----------------
been Satisfied, the Indenture Trustee or from or on behalf of the Company
Noteholders in the aggregate having at least 75% of the outstanding principal
amount of Company Note Obligation or (ii) on and after the date the Company Note
Obligations have been Satisfied, from or on behalf of the "Required Holders" (as
defined in the Holdings Note Purchase Agreement).

          "Restricted Subsidiary" means a "Restricted Subsidiary" under (and as
           ---------------------
defined in) the Indenture.

          "Satisfied" means, with respect to any Secured Debt, the payment in
           ---------
full in cash of such Secured Debt (other than, as of any date of payment,
Secured Debt consisting of indemnities which are contingent and not then due and
payable, but expressly excluding any amounts for which the Collateral Trustee
has been notified pursuant to clause FOURTH of Section 4.4(a)) or, in the case
                                               --------------
of the Company Note Obligations, the "Legal Defeasance" (as defined in the
Indenture) of the Company Note Obligations.

          "Secured Debt" means, as of any date, the Company Note Obligations,
           ------------
the Holdings Note Obligations and the Collateral Trustee's Fees, regardless of
whether such obligations and liabilities are absolute or contingent, due or not
due, liquidated or unliquidated and whether or not for the payment of money or
the performance or nonperformance of any act, arising under any Debt Instrument,
this Agreement or any Security Document.

          "Security Documents" means the Company Aircraft Mortgage, the Company
           ------------------
Hangar Mortgage, the Company Pledge and Security Agreement and any additional
documents executed to reflect the grant to the Collateral Trustee of any
interest (including, without limitation, a Lien) in any Collateral, and any
agreement or document referred to in Section 2.3, Section 5.7 or Section 8.1 or
                                     -----------  -----------    -----------
in the Company Aircraft Mortgage, the Company Hangar Mortgage or the Company
Pledge and Security Agreement, as each of the foregoing may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with their respective terms.

          "Subsidiary" means, in respect of any Person, any corporation,
           ----------
association, partnership or other business entity of which more than fifty
percent (50%) of the total voting; power of shares of Capital Stock or other
interests (including membership or partnership interests) entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) such Person, (ii) such Person and one or more
Subsidiaries of such Person or (iii), one or

                                       7
<PAGE>

more Subsidiaries of such Person.

          "Subsidiary Grantor" is defined in the preamble.
           ------------------

          "Trust Agreement Collateral" means "Trust Agreement Collateral" as
           --------------------------
defined in Section 4.2(a).
           --------------

          "Trust Company" means Wilmington Trust Company, a Delaware banking
           -------------
corporation, not in its capacity as Indenture Trustee or Collateral Trustee, but
in its individual capacity.

          "Uniform Commercial Code" means the Uniform Commercial Code as in
           -----------------------
effect from time to time in the State of New York; provided, that if, with
                                                   --------
respect to any financing statement or by reason of any provisions of law, the
perfection or the effect of perfection or non-perfection of the security
interests granted to the Collateral Trustee pursuant to the applicable Security
Document is governed by the Uniform Commercial Code as in effect in a
jurisdiction of the United States other than New York, then "Uniform Commercial
                                                             ------------------
Code" means the Uniform Commercial Code as in effect from time to time in such
----
other jurisdiction for purposes of the provisions of each Security Document and
any financing statement relating to such perfection or effect of perfection or
non-perfection.

          "Voting Stock" of a Person means all classes of Capital Stock or other
           ------------
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.

          Section 1.2.  References to this Agreement.
                        ----------------------------

          The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.  References to the preamble,
the recitals, Articles, Sections and clauses are internal references to this
Agreement unless otherwise specified.

          Section 1.3.  Payments and Distributions.
                        --------------------------

          In each case herein where any payment or distribution is to be made or
notice is to be given to "Holders," such payments, distributions and notices
shall be made, as applicable (but subject to the priority of payments set forth
herein), to (i) the Indenture Trustee for its benefit and for the benefit of the
Company Noteholders and (ii) to each Holdings Noteholder.

          Section 1.4.  Tense.
                        -----

          All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa, unless otherwise
specified.

          Section 1.5.  Uniform Commercial Code Terms.
                        -----------------------------

                                       8
<PAGE>

          Terms not otherwise defined herein, which are defined in or used in
Article 9 of the Uniform Commercial Code, shall herein have the meanings given
to them in such Article 9.

                                  ARTICLE II
         CERTAIN OBLIGATIONS AND DUTIES OF THE COLLATERAL TRUSTEE AND
                        THE COMPANY; POWERS OF ATTORNEY

          Section 2.1.  Authorization to Execute Security Documents.
                        -------------------------------------------

          The Collateral Trustee shall execute and deliver each of the Security
Documents requiring execution and delivery by it and shall accept delivery from
the Grantors of those Security Documents which do not require the Collateral
Trustee's execution.

          Section 2.2.  Actions.
                        -------

          The Collateral Trustee shall take any action with respect to the
Collateral and the Security Documents requested in writing by the Requisite
Holders and shall release all of the Collateral when required by Section 7.3
                                                                 -----------
from the Liens created under the Security Documents, provided, however, that the
                                                     --------  -------
Collateral Trustee shall not be obligated to take any such action which is in
conflict with any provisions of law or of this Agreement or the Security
Documents or with respect to which the Collateral Trustee has not received
adequate security or indemnity as provided in Section 6.4(d).  The Collateral
                                              --------------
Trustee, prior to its receipt of a Notice of Actionable Default, shall with
reasonable promptness give notice to the Company of any such request from the
Requisite Holders, but it is hereby expressly agreed that the Collateral
Trustee's failure to give such notice to the Company shall not affect the
validity of the Requisite Holders' request to the Collateral Trustee.

          Section 2.3.  Additional Security Documents.
                        -----------------------------

               (a)  To the extent and as required in the Security Documents, the
     Company shall notify the Collateral Trustee in the event that any of the
     Grantors acquires any interest in any property in which any of the Grantors
     are obligated to grant a Lien to the Collateral Trustee under and subject
     to the terms of the Debt Instruments or the Security Documents but which is
     either not covered by a Security Document or which has not been delivered
     to the Collateral Trustee in a manner which will confer a perfected, first
     priority Lien in such Collateral in favor of the Collateral Trustee without
     further act or deed of the Collateral Trustee and, to the extent that such
     security interest may be perfected by the execution and/or filing of
     Security Documents, the applicable Grantor shall immediately prepare,
     execute and deliver to the Collateral Trustee such Security Documents, in
     form and substance satisfactory to the Requisite Holders, as are necessary
     to confer a perfected, first priority Lien in such Collateral in favor of
     the Collateral Trustee.  If the signature of the Collateral Trustee is
     required on any such Security Document, the applicable Grantor shall
     present such Security Document to the Collateral Trustee for signature and
     the Collateral Trustee shall execute such Security Document and such
     Grantor shall file such Security Document with appropriate public filing
     and/or recording offices if such filing and/or recording is required or
     advisable to perfect or

                                       9
<PAGE>

     protect the Lien upon and security interest in such Collateral in favor of
     the Collateral Trustee. Such Grantor shall supply the Collateral Trustee
     with an executed copy of each such Security Document and satisfactory proof
     that each such Security Document has been properly filed or recorded, if
     filing or recording is required under this Section 2.3.
                                                -----------

               (b)  The Company shall immediately notify the Collateral Trustee
     in the event that it forms or acquires any Restricted Subsidiary, or any of
     its existing Subsidiaries which is not then a Grantor is determined at any
     time to be a Restricted Subsidiary, whereupon the Company shall cause such
     Restricted Subsidiary to take such action as may be necessary (i) to become
     a "Grantor" under and subject to this Agreement, (ii) to grant the
     Collateral Trustee, under and subject to a Security Documents, in form and
     substance satisfactory to the Requisite Holders, a security interest which
     will be a valid, perfected first-priority security interest in all property
     of the types granted by the other Grantors party to this Agreement and the
     Security Documents, and (iii) to the extent that such security interest may
     be perfected by the execution and/or filing of Security Documents, to
     prepare, execute and deliver immediately to the Collateral Trustee such
     Security Documents, in form and substance satisfactory to the Requisite
     Holders, to perfect the Lien on, or for the Collateral Trustee to obtain
     control over, such Collateral in favor of the Collateral Trustee.  If the
     signature of the Collateral Trustee is required on any such Security
     Document, the Restricted Subsidiary shall present such Security Document to
     the Collateral Trustee for signature and the Collateral Trustee shall
     execute such Security Document and such Restricted Subsidiary shall file
     such Security Document with appropriate filing and/or recording offices if
     such filing and/or recording is required or advisable to perfect or protect
     the Lien upon and security interest in such Collateral in favor of the
     Collateral Trustee.  Such Restricted Subsidiary shall supply the Collateral
     Trustee with an executed copy of each such Security Document and
     satisfactory proof that each such Security Document has been properly filed
     or recorded, if filing or recording is required under this Section 2.3.
                                                                -----------

               (c)  Simultaneously with the execution and delivery of the
     Security Documents required under this Section 2.3(b), the Company shall
                                            --------------
     cause the applicable Restricted Subsidiary to:

                    (i)    Deliver legal opinions from such Restricted
          Subsidiary's counsel in form and substance satisfactory to the
          Collateral Trustee addressing such matters as the Collateral Trustee
          and the Requisite Holders shall reasonably designate and such other
          opinions as are required under the Indenture and any additional
          opinions as are customary for transactions of a similar nature;

                    (ii)   Deliver lien search reports of filings in the
          applicable jurisdictions reflecting Uniform Commercial Code filings,
          tax liens and judgments on file with respect to such Restricted
          Subsidiary;

                    (iii)  Deliver instruments, stock certificates and duly
          executed stock powers in blank with respect to Collateral consisting
          of capital stock;

                                      10
<PAGE>

                    (iv) Take such actions, deliver such control agreements,
          notices or acknowledgments, cause to be marked the applicable books
          and records and take such other action as may be reasonably required
          by the Collateral Trustee to perfect the Lien under the Security
          Documents with respect to Collateral of such Restricted Subsidiary;
          and

                    (v)  Execute such other collateral documents, instruments
          and agreements as shall be reasonably requested by the Collateral
          Trustee, in each case, in form and substance satisfactory to the
          Collateral Trustee and the Requisite Holders, in order to effectuate
          the intent of the provisions of this Section 2.3.
                                               -----------

          Section 2.4.  Powers of Attorney.
                        ------------------

          The Grantors hereby irrevocably constitute and appoint the Collateral
Trustee and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full power and authority in the name
of the Grantors or any of them or the name of such attorney-in-fact, from time
to time in the Collateral Trustee's discretion subject to the terms and
provisions of the Security Documents, for the purpose of signing documents and
taking other action to perfect, preserve and protect the Liens and security
interests of the Collateral Trustee in the Collateral. This power of attorney is
a power coupled with an interest, shall be irrevocable and shall not be subject
to the occurrence of any Actionable Default.

                                  ARTICLE III
                         ACTIONABLE DEFAULTS; REMEDIES

          Section 3.1.  Actionable Default.
                        ------------------

               (a)  Upon receipt of a Notice of Actionable Default, the
     Collateral Trustee shall, within five (5) Business Days thereafter, notify
     each Holder and the Company in the manner provided in Section 8.2 that an
                                                           -----------
     Actionable Default exists.  Upon receipt of any written directions pursuant
     to Section 3.6(a), the Collateral Trustee shall, within five (5) Business
        --------------
     Days thereafter, send a copy thereof to each Holder.

               (b)  The party or parties giving a Notice of Actionable Default
     (or successors in interest thereto) shall be entitled to withdraw it by
     delivering written notice of withdrawal to the Collateral Trustee (i)
     before the Collateral Trustee takes any action to exercise any remedy with
     respect to the Collateral, or (ii) thereafter, if (A) the Company otherwise
     indemnifies the Holders (in a manner satisfactory to the Holders in their
     reasonable discretion) with respect to all costs and expenses incurred by
     the Holders in connection with reversing all actions the Collateral Trustee
     has taken to exercise any remedy or remedies with respect to the
     Collateral, and (B) the Requisite Holders shall have consented in writing
     to such reversal. The Collateral Trustee shall immediately notify the
     Company as to the receipt and contents of any such notice of withdrawal and
     shall promptly notify each Holder, in the manner provided in Section 8.2,
                                                                  -----------
     of the withdrawal of any Notice of Actionable Default.  A party giving a
     Notice of Actionable Default shall be deemed to have delivered a written
     notice of withdrawal as provided in

                                      11
<PAGE>

     the first sentence of this Section 3.1(b) upon the Collateral Trustee's
                                --------------
     receipt of confirmation in writing from such party that the Secured Debt
     owing to it has been Satisfied.

               (c)  To the extent that any Notice of Actionable Default shall
     give rise to any of the rights and remedies provided in this Article III
                                                                  -----------
     and the rights and remedies provided in any of the Security Documents or
     shall prohibit the Company or any Grantor from taking certain actions as
     specified herein, such rights and remedies shall be suspended, and any
     exercise thereof by the Collateral Trustee shall cease, and such
     prohibitions on the Company and the Grantors shall not remain in effect,
     upon the withdrawal of such Notice of Actionable Default pursuant to the
     terms and provisions of Section 3.1(b), provided, that such rights and
                             --------------  --------
     remedies, and such prohibitions, shall be reinstated upon the giving of any
     later Notice of Actionable Default.

          Section 3.2.  Remedies.
                        --------

               (a)  If and only if the Collateral Trustee shall have received a
     Notice of Actionable Default and during such time as such Notice of
     Actionable Default shall not have been withdrawn in accordance with the
     provisions of Section 3.1(b) hereof, the Collateral Trustee may, and upon
                   --------------
     the written direction of the Requisite Holders shall, exercise the rights
     and remedies provided in this Article III and the rights and remedies
                                   -----------
     provided in any of the Security Documents.

               (b)  The Grantors hereby waive presentment, demand, protest or
     any notice (to the extent permitted by applicable law and except as
     otherwise expressly provided in this Agreement or the Debt Instruments) of
     any kind in connection with this Agreement, any Collateral or any Security
     Document.

               (c)  Each of the Grantors hereby irrevocably constitutes and
     appoints the Collateral Trustee and any officer or agent thereof, with full
     power of substitution, as its true and lawful attorney-in-fact with full
     power and authority in the name of the Grantors, or any of them, or in its
     own name, from time to time, upon the occurrence and during the continuance
     of any Actionable Default, in the Collateral Trustee's discretion, for the
     purpose of carrying out the terms of this Agreement and any of the Security
     Documents, to take any and all appropriate action and to execute any and
     all documents and instruments which may be necessary or desirable to
     accomplish the purposes hereof and thereof and, without limiting the
     generality of the foregoing, hereby gives the Collateral Trustee the power
     and right on behalf of the Grantors, or any of them, without notice to or
     assent by any of the Grantors, to the extent permitted by applicable law
     and the Security Documents, to do the following:

                    (i)   to ask for, demand, sue for, collect, recover,
          compromise, receive and give acquittance and receipt for any and all
          moneys due or to become due under or with respect to any of the
          Collateral,

                    (ii)  to receive, take, endorse, assign, collect and deliver
          any and

                                      12
<PAGE>

          all checks, notes, drafts, acceptances, documents and other negotiable
          and nonnegotiable instruments, documents and chattel paper taken or
          received by the Collateral Trustee in connection with this Agreement
          or any of the Security Documents,

                    (iii)  to commence, file, prosecute, defend, settle,
          compromise or adjust any claim, suit, action or proceeding with
          respect to the Collateral,

                    (iv)   to sell, transfer, assign or otherwise deal in or
          with the Collateral or any part thereof pursuant to the terms and
          conditions of this Agreement and the Security Documents,

                    (v)    to perform the affirmative obligations of any Grantor
          hereunder or under any Security Document, and

                    (vi)   to do, at is option and at the expense and for the
          account of any or all of the Grantors, at any time or from time to
          time, all acts and things which the Collateral Trustee deems
          reasonably necessary, or which the Collateral Trustee is instructed in
          writing to do, to protect or preserve the Collateral or the Trust
          Estate and to realize upon the Collateral.

     Each Grantor acknowledges, consents and agrees that the powers of attorney
     granted pursuant to Section 2.4 and this Section 3.2 are irrevocable and
                         -----------          -----------
     coupled with an interest.

          Section 3.3.  Right to Initiate Judicial Proceedings, etc.
                        --------------------------------------------

          If and only if the Collateral Trustee shall have received a Notice of
Actionable Default and during such time as such Notice of Actionable Default
shall not have been withdrawn in accordance with the provisions of Section
                                                                   -------
3.1(b) hereof, (a) the Collateral Trustee shall have the right and power to
------
institute and maintain such suits and proceedings as it may deem appropriate (or
as it may be instructed) to protect and enforce the rights vested in it by this
Agreement and the Security Documents, and (b) the Collateral Trustee may, either
after entry or without entry, proceed by suit or suits at law or in equity to
enforce such rights and to foreclose upon the Collateral or any portion thereof
and to sell all or, from time to time, any of the Trust Estate under the
judgment or decree of a court of competent jurisdiction.

          Section 3.4.  Appointment of a Receiver.
                        -------------------------

          If a receiver of the Trust Estate shall be appointed in judicial
proceedings, Wilmington Trust Company may be appointed as such receiver.
Notwithstanding the appointment of a receiver, the Collateral Trustee shall, to
the extent permitted by law, be entitled to retain possession and control of all
cash held by or deposited with it or its agents or co-Collateral Trustees
pursuant to any provision of this Agreement or any Security Document.

          Section 3.5.  Exercise of Powers.
                        ------------------

          All of the powers, remedies and rights of the Collateral Trustee as
set forth in this

                                      13
<PAGE>

Agreement may be exercised by the Collateral Trustee in respect of any Security
Document as though set forth at length therein and all the powers, remedies and
rights of the Collateral Trustee set forth in any Security Document may be
exercised from time to time as herein and therein provided.

          Section 3.6.  Control by the Requisite Holders.
                        --------------------------------

               (a)  Subject to Section 3.6(b), if the Collateral Trustee shall
                               --------------
     have received a Notice of Actionable Default and during the period from
     such receipt until such Notice of Actionable Default is withdrawn in
     accordance with the provisions of Section 3.1(b), the Requisite Holders
                                       --------------
     shall have the right, by an instrument in writing executed and delivered to
     the Collateral Trustee, to direct the Collateral Trustee to exercise, or to
     refrain from exercising, any right, remedy, trust or power available to or
     conferred upon the Collateral Trustee hereunder, and in connection
     therewith, to direct the time, method and place of conducting any
     proceeding for any right or remedy available to the Collateral Trustee, or
     of exercising any trust or power conferred on the Collateral Trustee, or
     for the appointment of a receiver, or for the taking of any other action
     authorized by this Article III, provided that the Collateral Trustee shall
                        -----------
     have received adequate security or indemnity as provided in Section 6.4(d).
                                                                 --------------

               (b)  The Collateral Trustee shall not be obligated to follow any
     written directions received pursuant to Section 3.6(a) or Section 2.2 to
                                             --------------    -----------
     the extent the Collateral Trustee has received a written opinion of counsel
     to the Collateral Trustee reasonably satisfactory to the Requisite Holders
     to the effect that such written directions are in conflict with any
     provisions of law or this Agreement provided, however, under no
                                         --------  -------
     circumstances shall the Collateral Trustee be liable for following the
     written instructions of the Requisite Holders.

               (c)  Nothing in this Section 3.6 shall impair the right of the
                                    -----------
     Collateral Trustee in its discretion to take or omit to take any action
     which is deemed proper by the Collateral Trustee and which is not
     inconsistent with any direction of the Requisite Holders; provided,
                                                               --------
     however, the Collateral Trustee shall not be under any obligation, as a
     -------
     result of this Section 3.6, to take any action which is discretionary with
                    -----------
     the Collateral Trustee under the provisions hereof or under any Security
     Document unless so directed by the Requisite Holders.

          Section 3.7.  Remedies Not Exclusive.
                        ----------------------

               (a)  No remedy conferred upon or reserved to the Collateral
     Trustee herein or in the Security Documents is intended to be exclusive of
     any other remedy or remedies, but every such remedy shall be cumulative and
     shall be in addition to every other remedy conferred herein or in any of
     the Security Documents or now or hereafter existing at law or in equity or
     by statute.

               (b)  No delay or omission by the Collateral Trustee in the
     exercise of any right, remedy or power accruing upon any Actionable Default
     shall impair any such

                                      14
<PAGE>

     right, remedy or power or shall be construed to be a waiver of any such
     Actionable Default or an acquiescence therein; and every right, power and
     remedy given by this Agreement or any Security Documents to the Collateral
     Trustee may be exercised from time to time and as often as may be deemed
     expedient by the Collateral Trustee.

               (c)  In case the Collateral Trustee shall have proceeded to
     enforce any right, remedy or power under this Agreement or any Security
     Document and the proceeding for the enforcement thereof shall have been
     discontinued or abandoned for any reason or shall have been determined
     adversely to the Collateral Trustee, then, and in every such case, subject
     to any effect of or determination in such proceeding, (i) the Grantors, the
     Collateral Trustee and the Holders shall severally and respectively be
     restored to their former positions and rights hereunder and under such
     Security Document with respect to the Trust Estate and in all other
     respects, and (ii) thereafter all rights, remedies and powers of the
     Collateral Trustee shall continue in all other respects as though to such
     proceeding had been taken.

               (d)  All rights of action and rights to assert claims upon or
     under this Agreement and the Security Documents may be enforced by the
     Collateral Trustee without the possession of any Debt Instrument or the
     production thereof in any trial or other proceeding relative thereto, and
     any such suit or proceeding instituted by the Collateral Trustee shall be
     brought in its name as Collateral Trustee and any recovery of judgment
     shall be held as part of the Trust Estate.

          Section 3.8.  Waiver of Certain Rights.
                        ------------------------

          The Grantors, to the extent they may lawfully do so, on behalf of
themselves and all who may claim through or under them, including, without
limitation, any and all subsequent creditors, vendees, assignees and lienors,
expressly waive and release any, every and all rights to demand or to have any
marshaling of the Trust Estate upon any sale, whether made under any power of
sale granted under the Security Documents, pursuant to judicial proceedings, or
upon any foreclosure or any enforcement of this Agreement or the Security
Documents, and consent and agree that the Trust Estate may at any such sale be
offered and sold as an entirety or in part.

          Section 3.9.  Limitation on Collateral Trustee's Duties in Respect of
                        -------------------------------------------------------
Collateral.
----------

          Other than the Collateral Trustee's duties expressly set forth in this
Agreement and the Security Documents as to the custody of moneys, securities and
instruments received by the Collateral Trustee hereunder and the accounting to
the Grantors and the Holders therefor, the Collateral Trustee shall have no duty
to the Grantors or the Holders with respect to any Collateral in its possession
or control or in the possession or control of its agent or nominee, any income
thereon, or the preservation of rights against prior parties or any other right
pertaining thereto.

          Section 3.10. Limitation by Law.
                        -----------------

          All the provisions of this Article III are intended to be subject to
                                     -----------
all applicable mandatory provisions of law which may be controlling in the
premises and to be limited to the

                                      15
<PAGE>

extent necessary so that they will not render this Agreement invalid or
unenforceable in whole or in part.

          Section 3.11.  Absolute Rights of Holders.
                         --------------------------

          Notwithstanding any other provision of this Agreement or any provision
of any Security Document, but subject in all cases to the rights of the
Requisite Holders under Section 3.6 hereof, neither the right of each Holder,
                        -----------
which is absolute and unconditional, to receive payments of the Secured Debt
held by such Holder on or after the due date thereof as therein expressed, to
institute suit for the enforcement of such payment on or after such date, or to
assert its position and views as a secured creditor in, and to otherwise
exercise any right (other than the right to enforce any Lien on the Collateral,
which shall in all circumstances be exercisable only by the Collateral Trustee
at the direction of the Requisite Holders, or the right to release Collateral in
accordance with Article VII) it may have in connection with, a case under the
                -----------
Bankruptcy Code in which any of the Grantors is a debtor, nor the obligation of
any of the Grantors, which is also absolute and unconditional, to pay the
Secured Debt owing by the Company, to each Holder at the time and place
expressed in the Debt Instruments, shall be impaired or affected without the
consent of such Holder.

          Section 3.12.  Priority of Security; No Challenge.
                         ----------------------------------

          Notwithstanding (a) the date, manner or order of perfection of the
security interests and Liens, and whether or not such security interests and
Liens are perfected (but subject to the last sentence of this Section 3.12), (b)
                                                              ------------
the provisions of the Uniform Commercial Code or any other applicable law, (c)
the provisions of any contract (other than this Agreement) in effect between any
of the Holders, on the one hand, and, on the other hand, any one or more of the
Grantors and (d) whether any of the Holders or any agent or bailee thereof holds
possession or has control of all or any part of the Collateral, this Agreement
and the Security Documents are intended to secure the Secured Debt according to
the priorities set forth in Section 4.4 and shall be construed and enforced to
                            -----------
give effect to such intention.  Notwithstanding the foregoing, the priorities
provided for herein with respect to the Secured Debt of any Holder being secured
by the Collateral are applicable only to the extent that such Secured Debt is
enforceable and has not been avoided; if any Secured Debt of any Holder is
judicially determined to be unenforceable or is judicially avoided, the
priorities provided for herein shall not be available to such Secured Debt to
the extent it is avoided or determined to be unenforceable.  Each party hereto
covenants and agrees for the benefit of each other party hereto that it shall
not challenge, attack or seek to avoid any Secured Debt or any security interest
or Lien securing such Secured Debt in accordance with the Security Documents.

                                  ARTICLE IV
                   COLLATERAL ACCOUNT; APPLICATION OF MONEYS

          Section 4.1.  The Collateral Account.
                        ----------------------

          Until the trusts created by this Agreement shall have terminated,
there shall be maintained with the Collateral Trustee an account which shall be
entitled the "Collateral

                                      16
<PAGE>

Account" (herein called the "Collateral Account"). The Collateral Account shall
be established and maintained by the Collateral Trustee at the principal office
of the Collateral Trustee at which the corporate trust activities of the
Collateral Trustee are administered. After a Notice of Actionable Default has
been received by the Collateral Trustee and prior to its withdrawal, the
Requisite Holders may give a notice to the Grantors (with a copy to the
Collateral Trustee) directing the Grantors to pay, or cause to be paid, all
monies, checks, notes, drafts or any other payment relating to, or proceeds of,
Grantors' accounts, general intangibles or other property constituting
Collateral (until such time as such Notice of Actionable Default is withdrawn)
directly to the Collateral Trustee for deposit into the Collateral Account. All
moneys which are received by the Collateral Trustee with respect to the
Collateral after the Collateral Trustee shall have received a Notice of
Actionable Default which shall not have been withdrawn in accordance with the
terms of Section 3.1(b) hereof shall be deposited in the Collateral Account and
         --------------
thereafter shall be held, applied and/or disbursed by the Collateral Trustee in
accordance with the terms of this Agreement.  All moneys, if any, received by
the Collateral Trustee with respect to all or any part of the Collateral either
                                                                         ------
(i) prior to Collateral Trustee's receipt of a Notice of Actionable Default, or
(ii) after the withdrawal of all pending Notices of Actionable Default in
accordance with the terms of Section 3.1(b) hereof and prior to Collateral
                             --------------
Trustee's receipt of any additional Notice of Actionable Default, shall promptly
be delivered to the Company, the Grantors or any other Person entitled thereto
at such Person's instruction.  All moneys received by the Collateral Trustee
with respect to all or any part of the Collateral between the receipt by the
Collateral Trustee of any Notice of Actionable Default and the withdrawal of all
pending Notices of Actionable Default in accordance with the terms of Section
                                                                      -------
3.1(b) hereof shall, to the extent not distributed pursuant to the terms of
------
Section 4.4, promptly be delivered to the Company or any other Person entitled
-----------
thereto at such Person's instruction following the withdrawal of all pending
Notices of Actionable Default in accordance with Section 3.1(b).
                                                 --------------

          Section 4.2.  Grant of Security Interest; Control of Collateral
                        -------------------------------------------------
                        Account.
                        -------

                 (a)    To secure the prompt and complete payment, when due, of
     the Secured Debt and all amounts owing to the Holders hereunder and under
     the Security Documents, and the performance by the Grantors of their
     respective covenants and obligations to be performed by them pursuant to
     the Debt Instruments, this Agreement and the Security Documents, the
     Grantors hereby assign and pledge to the Collateral Trustee and grant to
     the Collateral Trustee a security interest in all of the right, title and
     interest of the Grantors, or any of them, in and to the following, whether
     presently existing or hereafter arising or acquired (the "Trust Agreement
     Collateral"): the Collateral Account, and solely to the extent the same are
     included in the Collateral Account in accordance with this Agreement and
     the other Security Documents, all cash, investment property , certificates
     and instruments, if any, from time to time representing the Collateral
     Account; investments from time to time made pursuant to Section 4.3; notes,
                                                             -----------
     certificates of deposit and other instruments from time to time hereafter
     delivered to or otherwise possessed by the Collateral Trustee in
     substitution for, or in addition to, any or all of the then existing Trust
     Agreement Collateral; all interest, cash, instruments and other investment
     property from time to time received in respect of or in exchange for any or
     all of the then existing Trust Agreement Collateral so long as they are
     required to be deposited in the Collateral Account; and to the extent not
     covered above, all Proceeds
                                      17
<PAGE>

     of any and all collections, earnings and accruals with respect to any or
     all of the foregoing (whether the same are acquired before or after the
     commencement of a case under the Bankruptcy Code by or against any of the
     Grantors as a debtor).

               (b)      All right, title and interest in and to the Collateral
     Account shall vest in the Collateral Trustee, and funds on deposit in the
     Collateral Account and other Trust Agreement Collateral shall constitute
     part of the Trust Estate.  The Collateral Account shall be subject to the
     exclusive dominion and control of the Collateral Trustee.

          Section 4.3.  Investment of Funds Deposited in Collateral Account.
                        ---------------------------------------------------

          The Collateral Trustee shall invest and reinvest moneys on deposit in
the Collateral Account at any time in Government Securities; provided, however,
                                                             --------  -------
that in order to provide the Collateral Trustee, for the benefit of the Holders,
with a perfected, first priority security interest therein, each such investment
shall be either (a) evidenced, or deemed under applicable federal regulations to
be evidenced, by negotiable certificates or instruments or nonnegotiable
certificates or instruments issued in the name of the Collateral Trustee, which
(together with any appropriate instruments of transfer) are delivered to, and
held by, the Collateral Trustee or an agent thereof (which shall not be any of
the Grantors or any of their respective Affiliates); or (b) in book-entry form
and in which (in the opinion of counsel to the Collateral Trustee) the
Collateral Trustee shall have a perfected first priority ownership or security
interest which under applicable law shall not be subject to any other ownership
or security interest.  All such investments and the interest and income received
thereon and therefrom and the net proceeds realized on the sale thereof shall be
held in the Collateral Account as part of the Trust Estate.

          Section 4.4.   Application of Moneys.
                         ---------------------

                 (a)     Subject to Section 4.1, all moneys held by the
                                    -----------
     Collateral Trustee in the Collateral Account shall, to the extent available
     for distribution, be distributed by the Collateral Trustee on the first and
     each succeeding Distribution Date as follows:

                         FIRST:  To the Collateral Trustee in an amount equal to
          the Collateral Trustee's Fees which are unpaid as of such Distribution
          Date, and to any Holder which has theretofore advanced or paid any
          such Collateral Trustee's Fees in an amount equal to the amount
          thereof so advanced or paid by such Holder prior to such Distribution
          Date; provided, however, that nothing herein is intended to relieve
                --------  -------
          any of the Grantors of their respective obligations to pay such costs,
          fees, expenses and liabilities from funds outside of the Collateral
          Account;

                         SECOND:  To the Holders of Company Note Obligations in
          an amount equal to the unpaid Company Note Obligations which are then
          due and payable and to secure unpaid Company Note Obligations which
          are not yet due and payable as provided in Section 4.4(b); provided,
                                                     --------------  --------
          if such moneys shall be insufficient to pay and/or secure in full such
          amounts, then to the payment and/or security thereof ratably (without
          priority of any one over any other, except in

                                      18
<PAGE>

          accordance with applicable subordination provisions, if any, contained
          in the Debt Instruments) in proportion to the unpaid amounts thereof
          on the relevant Distribution Date;

                         THIRD:  To the Holders of Holdings Note Obligations in
          an amount equal to the unpaid Holdings Note Obligations which are then
          due and payable and to secure unpaid Holdings Note Obligations which
          are not yet due and payable as provided in Section 4.4(b); provided,
                                                     --------------  --------
          if such moneys shall be insufficient to pay and/or secure in full such
          amounts, then to the payment and/or security thereof ratably (without
          priority of any one over any other, except in accordance with
          applicable subordination provisions, if any, contained in the Debt
          Instruments) in proportion to the unpaid amounts thereof on the
          relevant Distribution Date; and

                         FOURTH:  Any surplus then remaining shall be paid to
          the Grantors or their respective successors or assigns, or to whomever
          may be lawfully entitled to receive the same, or as a court of
          competent jurisdiction may direct, provided, however, that if any
                                             --------  -------
          Holder shall have notified the Collateral Trustee in writing that a
          claim is pending for which such Holder is entitled to the benefits of
          an indemnification, reimbursement or similar provision under which
          amounts are not yet due but with respect to which any of the Grantors
          continue to be contingently liable, and amounts payable by such
          Grantor with respect thereto are secured by the Trust Estate, the
          Collateral Trustee shall continue to hold the amount specified in such
          notice in the Collateral Account until such Grantor's liability with
          respect thereto is discharged or released to the satisfaction of such
          Holder.

                    (b)  In the event any of the Secured Debt consisting of
     principal is not due and payable on any Distribution Date, the Grantors
     shall be deemed for purposes of the distribution made on such Distribution
     Date to have an obligation to provide cash collateral in the amount of such
     principal, and the amount distributed with respect to such obligation to
     provide cash collateral shall be held by the Indenture Trustee (if with
     respect to the Company Note Obligations) or the Collateral Trustee (if with
     respect to the Holdings Note Obligations), subject to the provisions of
     this Section 4.4(b)), as cash collateral for such Secured Debt. Amounts
          --------------
     held by the Indenture Trustee or the Collateral Trustee as cash collateral
     under this Section 4.4(b) shall be invested in investments of the kinds
                --------------
     referred to in Section 4.3(a) or 4.3(b) having maturities of ninety (90)
                    --------------    ------
     days or less, and interest earned on such investments shall be (i) first,
     applied to interest accruing on the Secured Debt with respect to which such
     cash collateral is held and (ii) second, deposited in the Collateral
     Account.  The amount of any Secured Debt secured by such cash collateral
     shall be reduced by the amount of such cash collateral for purposes of
     calculating the amount of subsequent distributions under Section 4.4(a).
                                                              --------------
     When any Secured Debt secured by cash collateral as provided above becomes
     due and payable, the amount due and payable shall be paid out of such cash
     collateral, up to but not in excess of the percentage of the principal
     amount of other Secured Debt theretofore paid out of distributions from the
     Collateral Account.  The balance of such cash collateral, if any,

                                      19
<PAGE>

     shall be deposited in the Collateral Account.

                                   ARTICLE V
                      AGREEMENTS WITH COLLATERAL TRUSTEE

          Section 5.1.  Delivery of Debt Instruments.
                        ----------------------------

          On the date of this Agreement the Grantors will deliver to the
Collateral Trustee true and correct copies of the Debt Instruments and the
Security Documents. The Grantors agree that, promptly upon the execution
thereof, the Grantors will deliver to the Collateral Trustee a true and complete
copy of any and all other Debt Instruments, Security Documents and all
amendments, restatements, modifications or supplements to any Debt Instrument or
any Security Documents entered into by the Grantors subsequent to the date of
this Agreement.

          Section 5.2.  Information as to Holders.
                        -------------------------

          The Company agrees that it shall deliver to the Collateral Trustee, on
the date of this Agreement, a list setting forth, by each Debt Instrument, (i)
the aggregate principal amount outstanding thereunder, (ii) to the extent known
to the Company, the names of the Holders of such Secured Debt, the unpaid
principal amount thereof owing to each Holder thereof and whether any amount of
such Secured Debt outstanding is subordinated to any extent to any of the other
Secured Debt and (iii) with respect to the Company Note Obligations, the name of
the Indenture Trustee and the Indenture Paying Agent and whether any amount of
Company Note Obligations outstanding is subordinated to any extent to any of the
other Secured Debt.  The Company agrees, from time to time, to furnish the
Collateral Trustee with any information necessary to update the foregoing list.
The Company will furnish to the Collateral Trustee on the date of this Agreement
a list setting forth the name and address of each party to whom notices must be
sent under the Debt Instruments, and the Company agrees to furnish promptly to
the Collateral Trustee any changes or additions to such list.

          Section 5.3.  Compensation and Expenses.
                        -------------------------

          The Grantors jointly and severally agree to pay to the Collateral
Trustee the Collateral Trustee's customary and reasonable fees as set forth in a
separate fee agreement between the Grantors and the Collateral Trustee (which
fees and expenses may be prospectively adjusted on not  less than 90 days prior
written notice to Grantor) as compensation for the Collateral Trustee's services
hereunder and under the Security Documents and for administering the Trust
Estate, and from time to time upon demand, all of the fees, costs and expenses
of the Collateral Trustee (including, without limitation, the reasonable fees
and disbursements of its counsel and such special counsel, accountants or other
experts as the Collateral Trustee elects to retain) (a) arising in connection
with the preparation, execution, delivery, modification, restatement, amendment
or termination of this Agreement and each Security Document or the enforcement
(whether in the context of a civil action, adversary proceeding, workout or
otherwise) of any of the provisions hereof or thereof, (b) failure by any
Grantor to perform or observe any of the provisions of this Agreement or any
Security Document or (c) incurred or required to be advanced in connection with
the administration of the Trust Estate, the sale or

                                      20
<PAGE>

other disposition or the custody, preservation, use or operation of, or
protection of Collateral pursuant to any Security Document and the exercise or
enforcement of the Collateral Trustee's rights under this Agreement and in and
to the Collateral and the Trust Estate. As security for such payment, the
Collateral Trustee shall have a Lien prior to the Secured Debt upon all
Collateral and other property and funds properly held or collected by the
Collateral Trustee as part of the Trust Estate in accordance with this Agreement
and the other Security Documents.

          Section 5.4.  Stamp and Other Similar Taxes.
                        -----------------------------

          The Grantors jointly and severally agree to indemnify and hold
harmless the Collateral Trustee and each Holder from, and shall reimburse the
Collateral Trustee and each Holder for, any present or future claim for
liability for any stamp or other similar tax and any penalties or interest with
respect thereto, which may be assessed, levied or collected by any jurisdiction
in connection with this Agreement, any Security Document, the Trust Estate, or
the attachment or perfection of the security interest granted to the Collateral
Trustee in any Collateral.  The obligations of the Grantors under this Section
                                                                       -------
5.4 shall survive the termination of the other provisions of this Agreement.
---

          Section 5.5.  Filing Fees, Excise Taxes, etc.
                        -------------------------------

          The Grantors jointly and severally agree to pay or to reimburse the
Collateral Trustee for any and all amounts in respect of all search, filing,
recording and registration fees, taxes, excise taxes and other similar imposts
which may be payable or determined to be payable in respect of the execution,
delivery, performance and enforcement of this Agreement and each Security
Document and agree to save the Collateral Trustee harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.  The obligations of the Grantors under this
Section 5.5 shall survive the termination of the other provisions of this
-----------
Agreement.

          Section 5.6.   Indemnification.
                         ---------------

                 (a)     The Grantors jointly and severally agree to pay,
     indemnify and hold the Trust Company and the Collateral Trustee and each of
     its officers, directors, employees, attorneys and agents harmless from and
     against any and all liabilities, obligations, losses, damages, penalties,
     actions, claims, judgments, suits, costs, expenses or disbursements of any
     kind or nature whatsoever with respect to the execution, delivery,
     enforcement, performance and administration of this Agreement, the Security
     Documents, the Collateral or the Trust Estate, unless arising from the
     gross negligence or willful misconduct of such of the Trust Company or the
     Collateral Trustee or the officers, directors, employees, attorneys or
     agents that are seeking indemnification as found in a final judgment by a
     court of competent jurisdiction. As security for such payment, the
     Collateral Trustee shall have a Lien prior to the Secured Debt upon all
     Collateral and other property and funds properly held or collected by the
     Collateral Trustee as part of the Trust Estate in accordance with this
     Agreement and the other Security Documents.

                 (b)     In any suit, proceeding or action brought by the
     Collateral Trustee

                                      21
<PAGE>

     under or with respect to the Collateral for any sum owing thereunder, or to
     enforce any provisions thereof, or of any of the Security Documents or this
     Agreement, the Grantors jointly and severally agree to save, indemnify and
     keep the Collateral Trustee and the Holders harmless from and against all
     expense, loss or damage suffered by reason of any defense, setoff,
     counterclaim, recoupment or reduction of liability whatsoever of the
     obligor thereunder, arising out of a breach by any of the Grantors of any
     of their respective obligations hereunder or thereunder or arising out of
     any other agreement, indebtedness or liability at any time owing to, or in
     favor of, such obligor or its successors from the Grantors, and all such
     obligations of the Grantors shall be and remain enforceable against and
     only against the Grantors and shall not be enforceable against the
     Collateral Trustee or any Holder.

                 (c)     The agreements in this Section 5.6 shall survive the
                                                -----------
     termination of the other provisions of this Agreement and the resignation
     or removal of the Collateral Trustee.

          Section 5.7.   Further Assurances.
                         ------------------

          At any time and from time to time, upon the written request of the
Collateral Trustee, and at the expense of the applicable Grantor, each Grantor
will promptly execute and deliver any and all such further instruments and
documents and take such further action as the Collateral Trustee may request
pursuant to any Security Document or which the Collateral Trustee may otherwise
reasonably deem or be advised by counsel is necessary or desirable in obtaining
the full benefits of this Agreement and the Security Documents and of the rights
and powers herein and therein granted, including, without limitation, the filing
of any financing or continuation statements or other instruments, or the
delivery of Collateral, to perfect and establish the first-priority nature of
the Liens and security interests granted thereby.  The Grantors shall, not later
than thirty (30) days after the Requisite Holders' or the Collateral Trustee's
request therefor, deliver to the Collateral Trustee an opinion of independent
counsel, addressed to the Collateral Trustee for the benefit of the Holders,
concerning the continued perfection and priority of the Liens and security
interests created by the Security Documents (excluding, however, those Liens and
security interests which, in accordance with the terms of this Agreement and the
Security Documents, have been released); provided, however, that the Collateral
                                         --------  -------
Trustee shall have no obligation to request such opinion from any of the
Grantors and such opinion need not be provided by Grantor more frequently than
annually prior to the occurrence and during the continuance of an Actionable
Default.  The Grantors shall, in all of their published financial statements
customarily prepared with footnotes or filed with the Securities and Exchange
Commission, indicate by footnote or otherwise that the Secured Debt is secured
pursuant to this Agreement and the Security Documents.

                                  ARTICLE VI
                            THE COLLATERAL TRUSTEE

          Section 6.1.   Acceptance of Trust.
                         -------------------

          The Collateral Trustee, for itself and its successors, hereby accepts
the trusts

                                      22
<PAGE>

created by this Agreement upon the terms and conditions hereof, including those
contained in this Article VI.
                  ----------

          Section 6.2.   Exculpatory Provisions.
                         ----------------------

                 (a)     The Collateral Trustee shall not be responsible in any
     manner whatsoever for the correctness of any recitals, statements,
     representations or warranties contained herein or in the Security
     Documents, except for those made by the Collateral Trustee. The Collateral
     Trustee makes no representations as to the value or condition of the Trust
     Estate or any part thereof, or as to the title of any Grantor thereto or as
     to the security afforded by the Security Documents or this Agreement or as
     to the validity, execution, enforceability, legality or sufficiency of this
     Agreement, any Security Document or of the Secured Debt secured hereby and
     thereby, and the Collateral Trustee shall incur no liability or
     responsibility in respect of any such matters, except that the Trust
     Company represents and warrants in its individual capacity that:

                         (i)    the Trust Company is a Delaware banking
          corporation duly organized, validly existing and in good standing
          under the laws of the State of Delaware, holding a valid certificate
          to do business as a Delaware banking corporation with banking
          authority to execute and deliver, and perform its obligations, under
          this Agreement and each other Security Document to which it is a
          party;

                         (ii)   the Trust Company has taken, or caused to be
          taken, all necessary corporate action (including, without limitation,
          the obtaining of any consent or approval of stockholders required by
          law or by its Certificate of Incorporation or By-Laws) to authorize
          the execution and delivery by the Collateral Trustee or the Trust
          Company, as the case may be, of this Agreement and each other Security
          Document to which it is a party;

                         (iii)  the execution and delivery by the Collateral
          Trustee or the Trust Company, as the case may be, of this Agreement
          and the Security Documents to which it is a party, the performance by
          the Collateral Trustee or the Trust Company, as the case may be, of
          its obligations hereunder and thereunder and the consummation on the
          Issuance Date of the transactions contemplated hereby and thereby do
          not and will not (a) violate or contravene any provision of the
          Certificate of Incorporation or By-Laws of the Trust Company, (b)
          violate or contravene any law of the State of Delaware or any United
          States federal law relating to the banking or trust powers of the
          Trust Company, or (c) violate, contravene or constitute any default
          under, or result in the creation of any Lien (other than the Lien of
          the Indenture) upon any property of the Trust Company or any of its
          subsidiaries under, any indenture, mortgage, chattel mortgage, deed of
          trust, conditional sales contract, lease, loan or other agreement,
          instrument or document to which the Trust Company is a party or by
          which the Trust Company or any of its properties is or may be bound or
          affected;

                                      23
<PAGE>

                         (iv)   the execution and delivery by the Collateral
          Trustee or the Trust Company, as the case may be, of this Agreement
          and the Security Documents, the performance by the Collateral Trustee
          or the Trust Company, as the case may be, of its obligations hereunder
          and thereunder and the consummation on the Issuance Date by the
          Collateral Trustee or the Trust Company, as the case may be, of the
          transactions contemplated hereby and thereby do not and will not
          require the consent, approval, or authorization of, or the giving of
          notice to, or the registration with, or the recording or filing of any
          documents with, or the taking of any other action in respect of, (a)
          any trustee or other holder of any debt of the Trust Company or (b)
          any federal Governmental Authority governing the banking or trust
          powers of the Trust Company or any Governmental Authority of the State
          of Delaware;

                         (v)    this Agreement has been duly executed and
          delivered by a duly authorized officer of the Trust Company and, based
          on the opinion of its counsel, constitutes the legal, valid and
          binding obligation of the Trust Company, enforceable against it in
          accordance with its terms and each other Security Document to which
          the Collateral Trustee is a party has been duly executed and delivered
          by a duly authorized officer of the Collateral Trustee and constitutes
          the legal, valid and binding obligation of the Collateral Trustee,
          enforceable against it in accordance with its terms (assuming the due
          authorization, execution and delivery of each of the Security
          Documents by each of the parties thereto other than the Collateral
          Trustee and that such other Security Documents constitute legal, valid
          and binding obligations of each of the parties thereto other than the
          Collateral Trustee);

                         (vi)   there are no pending or, to the knowledge of the
          Trust Company, threatened actions or proceedings against the
          Collateral Trustee or the Trust Company before any court,
          administrative agency or tribunal which, if determined adversely to
          the Collateral Trustee or the Trust Company, as the case may be, would
          materially adversely affect the ability of the Collateral Trustee or
          the Trust Company, as the case may be, to perform its obligations
          under any of this Agreement or under any Security Document.

                    (b)  The Collateral Trustee shall not be responsible for
     insuring the Trust Estate or for the payment of taxes, charges, assessments
     or Liens upon the Trust Estate or otherwise as to the maintenance of the
     Trust Estate, except that in the event the Collateral Trustee enters into
     possession of a part or all of the Trust Estate, the Collateral Trustee
     shall use reasonable efforts to preserve the part in its possession.

                    (c)  The Collateral Trustee shall not be required to
     ascertain or inquire as to the performance by any of the Grantors of any of
     the covenants or agreements contained herein, in any Security Document or
     in any Debt Instrument. Whenever it is necessary, or in the opinion of the
     Collateral Trustee advisable, for the Collateral Trustee to ascertain the
     amount of Secured Debt then held by a Holder, the Collateral Trustee may
     conclusively rely on a certificate of such Holder as to such amount.

                                      24
<PAGE>

                    (d)  The Collateral Trustee shall not be personally liable
     for any acts, omissions, errors of judgment or mistakes of fact or law
     made, taken or omitted to be made or taken by it in accordance with this
     Agreement or any Security Document (including, without limitation, acts,
     omissions, errors or mistakes with respect to the Collateral), except for
     its own gross negligence or willful misconduct (or ordinary negligence in
     the handling of funds) or breach of any of its representations, warranties
     or covenants set forth herein or in the Security Documents. Without
     limiting the generality of the foregoing, the Collateral Trustee shall be
     under no obligation to take any steps necessary to preserve rights in the
     Collateral against any other parties but may do so at its option. The
     Collateral Trustee nevertheless agrees that it will, in its individual
     capacity and at its own cost and expense, promptly take such action as may
     be necessary duly to discharge all Liens on any part of the Collateral, or
     on any properties of the Company assigned, pledged or mortgaged as part of
     the Collateral, which result from claims against it in its individual
     capacity not related to the administration of the Collateral or any other
     transaction under this Agreement or any document included in the
     Collateral.

          Section 6.3.   Delegation of Duties.
                         --------------------

          The Collateral Trustee may execute any of the trusts or powers hereof
and perform any duty hereunder either directly or by or through agents, nominees
or attorneys-in-fact, which may include employees or officers of the Grantors.
The Collateral Trustee shall be entitled to advice of counsel concerning all
matters pertaining to such trusts, powers and duties.  The Collateral Trustee
shall not be responsible for the negligence or misconduct of any agents,
nominees or attorneys-in-fact selected by it without gross negligence or willful
misconduct, as found in a final judgment by a court of competent jurisdiction.

          Section 6.4.   Reliance by Collateral Trustee.
                         ------------------------------

                 (a)     Whenever in the administration of the trusts of this
     Agreement the Collateral Trustee shall deem it necessary or desirable that
     a matter be proved or established with respect to any of the Grantors in
     connection with the taking, suffering or omitting of any action hereunder
     by the Collateral Trustee, such matter (unless other evidence in respect
     thereof is herein specifically prescribed) may be deemed to be conclusively
     provided or established by a certificate of an Authorized Officer of the
     Company delivered to the Collateral Trustee, and such certificate shall be
     full warranty to the Collateral Trustee for any action taken, suffered or
     omitted in reliance thereon; subject, however, to the provisions of Section
                                                                         -------
     6.5.
     ---

                 (b)     The Collateral Trustee may consult with counsel
     reasonably satisfactory to it, accountants or other experts in connection
     with the fulfillment of its duties hereunder, and the Collateral Trustee
     shall be entitled to rely on the opinion of such counsel, accountants or
     other experts in connection with any action taken, omitted to be taken or
     suffered by Collateral Trustee in fulfilling its duties hereunder. The
     Collateral Trustee shall have the right at any time to seek instructions
     concerning the administration of the Trust Estate from the Holders or from
     any court of competent jurisdiction.

                                      25
<PAGE>

                 (c)     The Collateral Trustee may rely, and shall be fully
     protected in relying, upon any resolution, statement, certificate,
     instrument, opinion, report, notice, request, consent, order, bond or other
     paper or document which it has no reason to believe to be other than
     genuine and to have been signed or presented by the proper party or parties
     or, in the case of cables, telecopies and telexes, to have been sent by the
     proper party or parties, provided, however, that for the purpose of
                              --------  -------
     identifying the Holders of Company Note Obligations and the amounts of
     Secured Debt held by them, the information provided by the Company to the
     Collateral Trustee pursuant to Section 5.2 must be confirmed in writing by
                                    -----------
     the Indenture Trustee.  In the absence of its gross negligence or willful
     misconduct, as found in a final judgment by a court of competent
     jurisdiction, the Collateral Trustee may conclusively rely, except as
     provided above, as to the truth of the statements and the correctness of
     the opinions expressed therein, upon any certificates or opinions furnished
     to the Collateral Trustees and conforming to the requirements of this
     Agreement or any Security Document.

                 (d)     If the Collateral Trustee has been requested to take
     action pursuant to Section 2.2 or Section 3.6, the Collateral Trustee shall
                        -----------    -----------
     not be under any obligation to exercise any of the rights or powers vested
     in the Collateral Trustee by this Agreement or any Security Document unless
     the Collateral Trustee shall have been provided adequate security and
     indemnity against the costs, expenses and liabilities which may be incurred
     by it in compliance with such request or direction, including such
     reasonable advances as may be requested by the Collateral Trustee.

          Section 6.5.   Limitations on Duties of Collateral Trustee.
                         -------------------------------------------

                 (a)     The Collateral Trustee shall be obliged to perform such
     duties and only such duties as are specifically set forth in this Agreement
     or in any Security Document, and no implied covenants or obligations shall
     be read into this Agreement or any Security Document against the Collateral
     Trustee.  The Collateral Trustee shall, upon receipt of a Notice of
     Actionable Default and during such time as such Notice of Actionable
     Default shall not have been withdrawn in accordance with the provisions of
     Section 3.1(b), exercise the rights and powers vested in it by this
     --------------
     Agreement or by any Security Document, and the Collateral Trustee shall not
     be liable with respect to any action taken or omitted by it in accordance
     with the direction of the Requisite Holders pursuant to Section 3.6.
                                                             -----------

                 (b)     Except as herein otherwise expressly provided,
     including, without limitation, upon the written request of the Requisite
     Holders pursuant to Section 3.6, the Collateral Trustee shall not be under
                         -----------
     any obligation to take any action which is discretionary with the
     Collateral Trustee under the provisions hereof or under any Security
     Document. The Collateral Trustee shall furnish to each Holder promptly upon
     receipt thereof a copy of each certificate or other paper furnished to the
     Collateral Trustee by any of the Grantors under or in respect of this
     Agreement, any Security Document or any of the Trust Estate, unless by the
     express terms of any Security Document a copy of the same is required to be
     furnished by some other Person directly to the Holders, or the Collateral
     Trustee shall have determined that the same has already been so furnished.

                                      26
<PAGE>

          Section 6.6.   Moneys To Be Held in Trust.
                         --------------------------

          All moneys received by the Collateral Trustee under or pursuant to any
provision of this Agreement or any Security Document shall be held in trust for
the purposes for which they were paid or are held.

          Section 6.7.  Resignation and Removal of the Collateral Trustee.
                        -------------------------------------------------

                 (a)     The Collateral Trustee may at any time, by giving sixty
     (60) days' prior written notice to the Company and the Holders, resign and
     be discharged of the responsibilities hereby created, such resignation to
     become effective upon the appointment of a successor Collateral Trustee by
     the Requisite Holders and the acceptance of such appointment by such
     successor Collateral Trustee. The Collateral Trustee may be removed at any
     time and a successor Collateral Trustee appointed by the affirmative vote
     of the Requisite Holders; provided that the Collateral Trustee shall be
                               -------- ----
     entitled to its fees and expenses and indemnity in its capacity as
     Collateral Trustee through the date of removal.  If no successor Collateral
     Trustee shall be appointed and approved within sixty (60) days from the
     date of the giving of the aforesaid notice of resignation or within sixty
     (60) days from the date of such removal, the Collateral Trustee, as
     applicable, shall, or any Holder may, apply to any court of competent
     jurisdiction to appoint a successor Collateral Trustee or Collateral
     Trustees to act until such time, if any, as a successor Collateral Trustee
     or Collateral Trustees shall have been appointed as above provided.  Any
     successor Collateral Trustee or Collateral Trustees so appointed by such
     court shall immediately and without further act be superseded by any
     successor Collateral Trustee or Collateral Trustees approved by the
     Requisite Holders as above provided.

                 (b)     If at any time the Collateral Trustee shall resign, be
     removed or otherwise become incapable of acting, or if at any time a
     vacancy shall occur in the office of the Collateral Trustee for any other
     cause, a successor Collateral Trustee or Collateral Trustees may be
     appointed by the Requisite Holders, and the powers, duties, authority and
     title of the predecessor Collateral Trustee or Collateral Trustees
     terminated and canceled without procuring the resignation of such
     predecessor Collateral Trustee or Collateral Trustees, and without any
     other formality (except as may be required by applicable law) than the
     appointment and designation of a successor Collateral Trustee or Collateral
     Trustees in writing, duly acknowledged, delivered to the predecessor
     Collateral Trustee or Collateral Trustees and the Company, and filed for
     record in each public office, if any, in which this Agreement is required
     to be filed.

                 (c)     The appointment and designation referred to in Section
                                                                        -------
     6.7(b) shall, after any required filing, be full evidence of the right and
     ------
     authority to make the same and all of the facts therein recited, and this
     Agreement shall vest in such successor Collateral Trustee or Collateral
     Trustees, without any further act, deed or conveyance, all of the estate
     and title of its predecessor or their predecessors, and upon any required
     filing for record the successor Collateral Trustee or Collateral Trustees
     shall become fully vested with all the estates, properties, rights, powers,
     trusts, duties, authority and title of

                                      27
<PAGE>

     its predecessor or their predecessors; but such predecessor or predecessors
     shall, nevertheless, on the written request of the Requisite Holders, the
     Company, or any successor Collateral Trustee or Collateral Trustees,
     execute and deliver an instrument transferring to such successor or
     successors all the estates, properties, rights, powers, trusts, duties,
     authority and title of such predecessor or predecessors hereunder and shall
     deliver all securities, instruments and moneys held by it or them to such
     successor Collateral Trustee or Collateral Trustees. Should any deed,
     conveyance or other instrument in writing from any of the Grantors be
     required by any successor Collateral Trustee or Collateral Trustees for
     more fully and certainly vesting in such successor Collateral Trustee or
     Collateral Trustees the estates, properties, rights, powers, trusts,
     duties, authority and title vested or intended to be vested in the
     predecessor Collateral Trustee or Collateral Trustees, any and all such
     deeds, conveyances and other instruments in writing shall, on request of
     such successor Collateral Trustee or Collateral Trustees, be so executed,
     acknowledged and delivered.

                 (d)     Any required filing for record of the instrument
     appointing a successor Collateral Trustee or Collateral Trustees as
     hereinabove provided shall be at the expense of the Company. The
     resignation of any Collateral Trustee or Collateral Trustees and the
     instrument or instruments removing any Collateral Trustee or Collateral
     Trustees, together with all other instruments, deeds and conveyances
     provided for in this Article VI shall, if required by law, be forthwith
                          ----------
     recorded, registered and filed by and at the expense of the Company,
     wherever this Agreement is recorded, registered and filed.

          Section 6.8.   Status of Successors to the Collateral Trustee.
                         ----------------------------------------------

          Every successor to Wilmington Trust Company (or any of its successors
appointed pursuant to Section 6.7) and every corporation resulting from a merger
                      -----------
or consolidation pursuant to Section 6.9 shall be a bank or trust company in
                             -----------
good standing and having power so to act, incorporated under the laws of the
United States or any State thereof or the District of Columbia, and having its
principal corporate trust office within the forty-eight (48) contiguous States,
and shall also have capital, surplus and undivided profits of not less than
$100,000,000.

          Section 6.9.   Merger of the Collateral Trustee.
                         --------------------------------

          Any corporation into which the Collateral Trustee shall be merged, or
with which it shall be consolidated, or any corporation resulting from any
merger or consolidation to which the Collateral Trustee shall be a party, shall
be the Collateral Trustee under this Agreement without the execution or filing
of any paper or any further act on the part of the parties hereto.

          Section 6.10.  Additional Co-Collateral Trustees; Separate Collateral
                         ------------------------------------------------------
Trustees.
--------

                 (a)     If at any time or times it shall be necessary or
     prudent in order to conform to any law of any jurisdiction in which any of
     the Collateral shall be located or deemed located, or the Collateral
     Trustee shall be advised by counsel, satisfactory to it, that it is
     necessary or prudent in the interest of the Holders, or the Requisite
     Holders shall

                                      28
<PAGE>

     in writing so request, or the Collateral Trustee shall deem it desirable
     for its own protection in the performance of its duties hereunder, the
     Collateral Trustee and the Grantors shall execute and deliver all
     instruments and agreements necessary or proper to constitute another bank
     or trust company, or one or more persons approved by the Collateral Trustee
     and the Grantors either to act as co-Collateral Trustee or co-Collateral
     Trustees of all or any of the Collateral, jointly with the Collateral
     Trustee originally named herein or any successor or successors, or to act
     as separate Collateral Trustee or Collateral Trustees of any such property.
     In the event the Grantors shall not have joined in the execution of such
     instruments and agreements within ten (10) days after the receipt of a
     written request from the Collateral Trustee so to do, or in case an
     Actionable Default shall have occurred and be continuing, the Collateral
     Trustee may act under the foregoing provisions of this Section 6.10 without
                                                            ------------
     the concurrence of the Grantors, and the Grantors hereby irrevocably
     appoint the Collateral Trustee as their agent and attorney to act for them
     under the foregoing provisions of this Section 6.10 in either of such
                                            ------------
     contingencies.

               (b)  Every separate Collateral Trustee and every co-Collateral
     Trustee, other than any Collateral Trustee which may be appointed as
     successor to Wilmington Trust Company, shall, to the extent permitted by
     law, be appointed and act and be such, subject to the following provisions
     and conditions, namely:

                    (i)    all rights, powers, duties and obligations conferred
          upon the Collateral Trustee in respect of the custody, control and
          management of moneys, papers, instruments or securities shall be
          exercised solely by Wilmington Trust Company, or its successors as
          Collateral Trustee hereunder;

                    (ii)   all rights, powers, duties and obligations conferred
          or imposed upon the Collateral Trustee hereunder shall be conferred or
          imposed and exercised or performed by the Collateral Trustee and such
          separate Collateral Trustee or separate Collateral Trustees or co-
          Collateral Trustee or co-Collateral Trustees, jointly, as shall be
          provided in the instrument appointing such separate Collateral Trustee
          or separate Collateral Trustees or co-Collateral Trustee or co-
          Collateral Trustees, except to the extent that under any law of any
          jurisdiction in which any particular act or acts are to be performed,
          the Collateral Trustee shall be incompetent or unqualified to perform
          such act or acts, in which event such rights, powers, duties and
          obligations shall be exercised and performed by such separate
          Collateral Trustee or separate Collateral Trustees or co-Collateral
          Trustee or co-Collateral Trustees;

                    (iii)  no power given hereby to, or which it is provided
          hereby may be exercised by, any such co-Collateral Trustee or co-
          Collateral Trustees or separate Collateral Trustee or separate
          Collateral Trustees, shall be exercised hereunder by such co-
          Collateral Trustee or co-Collateral Trustees or separate Collateral
          Trustee or separate Collateral Trustees, except jointly with, or with
          the consent in writing of, the Collateral Trustee, anything herein
          contained to the contrary notwithstanding;

                                      29
<PAGE>

                    (iv)   no Collateral Trustee hereunder shall be personally
          liable by reason of any act or omission of any other Collateral
          Trustee hereunder; and

                    (v)   the Grantors and Collateral Trustee, at any time by an
          instrument in writing, executed by them jointly, may accept the
          resignation of or remove any such separate Collateral Trustee or co-
          Collateral Trustee, and in that case, by an instrument in writing
          executed by the Grantors and the Collateral Trustee jointly, may
          appoint a successor to such separate Collateral Trustee or co-
          Collateral Trustee, as the case may be, anything herein contained to
          the contrary notwithstanding.  In the event that the Grantors shall
          not have joined in the execution of any instrument within ten (10)
          days after the receipt of a written request from the Collateral
          Trustee so to do, or in case an Actionable Default shall have occurred
          and be continuing, the Collateral Trustee shall have the power to
          accept the resignation of or remove any such separate Collateral
          Trustee or co-Collateral Trustee and to appoint a successor without
          the concurrence of the Grantors, the Grantors hereby irrevocably
          appointing the Collateral Trustee their agent and attorney to act for
          them in such connection in either of such contingencies.

In the event that the Collateral Trustee shall have appointed a separate
Collateral Trustee or separate Collateral Trustees or co-Collateral Trustee or
co-Collateral Trustees as above provided, it may at any time, by an instrument
in writing, accept the resignation of or remove any such separate Collateral
Trustee or co-Collateral Trustee, the successor to any such separate Collateral
Trustee or co-Collateral Trustee to be appointed by the Grantors and the
Collateral Trustee, or by the Collateral Trustee alone, as provided in this
Section 6.10.
------------

                                  ARTICLE VII
                             RELEASE OF COLLATERAL

          Section 7.1.   Conditions to Full Release.
                         --------------------------

          Subject to this Section 7.1, all the Collateral shall be released on
                          -----------
the earlier of:

                 (a)     the date on which (i) all the Company Note Obligations
     and Holdings Note Obligations shall have been Satisfied, or in the case of
     such Secured Debt which shall then not be due and payable, secured to the
     satisfaction of the Holders thereof and (ii) all accrued and unpaid
     Collateral Trustee's Fees shall have been Satisfied; or

                 (b)     the date on which (i) the Company shall have received
     written instructions from the Requisite Holders instructing the Company to
     direct the Collateral Trustee to release the Collateral, and (ii) all
     accrued and unpaid Collateral Trustee's Fees shall have been Satisfied.

          Section 7.2.   Procedure for Full Release.
                         --------------------------

          Upon the occurrence of the events specified in either Section 7.1(a)
                                                                --------------
or Section 7.1(b), the Company, on behalf of the Grantors, shall deliver a
   --------------
Discharge Notice to the

                                      30
<PAGE>

Collateral Trustee (with a copy thereof given to the Indenture Trustee, the
Company Noteholders and the Holdings Noteholders). Upon receipt by the
Collateral Trustee of a Discharge Notice certifying that events set forth in
Section 7.1(a) or Section 7.1(b) have occurred, the Collateral Trustee shall
--------------    --------------
request the Requisite Holders at such time to confirm in writing that each of
the events described in Section 7.1(a)(i) or Section 7.1(b)(i) has occurred.
                        -----------------    -----------------

          Section 7.3.   Effective Time of Full Release.
                         ------------------------------

                 (a)     The Collateral Trustee shall release the Collateral
     upon receipt by the Collateral Trustee of (i) a Discharge Notice and (ii)
     the written confirmation from the Requisite Holders as specified in Section
                                                                         -------
     7.2.  The Collateral Trustee shall promptly notify the Company, the
     ---
     Indenture Trustee, the Company Noteholders and the Holdings Noteholders, in
     the manner specified in Section 8.2, when the release of the Collateral is
                             -----------
     effective.

                 (b)     When the release of the Collateral is effective, all
     right, title and interest of the Collateral Trustee in, to and under the
     Trust Estate, the Collateral and the Security Documents shall terminate and
     shall revert to the Grantors or their respective successors and assigns,
     and the estate, right, title and interest of the Collateral Trustee therein
     shall thereupon cease, terminate and become void. In such case, the
     Grantors shall deliver to the Collateral Trustee one or more instruments of
     discharge, satisfaction and release in form reasonably satisfactory to the
     Collateral Trustee, and, upon the written request of the Company or its
     successors or assigns, and at the cost and expense of the Company or its
     successors or assigns, the Collateral Trustee shall promptly execute a
     satisfaction of the Security Documents and such instruments as are
     necessary or desirable to terminate and remove of record any documents
     constituting public notice of the Security Documents and the Liens and
     assignments granted thereunder and shall assign and transfer, or cause to
     be assigned and transferred, and shall deliver or cause to be delivered to
     each of the Grantors, all property, including all moneys, instruments and
     securities of each Grantor, then held by the Collateral Trustee. The
     cancellation and satisfaction of the Security Documents shall be without
     prejudice to the rights of the Collateral Trustee or any successor
     Collateral Trustee to charge and be reimbursed for any expenditures which
     it may thereafter incur in connection therewith.

          Section 7.4.   Partial Release of Collateral.
                         -----------------------------

                 (a)     Upon the sale, transfer or other disposition of any
     items constituting Collateral hereunder in accordance with the terms and
     conditions of the each Debt Instrument or any Security Document (such
     Collateral, the "Released Collateral"), and upon receipt by the Collateral
     Trustee of an Officer's Certificate from the applicable Grantor (i)
     identifying such Released Collateral, (ii) certifying that any amounts then
     due and payable under the Debt Instruments and any Security Document have
     been in paid in full, and (iii) certifying that no Default or Event of
     Default has occurred and is continuing or, as a result of such release,
     will occur, such Released Collateral shall be released from the Lien
     granted under the Debt Instruments and the Security Documents. Following
     such release, the Collateral Trustee shall promptly notify the Company, the
     Indenture

                                      31
<PAGE>

     Trustee, the Company Noteholders and the Holdings Noteholders, in the
     manner specified in Section 8.2, of the release of the Released Collateral.
                         -----------
     Notwithstanding the foregoing, for any sale, transfer or other disposition
     of a "Part" (as defined in the Aircraft Mortgage) that complies with the
     requirements of Section 11.01(b)(i) or (ii) of the Aircraft Mortgage, no
     such Officer's Certificate shall be required, and the Lien granted under
     the Aircraft Mortgage with respect to any such item shall be automatically
     released without further act with respect to such item, and the Collateral
     Trustee shall not be required to provide notice of such automatic release
     as required in the preceding sentence.

                 (b)     When the release of such Released Collateral is
     effective, all right, title and interest of the Collateral Trustee in, to
     and under the Trust Estate, the Collateral and the Security Documents, in
     each case with respect to the Released Collateral only, shall terminate and
     shall revert to the Grantors or their respective successors and assigns,
     and the estate, right, title and interest of the Collateral Trustee in the
     Released Collateral shall thereupon cease, terminate and become void. In
     such case, the Grantors shall deliver to the Collateral Trustee one or more
     instruments of discharge, satisfaction and release with respect to the
     Released Collateral only in form reasonably satisfactory to the Collateral
     Trustee, and, upon the written request of the Company or its successors or
     assigns, and at the cost and expense of the Company or its successors or
     assigns, the Collateral Trustee shall promptly execute such instruments as
     are necessary or desirable to terminate and remove of record any documents
     constituting public notice of the Security Documents and the Liens and
     assignments granted thereunder, in each case with respect to the Released
     Collateral, and shall assign and transfer, or cause to be assigned and
     transferred, and shall deliver or cause to be delivered to each of the
     Grantors, all property, including all moneys, instruments and securities of
     each Grantor, then held by the Collateral Trustee in respect of the
     Released Collateral.

                                 ARTICLE VIII
                                 MISCELLANEOUS

          Section 8.1.   Amendments, Supplements, and Waivers.
                         ------------------------------------

                 (a)     With the prior written consent of the Requisite
     Holders, the Collateral Trustee and the Grantors may, from time to time,
     enter into written agreements supplemental hereto for the purpose of adding
     to or waiving any provision of this Agreement or any of the Security
     Documents or amending the definition of any capitalized term used herein or
     therein, as such capitalized term is used herein or therein, or changing in
     any manner the rights of the Collateral Trustee, the Holders or the
     Grantors hereunder or thereunder; provided, however, that no such
                                       --------  -------
     supplemental agreement shall:

                         (i)    modify the definition of Requisite Holders
          without the written consent of (A) until all of the Company Note
          Obligations shall have been Satisfied, all Holders of Company Note
          Obligations and (B) on and after the date the Company Note Obligations
          shall have been Satisfied, all Holders of Holdings Note Obligations;

                                      32
<PAGE>

                         (ii)   modify the definition of Secured Debt without
          the written consent of all Holders;

                         (iii)  modify the terms of any provision contained
          herein requiring the vote or approval of Holders in addition to the
          Requisite Holders without the written consent of all such additional
          Holders; or

                         (iv)   amend, modify or waive any provision of this
          Agreement or any Security Document so as to adversely affect any of
          the Collateral Trustee's rights, immunities or indemnities hereunder
          or thereunder or enlarge its duties hereunder or thereunder, without
          the written consent of the Collateral Trustee.

     Any such supplemental agreement shall be binding upon the Grantors, the
     Holders and the Collateral Trustee and their respective successors and
     assigns.  The Collateral Trustee shall not enter into any such supplemental
     agreement unless it shall have received a certificate signed by an
     Authorized Officer of the Company to the effect that such supplemental
     agreement will not result in a breach of any provision or covenant
     contained in any Debt Instrument.  Prior to executing any amendment
     pursuant to the terms of this Section 8.1(a), the Collateral Trustee shall
                                   --------------
     be entitled to receive an opinion of counsel to the effect that the
     execution of such document is authorized hereunder and that all conditions
     precedent have been met.  The Collateral Trustee may, but shall not be
     obligated to, enter into an amendment or supplement which adversely affects
     its rights, duties or immunities hereunder.

                 (b)     Without the consent of the Holders, the Grantors and
     the Collateral Trustee, at any time and from time to time, may, with the
     consent of the Grantor Representative, enter into additional Security
     Documents or one or more agreements supplemental hereto or to any Security
     Document, in form satisfactory to the Collateral Trustee:

                         (i)   to add to the covenants of the Grantors for the
          benefit of the Holders;

                         (ii)   to mortgage, pledge or grant a security interest
          in favor of the Collateral Trustee as additional security for the
          Secured Debt pursuant to any Security Document; or

                         (iii)  to cure any ambiguity, to correct or supplement
          any provision herein or in any Security Document which may be
          defective or inconsistent with any other provision herein or therein;
          provided, however, that any such action contemplated in this clause
          --------  -------                                            ------
          (iii) shall not adversely affect the interests of the Holders in any
          -----
          manner whatsoever.

                 (c)     Without the consent of the Holders, the Grantors and
     the Collateral Trustee may, at the direction of the Grantor Representative
     and at any time and from time to time, add additional Persons ("Additional
     Grantors") to this Agreement, or any of the

                                      33
<PAGE>

     Security Documents, and such additional provisions hereto and thereto as
     may be necessary or appropriate to effect the grant by such Additional
     Grantors of Liens on any assets of such Additional Grantors as additional
     security for the Secured Debt.

          Section 8.2.  Notices.
                        -------

          All notices, requests, demands and other communications provided for
or permitted hereunder shall be in writing (including telex and telecopy
communications), shall be sent by mail, telex, telecopier or hand delivery and,
except as otherwise provided in this Agreement, the cost thereof shall be for
the sole accounts of the Company and shall be added to the Secured Debt:

               (a) if to the Company or any of the Grantors, at:  AirTran
     Airways, Inc., 9955 AirTran Boulevard, Orlando, FL 32827, Attention:
     Treasurer, Facsimile: (407) 251-5567; or at such other address as shall be
     designated by it in a written notice to the Collateral Trustee and the
     Holders;

               (b) If to the Collateral Trustee, at: Wilmington Trust Company,
     Rodney Square North, 1100 North Market Street, Wilmington, Delaware,
     Attention: Corporate Trust Administration, Facsimile: (302) 651-8882; or at
     such other address as shall be designated by it in a written notice to the
     Company and the Holders;

               (c) If to the Indenture Trustee, at:  Wilmington Trust Company,
     Rodney Square North, 1100 North Market Street, Wilmington, Delaware,
     Attention: Corporate Trust Administration, Facsimile: (302) 651-8882; or at
     such other address as shall be designated by the Indenture Trustee in a
     written notice to the Collateral Trustee;

               (d) If to the Holdings Noteholders, to Boeing Capital Loan
     Corporation c/o Entity Services, 2325-B Renaissance Drive, Suite 8, Las
     Vegas, Nevada 89119, Attention: Ms. Kristine Epps, Facsimile: (702) 966-
     4247; with a copy to Boeing Capital Loan Corporation, 500 Naches Ave. S.W.,
     3/rd/ Floor, Renton, Washington 98055, Attention: Legal Department,
     Facsimile: (425) 393-2903; with a copy to Sidley & Austin, 555 West Fifth
     Street, Los Angeles, CA 90013, Attention: Robert W. Kadlec, Esq.,
     Facsimile: (213) 896-6600; or at such other address as shall be designated
     by the "Required Holders" (as defined in the Holdings Note Purchase
     Agreement) ( in a written notice to the Collateral Trustee.

All such notices, requests, demands and communications shall, to be effective
hereunder, be in writing or by a telecommunications device capable of creating a
written record, and shall be deemed to have been given or made when delivered by
hand or four (4) days after its deposit in the mail, first class or air postage
prepaid, (except that any notice to the Company or any Grantor by mail that an
Actionable Default has occurred or given by the Company or any Grantor pursuant
to Section 7.2 shall be sent by registered or certified mail) or in the case of
   -----------
notice by such a telecommunications device, when properly transmitted; provided,
                                                                       --------
however, that any notice, request, demand or other communication to the
-------
Collateral Trustee shall not be effective until received.

                                      34
<PAGE>

          Section 8.3.  Headings.
                        --------

          Section, subsection and other headings used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.

          Section 8.4.  Severability.
                        ------------

          Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall not invalidate 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;

provided that this Agreement shall be construed so as to give effect to the
-------- ----
intention expressed in Section 3.12.
                       ------------

          Section 8.5.  Treatment of Payee or Indorsee by Collateral Trustee.
                        ----------------------------------------------------

                    (a) The Collateral Trustee may treat the registered holder
     of any registered note, and the payee or indorsee of any note or debenture
     which is not registered, as the absolute owner thereof for all purposes
     hereunder and shall not be affected by any notice to the contrary, whether
     such promissory note or debenture shall be past due or not.

                    (b) Any Person which shall be designated as the duly
     authorized representative of one or more Holders to act as such in
     connection with any matters pertaining to this Agreement or any Security
     Document or the Collateral shall present to the Collateral Trustee such
     documents, including, without limitation, opinions of counsel, as the
     Collateral Trustee may reasonably request, in order to demonstrate to the
     Collateral Trustee the authority of such Person to act as the
     representative of such Holders.

          Section 8.6.  Dealing with the Grantors.
                        -------------------------

                    (a) Upon any application or demand by any of the Grantors to
     the Collateral Trustee to take or permit any action under any of the
     provisions of this Agreement or any Security Document, such Grantor shall
     furnish to the Collateral Trustee a certificate signed by an Authorized
     Officer of such Grantor stating that all conditions precedent, if any,
     provided for in this Agreement or any Security Document relating to the
     proposed action have been complied with, except that in the case of any
     such application or demand as to which the furnishing of such documents is
     specifically required by any provision of this Agreement or any Security
     Document relating to such particular application or demand, no additional
     certificate or opinion need be furnished.

                    (b) Any opinion of counsel may be based, insofar as it
     relates to factual matters, upon a certificate of Authorized Officers of
     the applicable Grantor delivered to the Collateral Trustee.

          Section 8.7.  Binding Effect.
                        --------------

                    (a) This Agreement shall be binding upon and inure to the
     benefit of

                                      35
<PAGE>

     each of the parties hereto and shall inure to the benefit of the Holders
     and their respective successors and assigns, and nothing herein or in any
     Security Document is intended or shall be construed to give any other
     Person any right, remedy or claim under, to or in respect of this
     Agreement, any Security Document, the Collateral or the Trust Estate.

                    (b) The Grantors jointly and severally agree to pay the
     Collateral Trustee's Fees on demand.  In the event the Grantors fail to pay
     the Collateral Trustee's Fees and the Collateral Trustee's Fees cannot be
     paid out of amounts received in the Collateral Account, each Holder agrees
     to pay the Collateral Trustee's Fees, ratably in accordance with the
     proportion of the Secured Debt held by it.

          Section 8.8.  Conflict with Other Agreements.
                        ------------------------------

          The parties agree that in the event of any conflict between the
provisions of this Agreement and the provisions of any of the Security
Documents, the provisions of this Agreement shall control.

          Section 8.9.  Governing Law.
                        -------------

          The provisions of this Agreement shall be construed and interpreted
and the rights of the parties shall be determined in accordance with the laws of
the State of New York, as applied to contracts made and performed within the
State of New York, including, without limitation, Sections 5-1401 and 5-1402 of
the New York General Obligations Laws and New York Civil Practice Laws and Rules
327(b).  Each Grantor hereby irrevocably submits to the jurisdiction of any New
York state court sitting in the Borough of Manhattan in The City of New York or
any federal court sitting in the Borough of Manhattan in The City of New York in
respect of any suit, action or proceeding arising out of or relating to this
Agreement or any Security Document, and irrevocably accepts for itself and in
respect of its property, generally and unconditionally, jurisdiction of the
aforesaid courts.  Each Grantor irrevocably waives, to the fullest extent it may
effectively do so under applicable law, trial by jury and any objection that it
may now or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit, action or
proceeding brought in such court has been brought in an inconvenient forum.
Each Grantor irrevocably consents, to the fullest extent it may effectively do
so under applicable law, to the service of process of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the Issuer at the address set
forth herein, such service to become effective thirty (30) days after such
mailing.  Nothing herein shall affect the right of the Collateral Trustee or any
Holder to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against any Grantor in any other
jurisdiction.

          Section 8.10.  Counterparts.
                         ------------

          This Agreement may be executed in separate counterparts, each of which
shall be an original and all of which taken together shall constitute one and
the same instrument.

                                      36
<PAGE>

          Section 8.11.  Company as Agent for Grantors.
                         -----------------------------

          Each Grantor hereby designates and appoints the Company as the agent
of such Grantor, and each Grantor irrevocably authorizes the Company, to execute
and deliver any notice required hereunder on behalf of such Grantor.  Any notice
required to be delivered to any Grantor hereunder shall be deemed delivered to
such Grantor when any such notice is delivered to the Company in accordance with
the terms hereof.  The Company hereby accepts such designation as agent for the
Grantors until all Secured Debt has been Satisfied and this Agreement has been
terminated.  Each Grantor agrees not to revoke, modify or withdraw such
designation until all Secured Debt has been Satisfied and this Agreement has
been terminated.

          Section 8.12.  No Strict Construction.
                         ----------------------

          The parties hereto have participated jointly in the negotiation and
drafting of this Agreement.  In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

          Section 8.13.  Senior Secured Credit Facility.
                         ------------------------------

          The Company intends to secure financing from a senior secured
lender(s) after the date hereof.  Accordingly, the parties hereby agree to amend
and restate this Agreement so that such senior secured lender(s) rank senior to
the Notes in right of payment on the Collateral under Section 4.4 hereof and
otherwise pari passu with the Notes; provided, that such senior secured
lender(s) shall have no right, title or interest in and to that certain Purchase
Agreement DAC 95-40-D, dated December 6, 1995, between the Company (as successor
to ValuJet Airlines, Inc.) and McDonnell Douglas Corporation, a Maryland
corporation and a wholly owned subsidiary of The Boeing Company, in respect of
the purchase and sale of the Boeing model 717-200 aircraft described therein,
and any advance payments made by the Company and held by The Boeing Company with
respect thereto.  Such amendment shall contain terms and conditions regarding
intercreditor and related matters reflecting the foregoing priority scheme and
otherwise normal and customary in transactions of this nature and reasonably
acceptable to the parties.  Such amendment shall require the consent of a
majority in interest of the Holders of the Notes, which consent shall not be
unreasonably withheld, delayed or conditioned.

                 [Remainder of this Page Intentionally Blank.]

                                      37
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be duly executed by their respective officers thereunto
duly authorized as of the day and year first above written.

                                AIRTRAN AIRWAYS, INC.

                                By:
                                Name:
                                Title:

                                WILMINGTON TRUST COMPANY,
                                not in its individual capacity (except as
                                otherwise expressly provided in this Agreement)
                                but solely as Collateral Trustee

                                By:
                                Name:
                                Title:

                                      38
<PAGE>

Acknowledged and Agreed:

WILMINGTON TRUST COMPANY,
as the Indenture Trustee

By:_____________________________
Title:

BOEING CAPITAL LOAN CORPORATION,
as the initial Holder under the
Holdings Note Purchase Agreement

By:_____________________________
Title:

                                      39
<PAGE>

                          COLLATERAL TRUST AGREEMENT

                                 by and among

                            AIRTRAN AIRWAYS, INC.,

                                      and

                           WILMINGTON TRUST COMPANY,
         not in its individual capacity (except as otherwise expressly
         provided in this Agreement) but solely as Collateral Trustee

                          Dated as of April 12, 2001

                                      40
<PAGE>

                               TABLE OF CONTENTS

                                   ARTICLE I
                         DEFINITIONS AND OTHER MATTERS

<TABLE>
<S>                                                                                   <C>
Section 1.1.    Defined Terms.                                                         2
Section 1.2.    References to this Agreement.                                          8
Section 1.3.    Payments and Distributions.                                            8
Section 1.4.    Tense.                                                                 8
Section 1.5.    Uniform Commercial Code Terms.                                         8

                                   ARTICLE II
         CERTAIN OBLIGATIONS AND DUTIES OF THE COLLATERAL TRUSTEE AND
                        THE COMPANY; POWERS OF ATTORNEY

Section 2.1.    Authorization to Execute Security Documents.                           8
Section 2.2.    Actions.                                                               9
Section 2.3.    Additional Security Documents.                                         9
Section 2.4.    Powers of Attorney.                                                   11

                                  ARTICLE III
                         ACTIONABLE DEFAULTS; REMEDIES

Section 3.1.     Actionable Default.                                                  11
Section 3.2.     Remedies.                                                            12
Section 3.3.     Right to Initiate Judicial Proceedings, etc.                         13
Section 3.4.     Appointment of a Receiver.                                           13
Section 3.5.     Exercise of Powers.                                                  13
Section 3.6.     Control by the Requisite Holders.                                    13
Section 3.7.     Remedies Not Exclusive.                                              14
Section 3.8.     Waiver of Certain Rights.                                            15
Section 3.9.     Limitation on Collateral Trustee's Duties in Respect of Collateral.  15
Section 3.10.    Limitation by Law.                                                   15
Section 3.11.    Absolute Rights of Holders.                                          15
Section 3.12.    Priority of Security; No Challenge.                                  16

                                   ARTICLE IV
                   COLLATERAL ACCOUNT; APPLICATION OF MONEYS

Section 4.1.    The Collateral Account.                                               16
Section 4.2.    Grant of Security Interest; Control of Collateral Account.            17
Section 4.3.    Investment of Funds Deposited in Collateral Account.                  17
Section 4.4.    Application of Moneys.                                                18
</TABLE>

                                   ARTICLE V
                      AGREEMENTS WITH COLLATERAL TRUSTEE

                                      41
<PAGE>

<TABLE>
<S>                                                                                   <C>
Section 5.1.    Delivery of Debt Instruments.                                         19
Section 5.2.    Information as to Holders.                                            19
Section 5.3.    Compensation and Expenses.                                            20
Section 5.4.    Stamp and Other Similar Taxes.                                        20
Section 5.5.    Filing Fees, Excise Taxes, etc.                                       20
Section 5.6.    Indemnification.                                                      21
Section 5.7.    Further Assurances.                                                   21

                                   ARTICLE VI
                             THE COLLATERAL TRUSTEE

Section 6.1.     Acceptance of Trust.                                                 22
Section 6.2.     Exculpatory Provisions.                                              22
Section 6.3.     Delegation of Duties.                                                24
Section 6.4.     Reliance by Collateral Trustee.                                      25
Section 6.5.     Limitations on Duties of Collateral Trustee.                         26
Section 6.6.     Moneys To Be Held in Trust.                                          26
Section 6.7.     Resignation and Removal of the Collateral Trustee.                   26
Section 6.8.     Status of Successors to the Collateral Trustee.                      27
Section 6.9.     Merger of the Collateral Trustee.                                    28
Section 6.10.    Additional Co-Collateral Trustees; Separate Collateral Trustees.     28

                                  ARTICLE VII
                             RELEASE OF COLLATERAL

Section 7.1.    Conditions to Release.                                                30
Section 7.2.    Procedure for Release.                                                30
Section 7.3.    Effective Time of Release.                                            30
Section 7.4.    Partial Release of Collateral.                                        31

                                 ARTICLE VIII
                                 MISCELLANEOUS

Section 8.1.     Amendments, Supplements, and Waivers.                                32
Section 8.2.     Notices.                                                             33
Section 8.3.     Headings.                                                            34
Section 8.4.     Severability.                                                        34
Section 8.5.     Treatment of Payee or Indorsee by Collateral Trustee.                34
Section 8.6.     Dealing with the Grantors.                                           34
Section 8.7.     Binding Effect.                                                      35
Section 8.8.     Conflict with Other Agreements.                                      35
Section 8.9.     Governing Law.                                                       35
Section 8.10.    Counterparts.                                                        36
Section 8.11.    Company as Agent for Grantors.                                       36
Section 8.12.    No Strict Construction.                                              36
</TABLE>
                                      42
<PAGE>

Section 8.13.    Senior Secured Credit Facility.                             36
<PAGE>

                                   EXHIBIT D

                     FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>

                                                                  Executive Copy

                            AIRTRAN HOLDINGS, INC.

                               CONVERTIBLE NOTES

                                      and

                             WARRANTS TO PURCHASE
                            SHARES OF COMMON STOCK

                         REGISTRATION RIGHTS AGREEMENT

                                                                  April 12, 2001

BOEING CAPITAL LOAN CORPORATION
c/o Entity Services
2325-B Renaissance Drive, Suite 8
Las Vegas, NV  89119

Ladies and Gentlemen:

          Pursuant to (i) a Purchase Agreement (the "Purchase Agreement") dated
                                                     ------------------
April 12, 2001 by and among AirTran Airways, Inc. ("Airways"), AirTran Holdings,
                                                    -------
Inc. (the "Issuer") and Boeing Capital Loan Corporation (the "Initial
           ------                                             -------
Purchaser") and (ii) a Note Agreement (the "Note Agreement") dated as of April
---------                                   --------------
12, 2001 by and between the Issuer and the Initial Purchaser, the Issuer is
issuing to the Initial Purchaser 166,400 warrants (the "Warrants") to purchase
                                                        --------
an aggregate of three million (3,000,000) shares of its common stock, par value
$0.001 per share (the "Common Stock") and $17,500,000 aggregate principal amount
                       ------------
of its 12.27% Series B Senior Secured Convertible Notes due April 12, 2009 (the
"Convertible Notes").  As an inducement to the Initial Purchaser to enter into
 -----------------
the Purchase Agreement and the Note Agreement, the Issuer agrees with the
Initial Purchaser, for the equal and ratable benefit of the Holders of the
Warrants and the Convertible Notes, as follows:

1.   Definitions

     Capitalized terms not otherwise defined herein shall have the respective
meanings ascribed to them in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:

     Agreement: This Registration Rights Agreement, dated as of the Closing
Date, among the Issuer and the Initial Purchaser.

     Business Day: A day that is not a Saturday, a Sunday or a day on which
banking

                                       1
<PAGE>

institutions in the City of New York are authorized or required by law or
executive order to be closed.

     Closing Date:  April 12, 2001.

     Convertible Notes: See the first introductory paragraph to this Agreement.

     Convertible Shares: The shares of Common Stock issuable upon conversion of
the Convertible Notes.

     Common Stock: See the first introductory paragraph to this Agreement.

     Day: Unless otherwise expressly provided, a calendar day.

     Effectiveness Date: The 180th day after the Closing Date.

     Effectiveness Period: See Section 2(a).
                               ------------

     Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

     Exercise Date: The date on which the Warrants are first exercisable.

     Filing Date: The 120th day after the Closing Date.

     Holder: A registered holder of Registrable Securities.

     Indemnified Party: See Section 4(c).
                            ------------

     Indemnifying Party: See Section 4(c).
                             ------------

     Initial Purchaser: See the first introductory paragraph to this Agreement.

     Issuer: See the first introductory paragraph to this Agreement.

     NASD: National Association of Securities Dealers, Inc.

     Note Agreement: See the first introductory paragraph to this Agreement.

     Person: An individual, trustee, corporation, partnership, limited liability
company, joint stock company, trust, unincorporated association, union, business
association, firm, government or agency or political subdivision thereof, or
other legal entity.

     Piggy-Back Registration: See Section 2(b).
                                  ------------

     Prospectus: The prospectus included in any Registration Statement with
respect to the

                                       2
<PAGE>

terms of the offering of any portion of the Registrable Securities covered by
such Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated under
the Securities Act), as such prospectus may be amended or supplemented,
including, without limitation, as such prospectus may be amended pursuant to
Rule 424(b) promulgated under the Securities Act.

     Purchase Agreement: See the first introductory paragraph to this Agreement.

     Registrable Securities: Any of (i) the Warrants, (ii) the Warrant Shares
(whether or not the related Warrants have been exercised), (iii) the Convertible
Shares (whether or not the related Convertible Notes have been converted) and
(iv) any other securities issued or issuable with respect to any Warrant Shares
or Convertible Shares by way of stock dividends or stock splits or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (i) such securities
shall have been disposed of by the holder thereof pursuant to a Registration
Statement that has been declared effective under the Securities Act, (ii) such
securities are eligible for sale to the public pursuant to Rule 144(k) or
otherwise under Rule 144 by the holder thereof without being subject to volume
limitations, or (iii) such securities shall have otherwise been transferred by
the holder thereof in compliance with the Securities Act and any applicable
state securities laws and new certificates for such securities not bearing a
legend restricting further transfer shall have been delivered by the Issuer or
its transfer agent.

     Registrable Shares: Any of (i) the Warrant Shares (whether or not the
related Warrants have been exercised), (ii) the Convertible Shares, (whether or
not the related Convertible Notes have been converted) and (iii) any other
securities issued or issuable with respect to any Warrant Shares or Convertible
Shares by way of stock dividends or stock splits or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Shares, such
securities shall cease to be Registrable Shares when (i) such securities shall
have been disposed of by the holder thereof pursuant to a Registration Statement
that has been declared effective under the Securities Act, (ii) such securities
are eligible for sale to the public pursuant to Rule 144(k) or otherwise under
Rule 144 by the holder thereof without being subject to volume limitations, or
(iii) such securities shall have otherwise been transferred by the holder
thereof in compliance with the Securities Act and any applicable state
securities laws and new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Issuer or its
transfer agent.

     Registration Expenses: See Section 3.
                                ---------

     Registration Statement: Any registration statement filed under the
Securities Act covering the Registrable Securities.

                                       3
<PAGE>

     Rule 144: Rule 144 promulgated under the Securities Act, as such rule may
be amended from time to time.

     Rule 144A: Rule 144A promulgated under the Securities Act, as such rule may
be amended from time to time.

     Rule 415: Rule 415 promulgated under the Securities Act, as such rule may
be amended from time to time.

     SEC: The United States Securities and Exchange Commission.

     Securities: The Warrants, the Warrant Shares, the Convertible Notes and
Convertible Shares.

     Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

     Selling Holder: A Holder of Registrable Securities who is selling
Registrable Securities in accordance with Section 2 hereof.
                                          ---------

     Underwritten Registration or Underwritten Offering: A registration in which
securities of the Issuer are sold to an underwriter for reoffering to the
public.

     Warrant Agreement: The Warrant Agreement, dated as of the Closing Date,
between the Issuer and Wilmington Trust Company, as Warrant Agent.

     Warrant Shares: The shares of Common Stock issuable upon exercise of the
Warrants.

     Warrants: See the first introductory paragraph to this Agreement.

2.   Registration of Registrable Securities
     --------------------------------------

     (a)  Shelf Registration of Registrable Securities.
          --------------------------------------------

          (i) The Issuer shall (x) prepare and file with the SEC promptly after
the date hereof, but in no event later than the Filing Date, a "shelf"
Registration Statement pursuant to Rule 415 (the "Shelf Registration Statement")
                                                  ----------------------------
covering resales of the Registrable Securities (the "Registration"), (y) use its
                                                     ------------
best efforts to cause such Shelf Registration Statement to be declared effective
under the Securities Act as promptly as practicable after the filing thereof,
but in no event later than the Effectiveness Date and (z) use its best efforts
to keep the Shelf Registration Statement effective until April 12, 2009 or such
shorter period that will terminate when all of the Registrable Securities have
been sold pursuant to a Registration Statement (the "Effectiveness Period").
                                                     --------------------
The Issuer shall provide to each Holder of Registrable Securities copies of the
Prospectus that is a part of the Shelf Registration Statement, notify each such
Holder of Registrable Securities when the Shelf Registration Statement has
become effective and take such

                                       4
<PAGE>

other actions as are required to permit unrestricted resales of the Registrable
Securities. The Issuer shall require a Selling Holder that sells Registrable
Securities pursuant to the Shelf Registration Statement to be named as a Selling
Holder in the related prospectus and to deliver a prospectus to purchasers, and
any such Selling Holder shall be bound by the provisions of this Agreement that
are applicable to such Selling Holder (including certain indemnification rights
and obligations). Each Selling Holder shall deliver information to be used in
connection with the Shelf Registration Statement within the time period set
forth in this Agreement in order to have its Registrable Securities included in
the Shelf Registration Statement.

          (ii) If the Registration, or any Subsequent Registration (as defined
below) ceases to be effective for any time during the Effectiveness Period, the
Issuer shall use its commercially reasonable efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within 30 days of such cessation of effectiveness amend such Registration
Statement in a manner reasonably expected to obtain the withdrawal of the order
suspending the effectiveness thereof, or the Issuer shall use its best efforts
to file an additional "shelf" Registration Statement (a "Subsequent Registration
                                                         -----------------------
Statement") pursuant to Rule 415 covering all of the Registrable Securities (a
---------
"Subsequent Registration") on or prior to 90 days after such cessation of
------------------------
effectiveness and to cause the Subsequent Registration Statement to be declared
effective on or prior to 180 days after such cessation of effectiveness.  Upon a
Subsequent Registration Statement being declared effective, the Issuer shall use
its best efforts to keep such Subsequent Registration Statement continuously
effective for a period equal to the number of days in the Effectiveness Period
less the aggregate number of days during which the Registration Statement, and
any Subsequent Registration, was previously effective.

     (b)  Piggy-Back Registration of Registrable Warrant Shares.
          -----------------------------------------------------

          (i) If at any time after the Closing Date and prior to the Filing Date
the Issuer proposes to file a registration statement under the Securities Act
with respect to an offering by the Issuer for its own account or for the account
of any holders of its Common Stock (other than (x) a registration statement on
Form S-4 or Form S-8 (or any substitute form that may be adopted by the SEC) or
(y) a registration statement filed in connection with an exchange offer or
offering of securities solely to the Issuer's existing security holders), then
the Issuer shall give written notice of such proposed filing to the Holders of
Registrable Shares as soon as practicable (but in no event fewer than 30 days
before the anticipated filing date), and such notice shall offer such Holders
the opportunity to register such number of Registrable Shares as each Holder of
Registrable Shares may request in writing within 20 days after receipt of such
written notice from the Issuer (which request shall specify the Registrable
Shares intended to be disposed of by such Selling Holder and the intended method
of distribution thereof) (a "Piggy-Back Registration").  The Issuer shall use
                             -----------------------
its best efforts to keep such Piggy-Back Registration continuously effective
under the Securities Act until at least the earlier of (x) the end of the
Effectiveness Period or (y) the consummation of the distribution by the Selling
Holders of all of the Registrable Shares covered thereby.  The Issuer shall use
its reasonable efforts to cause the managing underwriter or underwriters, if
any, of such proposed offering to permit the Registrable Shares requested to be
included in a Piggy-Back Registration to be included on the same terms and
conditions as any

                                       5
<PAGE>

similar securities of the Issuer or any other security holder included therein
and to permit the sale or other disposition of such Registrable Shares in
accordance with the intended method of distribution thereof.

          (ii)  Priority in Piggy-Back Registration.  In a registration pursuant
                -----------------------------------
to this Section 2(b) involving an underwritten offering, if the managing
        ------------
underwriter or underwriters of such underwritten offering have informed, in
writing, the Issuer and the Selling Holders requesting inclusion in such
offering that in such underwriter's or underwriters' opinion the total number of
securities which the Issuer, the Selling Holders and any other Persons desiring
to participate in such registration intend to include in such offering is such
as to adversely affect the success of such offering, including the price at
which such securities can be sold, then the Issuer will be required to include
in such registration only the amount of securities which it is so advised should
be included in such registration.  In such event: (x) in cases initially
involving the registration for sale of securities for the Issuer's own account,
securities shall be registered in such offering in the following order of
priority: (i) first, the securities which the Issuer proposes to register, (ii)
second, provided that no securities proposed to be registered by the Issuer have
been excluded from such registration, the securities that have been requested to
be included in such registration by the Selling Holders, and (iii) third,
provided that no securities sought to be included by the Selling Holders have
been excluded from such registration, the securities of other Persons entitled
to exercise "piggy-back" registration rights pursuant to contractual commitments
of the Issuer (pro rata based on the amount of securities sought to be
registered by such Persons); and (y) in cases not initially involving the
registration for sale of securities for the Issuer's own account, securities
shall be registered in such offering in the following order of priority: (i)
first, the securities of any Person whose exercise of a "demand" registration
right pursuant to a contractual commitment of the Issuer is the basis for the
registration, (ii) second, provided that no securities of any Person whose
exercise of a "demand" registration right pursuant to a contractual commitment
of the Issuer is the basis for such registration have been excluded from such
registration, the securities requested to be included in such registration by
the Selling Holders pursuant to this Agreement, (iii) third, provided that no
securities sought to be included by the Selling Holders or such Persons have
been excluded from such registration, securities of other Persons entitled to
exercise "piggy-back" registration rights pursuant to contractual commitments of
the Issuer (pro rata based on the amount of securities sought be registered by
such Persons) and (iv) fourth, provided that no securities sought to be included
by other Persons entitled to exercise "piggy-back" registration rights pursuant
to such contractual commitments have been excluded from such registration, any
securities which the Issuer proposes to register.

          (iii) Suspension of Sales, etc.  During any consecutive 365-day
                -------------------------
period, the Issuer shall be entitled to suspend the availability of the Piggy-
Back Registration for up to two 45 consecutive-day periods (except during the 45
consecutive-day period immediately prior to the Expiration Date) if the Board of
Directors of the Issuer determines in good faith that the effectiveness of, or
sales pursuant to, such Piggy-Back Registration would materially impede, delay
or interfere with any significant financing, offer or sale of securities,
acquisition, corporate reorganization or other significant transaction involving
the Issuer or any of its affiliates.  If the Issuer shall so postpone the
effectiveness of, or suspend the rights of any Selling Holders to make

                                       6
<PAGE>

sales pursuant to, a Piggy-Back Registration, it shall, as promptly as possible,
notify any Selling Holders of such determination, and the Selling Holders shall
(y) have the right, in the case of a postponement of the effectiveness of a
Piggy-Back Registration, upon the affirmative vote of Selling Holders of not
less than a majority of the Registrable Warrant Shares to be included in such
Piggy-Back Registration, to withdraw the request for registration by giving
written notice to the Issuer within 20 days after receipt of such notice or (z)
in the case of a suspension of the right to make sales, receive an extension of
the registration period referred to in Section 2(a) hereof equal to the number
                                       ------------
of days of the suspension.

          (iv) Any Selling Holder shall have the right to withdraw its request
for inclusion of its Registrable Shares in any Piggy-Back Registration pursuant
to this Section 2(b) by giving written notice to the Issuer of its request to
        ------------
withdraw at any time prior to the filing of such Piggy-Back Registration with
the SEC.  The Issuer will pay all Registration Expenses in connection with each
registration of Registrable Shares requested pursuant to this Section 2(b), and
                                                              ------------
each Holder of Registrable Shares shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
the Registrable Shares of such Holder of Registrable Shares pursuant to a Piggy-
Back Registration effected pursuant to this Section 2(b).
                                            ------------

          (v)  Exclusion of Registrable Shares. The Issuer shall not be required
               -------------------------------
by this Section 2(b) to include Registrable Shares in a Piggy-Back Registration
        ------------
if (i) in the written opinion of outside counsel to the Issuer, addressed to the
holders of Registrable Shares and delivered to them, the Holders of such
Registrable Shares seeking registration would be free to sell all such
Registrable Shares within the current calendar quarter without registration
under Rule 144, which opinion may be based in part upon the representation by
the Holders of such Registrable Shares seeking registration, which
representation shall not be unreasonably withheld, that each such Holder is not
an affiliate of the Issuer within the meaning of the Securities Act, and (ii)
all requirements under the Securities Act for effecting such sales are satisfied
at such time.

          (vi) No Special Audit.  The Issuer shall not be obligated to cause any
               ----------------
special audit to be undertaken in connection with any Piggy-Back Registration
unless such audit is requested by the underwriters with respect to such Piggy-
Back Registration or, if such Piggy-Back Registration does not involve an
underwritten offering, by the Selling Holders of not less than a majority of the
Registrable Shares to be included in such Piggy Back Registration.

     (c)  Obligations of Selling Holders. The Issuer's obligations under this
          ------------------------------
Section 2 shall be subject to the obligations of the Selling Holders, which the
---------
Selling Holders hereby acknowledge, to furnish all information and materials and
to take any and all actions as may be required under applicable requirements of
the SEC and to obtain an acceleration of the effective date of a Registration
Statement.

     (d)  Listing. The Issuer covenants and agrees to (i) list all Convertible
          -------
Shares issued or issuable upon the conversion of the Convertible Notes and all
Warrant Shares issued or issuable upon exercise of the Warrants on the American
Stock Exchange or any other securities exchange on which the Common Stock is
then listed or (ii) authorize for quotation on the National

                                       7
<PAGE>

Association of Securities Dealers Automated Quotation System ("NASDAQ") or the
                                                               ------
National Market System of NASDAQ all Common Stock issued or issuable upon
conversion of the Convertible Notes or exercise of the Warrants if the Common
Stock is then so authorized for quotation.

3.  Registration Expenses.  Except as set forth in Section 2(b)(iv), all fees
    ---------------------                          ----------------
and expenses incident to the performance of or compliance with this Agreement
(the "Registration Expenses") shall be borne by the Issuer, whether or not a
      ---------------------
Registration Statement is filed or becomes effective, including, without
limitation, (i) all registration and filing fees, including, without limitation,
(A) fees with respect to filings required to be made with the NASD in connection
with any underwritten offering and (B) fees and expenses of compliance with
state securities or Blue Sky laws, (ii) printing expenses, including, without
limitation, expenses of printing Prospectuses if the printing of Prospectuses is
requested by the managing underwriter or underwriters, if any, (iii) messenger,
telephone and delivery expenses incurred in connection with the performance of
its obligations hereunder, (iv) fees and disbursements of counsel for the
Issuer, (v) rating agency fees, (vi) Securities Act liability insurance, if the
Issuer desires such insurance, (vii) fees and expenses of all other Persons
retained by the Issuers, (viii) internal expenses of the Issuer (including,
without limitation, all salaries and expenses of officers and employees of the
Issuer performing legal or accounting duties), (ix) the expense of any annual
audit, (x) the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange and (xi) the expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement; provided,
                                                                      --------
however, that in the case of any underwritten offering, in no event shall the
-------
Issuer be responsible for any underwriting discounts and commissions.

4.  Indemnification
    ---------------

    (a) Indemnification by the Issuer. The Issuer shall without limitation as to
        ----------------------------
time, indemnify and hold harmless each Holder of Registrable Securities, each
Person, if any, who controls each such Holder (within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act) and the officers,
directors and partners of each such Holder and controlling person, to the
fullest extent lawful, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable costs of
preparation and reasonable attorneys' fees and disbursements as provided in this
Section 4) and expenses (including, without limitation, costs and expenses
---------
incurred in connection with investigating, preparing, pursuing or defending
against any of the foregoing) (collectively, "Losses"), as incurred, directly or
                                              ------
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus, or in any amendment or supplement thereto,
or in any preliminary prospectus, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as such Losses are solely based upon information
relating to such Holder and furnished in writing to the Issuer by such Holder or
its counsel expressly for use therein;

                                       8
<PAGE>

provided, however, that the Issuer will not be liable to any Indemnified Party
--------  -------
under this Section 4 to the extent Losses were solely caused by an untrue
           ---------
statement or omission or alleged untrue statement or omission that was contained
or made in any preliminary prospectus and corrected in the Prospectus or any
amendment or supplement thereto if (i) the Prospectus does not contain any other
untrue statement or omission or alleged untrue statement or omission of a
material fact that was the subject matter of the related proceeding, (ii) any
such Losses resulted from an action, claim or suit by any Person who purchased
Registrable Securities which are the subject thereof from such Indemnified Party
and (iii) it is established in a related proceeding that such Indemnified Party
failed to deliver or provide a copy of the Prospectus (as amended or
supplemented) to such Person with or prior to the confirmation of the sale of
such Registrable Securities sold to such Person if required by applicable law,
unless such failure to deliver or provide a copy of the Prospectus (as amended
or supplemented) was a result of noncompliance by the Issuer with this
Agreement. The Issuer shall also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, their officers, directors, agents and employees and each Person
who controls such Persons (within the meaning of Section 5 of the Securities Act
or Section 20(a) of the Exchange Act) to the same extent as provided above with
respect to the indemnification of the Holders.

     (b)  Indemnification by Holders.  In connection with any Registration
          --------------------------
Statement, Prospectus, any amendment or supplement thereto, or any preliminary
prospectus in which a Holder is participating, such Holder shall furnish to the
Issuer in writing such information as the Issuer reasonably requests for use in
connection with any Registration Statement, Prospectus, any amendment or
supplement thereto, or any preliminary prospectus and shall, without limitation
as to time, indemnify and hold harmless the Issuer, its directors and each
Person, if any, who controls the Issuer (within the meaning of Section 15 of the
Securities Act and Section 20(a) of the Exchange Act), and the directors,
officers, employees, agents, and partners of such controlling persons, to the
fullest extent lawful, from and against all Losses arising out of or based upon
any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or in any amendment or supplement thereto or
in any preliminary prospectus, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading to the extent (but only to the extent) that such Losses are
finally judicially determined by a court of competent jurisdiction (which
determination is not subject to appeal) to have resulted solely from an untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission of a material fact contained in or omitted from any information so
furnished in writing by such Holder to the Issuer expressly for use therein.
Notwithstanding the foregoing, in no event shall the liability of any selling
Holder be greater in amount than the dollar amount of the proceeds (net of
payment of all expenses) received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.

     (c)  Conduct of Indemnification Proceedings.  If any Proceeding shall be
          --------------------------------------
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the party or
 -----------------
parties from which such indemnity is sought (an

                                       9
<PAGE>

"Indemnifying Party") in writing; provided, that the failure to so notify the
 ------------------               --------
Indemnifying Parties shall not relieve the Indemnifying Parties from any
obligation or liability except to the extent (but only to the extent) that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal) that the Indemnifying Parties have been
prejudiced materially by such failure.

          The Indemnifying Party shall have the right, exercisable by giving
written notice to an Indemnified Party, within 20 Business Days after receipt of
written notice from such Indemnified Party of such Proceeding, to assume, at its
expense, the defense of any such Proceeding, provided, that an Indemnified Party
                                             --------
shall have the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party or parties unless: (1) the
Indemnifying Party has agreed to pay such fees and expenses; or (2) the
Indemnifying Party shall have failed promptly to assume the defense of such
Proceeding or shall have failed to employ counsel satisfactory to such
Indemnified Party; or (3) the named parties to any such Proceeding (including
any impleaded parties) include both such Indemnified Party and the Indemnifying
Party or any of its affiliates or controlling persons, and such Indemnified
Party shall have been advised by counsel that there may be one or more defenses
available to such Indemnified Party that are in addition to, or in conflict
with, those defenses available to the Indemnifying Party or such affiliate or
controlling person (in which case, if such Indemnified Party notifies the
Indemnifying Parties in writing that it elects to employ separate counsel at the
expense of the Indemnifying Parties, the Indemnifying Parties shall not have the
right to assume the defense and the reasonable fees and expenses of such counsel
shall be at the expense of the Indemnifying Party; it being understood, however,
that, the Indemnifying Party shall not, in connection with any one such
Proceeding or separate but substantially similar or related Proceedings in the
same jurisdiction, arising out of the same general allegations or circumstances,
be liable for the fees and expenses or more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such Indemnified
Party).

          No Indemnifying Party shall be liable for any settlement of any such
Proceeding effected without its written consent, which shall not be unreasonably
withheld, but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such Proceeding, each Indemnifying Party
jointly and severally agrees, subject to the exceptions and limitations set
forth above, to indemnify and hold harmless each Indemnified Party from and
against any and all Losses by reason of such settlement or judgment.  The
Indemnifying Party shall not consent to the entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the giving
by the claimant or plaintiff to each Indemnified Party of a release, in form and
substance satisfactory to the Indemnified Party, from all liability in respect
of such Proceeding for which such Indemnified Party would be entitled to
indemnification hereunder (whether or not any Indemnified Party is a party
thereto).

          (d)  Contribution.  If the indemnification provided for in this
               ------------
Section 4 is unavailable to an Indemnified Party or is insufficient to hold such
---------
Indemnified Party harmless for any Losses in respect of which this Section 4
                                                                   ---------
would otherwise apply by its terms (other than by reason of

                                      10
<PAGE>

exceptions provided in this Section 4), then each applicable Indemnifying Party,
                            ---------
in lieu of indemnifying such Indemnified Party, shall have a joint and several
obligation to contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party, on the one hand,
and Indemnified Party, on the other hand, shall be determined by reference to,
among other things, whether any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent any such statement or omission. The amount paid or payable by
an Indemnified Party as a result of any Losses shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
Proceeding, to the extent such party would have been indemnified for such fees
or expenses if the indemnification provided for in Section 4(a) or 4(b) was
                                                   ------------    ----
available to such party.

     The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4(d) were determined by pro rata
                              ------------
allocation or by other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 4(d), a selling Holder shall not
                                       ------------
be required to contribute, in the aggregate, any amount in excess of such
Holder's Maximum Contribution Amount. A selling Holder's "Maximum Contribution
                                                          --------------------
Amount" shall equal the excess of (i) the aggregate net proceeds received by
------
such Holder pursuant to the sale of such Registrable Securities over (ii) the
aggregate amount of 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 Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.

     The indemnity and contribution agreements contained in this Section 4 are
                                                                 ---------
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

5.   Liquidated Damages
     ------------------

     (a) The Issuer acknowledges and agrees that the Holders of Registrable
Securities will suffer damages, and that it would not be feasible to ascertain
the extent of such damages with precision, if the Issuer fails to fulfill its
obligation hereunder.  Accordingly, in the event of such failure, the Issuer
agrees to pay liquidated damages to each Holder of Registrable Securities under
the circumstances and to the extent set forth below:

          (i)  if the Issuer fails to file any required Registration Statement
on or prior to the Filing Date; or

          (ii) if any required Registration Statement is not declared effective
by the SEC on or

                                      11
<PAGE>

prior to the Effectiveness Date;

          (iii)  if a Registration Statement is filed and declared effective by
the SEC but thereafter ceases to be effective or usable in connection with the
resale of the Registrable Securities without being succeeded within 30 days by a
Subsequent Registration Statement filed and declared effective;

(each of the foregoing a "Registration Default").
                          --------------------

     Upon occurrence of any Registration Default, the Issuer shall pay, or cause
to be paid to each Holder of Registrable Securities $.033 per Warrant Share for
each 90-day period (or portion thereof) after the occurrence of a Registration
Default as liquidated damages, and not as a penalty, for each Registrable
Security owned by such Holder.

     (b)  Notwithstanding Section 5(a) of this Agreement, the Issuer shall not
                          ------------
be required to pay Liquidated Damages to a Holder of Registrable Securities with
respect to the Registrable Securities held by such Holder (1) to the extent such
Registrable Securities are comprised of the Convertible Notes, the Convertible
Shares or any other securities issued or issuable with respect to any
Convertible Shares by way of stock dividends or stock splits or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise or (2) if the Registration Default arises by reason
of the failure of such Holder to provide information that (i) the Issuer may
reasonably request, with reasonable prior notice, for use in the Registration
Statement or any prospectus included therein to the extent the Issuer reasonably
determines that such information is required to be included therein by
applicable law or (ii) the SEC may request in connection with such Registration
Statement (but only to the extent that such compliance is necessary for the
Registration Statement to be declared effective).

6.   Miscellaneous
     -------------

     (a)  No Inconsistent Agreements.  The Issuer has not entered, as of the
          --------------------------
date hereof, and the Issuer shall not enter, after the date of this Agreement,
into any agreement with respect to any of its securities that is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement or otherwise conflicts with the provisions hereof.  Except as set
forth on Schedule 6(a) attached hereto, the Issuer has not entered into any
agreement with respect to any of its securities which will grant to any Person
piggy-back rights with respect to a Registration Statement.  The Issuer will not
enter into any agreement with respect to any of its securities which will grant
to any Person piggy-back rights that are senior to the rights granted to the
Holders under this Agreement with respect to a Registration Statement.

     (b)  Adjustments Affecting Registrable Securities. The Issuer shall not,
          --------------------------------------------
directly or indirectly, take any action with respect to the Registrable
Securities that would adversely affect the ability of the Holders to include
such Registrable Securities in a registration undertaken pursuant to this
Agreement.

     (c)  Amendments and Waivers. The provisions of this Agreement may not be
          ----------------------
amended,

                                      12
<PAGE>

modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, otherwise than with the prior written
consent of (A) in circumstances that would adversely affect any Holders, the
Holders of a majority of the Registrable Securities (treating as outstanding for
this purpose Warrant Shares issuable on exercise of unexercised Warrants and
Convertible Shares issuable on conversion of outstanding Convertible Notes);
provided, however, that Section 4 and this Section 6(c) may not be amended,
--------  -------       ---------          ------------
modified or supplemented without the prior written consent of each Holder
(including any Holder of Registrable Securities disposed of pursuant to any
Registration Statement).

     (d)  Notices.  All notices and other communications provided for or
          -------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or telecopier:

          (i)   if to a Holder, at the most current address of such Holder set
forth on the records of the Registrar of the Warrants or Convertible Notes, as
the case may be, with a copy in like manner:

                    Sidley & Austin

                    555 West Fifth Street
                    Los Angeles, CA 90013
                    Attention:  Robert W. Kadlec, Esq.

          (ii)  if to the Initial Purchaser, as follows:

                    Boeing Capital Loan Corporation
                    c/o Entity Services
                    2325 Renaissance Drive, Suite 8
                    Las Vegas, NV  89119
                    Attention: Kristine Epps

                    with a copy to:

                    Boeing Capital Corporation
                    500 Naches Ave., S.W.
                    Renton, WA  98055
                    Attention: Legal Department

                with a copy to:

                    Sidley & Austin
                    555 West Fifth Street
                    Los Angeles, CA 90013
                    Attention:  Robert W. Kadlec, Esq.

          (iii) if to the Issuer, as follows:

                                      13
<PAGE>

                    AirTran Holdings, Inc.
                    9955 AirTran Boulevard
                    Orlando, Florida 32827
                    Attention: Treasurer

               with a copy to:

                    Smith, Gambrell & Russell, LLP
                    1230 Peachtree Street, Suite 3100
                    Promenade II
                    Atlanta, Georgia 30309-3592
                    Attention:  Howard E. Turner, Esq. or
                               John R. Schneider, Esq.

          All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five Business Days after
being deposited in the United States mail, postage prepaid, if mailed, one
Business Day after being timely delivered to a next-day air courier guaranteeing
overnight delivery, and when receipt is acknowledged by the addressee, if
telecopied.

          Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Warrant Agent under
the Warrant Agreement at the address specified in the Warrant Agreement.

     (e) Successors and Assigns.  This Agreement shall inure to the benefit of
         ----------------------
and be binding upon the successors and assigns of each of the parties hereto,
including, without limitation and without the need for an express assignment,
subsequent holders of Registrable Securities.

     (f) Counterparts.  This Agreement may be executed in any number of
         ------------
counterparts and by the parties hereto in one or more 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.

     (g) Headings.  The headings in this Agreement are for convenience of
         --------
reference only and shall not limit or otherwise affect the meaning hereof.

     (h) Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
         -------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAW THEREOF.  THE ISSUER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS.  THE ISSUER

                                      14
<PAGE>

IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY TO DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE ISSUER IRREVOCABLY
CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,
TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE ISSUER AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE ISSUER IN ANY OTHER
JURISDICTION.

     (i) Severability.  If any term, provision, covenant or restriction of this
         ------------
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction.  It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

     (j) Securities Held by the Issuer or Its Affiliates.  Whenever the consent
         -----------------------------------------------
or approval of holders of a specified percentage of Holders is required
hereunder, Registrable Securities held by the Issuer or its affiliates (as such
term is defined in Rule 405 under the Securities Act) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.  The parties hereby acknowledge and agree that neither the
Initial Purchaser nor any of its affiliates is an affiliate of the Issuer.

     (k) Third Party Beneficiaries.  Holders of Registrable Securities are
         -------------------------
intended third party beneficiaries of this Agreement, and this Agreement may be
enforced by such Persons.

Entire Agreement.  This Agreement, together with the Purchase Agreement, the
----------------
Warrant Agreement and the Note Agreement is intended by the parties as a final
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein and any and all
prior oral or written agreements, representations, or warranties, contracts,
understanding, correspondence, conversations and memoranda between the Initial
Purchaser on the one hand and the Issuer on the other, or between or among any
agents, representatives, parents, subsidiaries, affiliates, predecessors in
interest or successors in interest with respect to the subject matter hereof and
thereof are merged herein and replaced hereby.

                                      15
<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
                                        AIRTRAN HOLDINGS, INC.

                                        By:
                                            Name:
                                            Title:

ACCEPTED AND AGREED TO:
----------------------
BOEING CAPITAL LOAN CORPORATION

By:
    Name:
    Title:

                                      16
<PAGE>

                                   EXHIBIT E

                     FORM OF COLLATERAL SUPPORT AGREEMENT
<PAGE>

                         COLLATERAL SUPPORT AGREEMENT

          THIS COLLATERAL SUPPORT AGREEMENT (as the same may be amended,
restated, supplemented or otherwise modified from time to time, this
"Agreement") is made as of April 12 2001, by AirTran Airways, Inc. ("Airways")
in favor of the Holders (as defined in the Note Agreement) pursuant to that
certain Note Agreement, dated as of the date hereof, by and among AirTran
Holdings, Inc., a Nevada corporation (the "Company") and the purchasers
signatory thereto (as amended, restated, supplemented or otherwise modified from
time to time, the "Note Agreement").  Capitalized terms used herein and not
otherwise defined herein have the meanings ascribed to such terms in the Note
Agreement.

          1.  Agreement to Provide Collateral Support.  For value received and
              ---------------------------------------
in consideration of any loan, advance or financial accommodation of any kind
whatsoever heretofore, now or hereafter made, given or granted by the Holders to
the Company, Airways hereby unconditionally pledges for the benefit of each of
the Holders the Collateral now or hereafter subject to the Collateral Trust
Agreement as security for the full and prompt payment and performance when due,
whether at maturity or earlier, by reason of acceleration or otherwise, and at
all times thereafter, of all of the Obligations of the Company under the Note
Agreement, the Notes and the other Transaction Documents (the "Additional
Secured Obligations") (including, without limitation, interest accruing
following an Insolvency Event of the Company, at the applicable rate specified
in the Note Agreement, whether or not such interest is allowed as a claim in a
proceeding relating to such Insolvency Event).  At any time after the occurrence
and during the continuance of an Event of Default, Airways shall make available
to the Holders, on demand the Collateral in accordance with the provisions of
the Collateral Trust Agreement in satisfaction of the Additional Secured
Obligations (including and in immediately available funds, the full amount of
the Additional Secured Obligations of the Company (including any portion thereof
which is not yet due and payable).  Airways further agrees that the Collateral
may be applied by Holders against (i) all losses (including, without limitation,
lost profits), fees, costs and expenses (including, without limitation, all
court costs and reasonable attorneys' and paralegals' fees, costs and expenses)
paid or incurred by the Holders in: (A) enforcing or defending such Person's
rights under or in respect of this Agreement, the other Transaction Documents or
any other document or instrument now or hereafter executed and delivered in
connection herewith, (B) in collecting all or any part of the Additional Secured
Obligations of the Company or the Obligations of Airways under this Agreement,
(C) in foreclosing or otherwise collecting upon the Collateral for the
Additional Secured Obligations of the Company or the Obligations of Airways
under this Agreement or any part thereof and (D) obtaining any legal, accounting
or other advice in connection with any of the foregoing and (ii) interest on (A)
the Additional Secured Obligations of the Company which do not constitute
interest, (B) to the extent permitted by applicable law, the Additional Secured
Obligations of the Company which constitute interest, and (C) the expenses
described in clause (i) above, from the date of demand hereunder until
indefeasibly paid in full at the applicable per annum rate of interest described
in the Note Agreement.

          2.  Additional Secured Obligations Absolute.  Airways agrees that its
              ---------------------------------------
Obligations under this Agreement are independent of the Additional Secured
Obligations and any guarantor, surety or other Person pledging property as
security for of all or any part of the Additional

                                       1
<PAGE>

Secured Obligations, and a separate action or actions may be taken pursuant to
the Collateral Trust Agreement whether or not the Company is subject to any such
action or actions. The liability of Airways under this Agreement and the
Transaction Documents securing Airways' Obligations under this Agreement shall
be absolute and unconditional, and shall not be affected or released in any way,
irrespective of:

     (a)       the validity, assignment, enforceability, avoidance, novation or
               subordination of, in whole or in part, any of the Additional
               Secured Obligations or any of the Transaction Documents;

     (b)       the absence of any attempt by, or on behalf of, any Holder to
               collect, or to take any other action to enforce, all or any part
               of the Additional Secured Obligations whether from or against the
               Company, any guarantor of the Additional Secured Obligations or
               any other Person;

     (c)       the waiver of or the election of any remedy by, or on behalf of,
               any Holder with respect to all or any part of the Additional
               Secured Obligations;

     (d)       the waiver, consent, extension, forbearance or granting of any
               indulgence by, or on behalf of, any Holder with respect to any
               provision of any of the Transaction Documents;

     (e)       the failure of the Collateral Trustee or any other Person to take
               any steps to perfect and maintain its security interest in, or to
               preserve its rights to, any security or collateral for the
               Additional Secured Obligations;

     (f)       the election by, or on behalf of, any one or more of the Holders,
               in any proceeding instituted under Chapter 11 of the United
               States Bankruptcy Code (11 U.S.C (S)(S) 101 et seq. (the
               "Bankruptcy Code")) of the application of Section 1111(b)(2) of
               the Bankruptcy Code;

     (g)       any borrowing or grant of a security interest by the Company, as
               debtor-in-possession, under Section 364 of the Bankruptcy Code;

     (h)       the disallowance, under Section 502 of the Bankruptcy Code, of
               all or any portion of the claims of any of the Holders for
               repayment of all or any part of the Additional Secured
               Obligations or any expenses described in Section 1;

     (i)       any refusal of payment by any Holder, in whole or in part, from
               any obligor or guarantor in connection with any of the Additional
               Secured Obligations, whether or not with notice to, or further
               assent by, or any reservation of rights against, the Company or
               Airways;

     (j)       any disposition of assets, merger, consolidation, change,
               restructuring or termination of the corporate structure or
               existence of any of the Company or its Subsidiaries (each of the
               Company and its Subsidiaries, a "Credit Party"), or any
               modification, compounding, compromise, settlement or release by
               any Holder or

                                       2
<PAGE>

               any other Person (or by operation of law or otherwise),
               collection or other liquidation of the Additional Secured
               Obligations or the liability of any Credit Party, or of the
               Collateral, in whole or in part;

          (k)  any exchange, surrender, substitution or modification of any
               collateral security for any of the Additional Secured
               Obligations;

          (l)  any defense, setoff, cross claim or counterclaim which may at any
               time be available to or asserted by or against Airways or the
               Company; or

          (m)  any other circumstance (other than payment in cash or full
               performance of the Additional Secured Obligations) which might
               otherwise constitute a legal or equitable discharge or defense of
               the Company, Airways or any guarantor of the Additional Secured
               Obligations.

          3.   Enforcement; Application of Payments.  Upon the occurrence and
               ------------------------------------
during the continuance of an Event of Default, the Required Holders may proceed
directly and at once, without notice, against Airways to obtain performance
under this Agreement and to exercise their rights under the Collateral Trust
Agreement, without first proceeding against the Company or any other Person, or
against any security or collateral for the Additional Secured Obligations.
Subject only to the terms and provisions of the Note Agreement, the Required
Holders shall have the exclusive right to determine the application of payments
and credits, if any, constituting proceeds of the exercise of its rights under
the Collateral Trust Agreement, the Company or from any other Person on account
of the Additional Secured Obligations or any other liability of Airways to the
any Holder, without affecting the liability of Airways hereunder.

          4.   Waivers.
               -------

          (a)  Airways hereby waives:

               (i)    diligence, presentment, demand of payment (except as
                      expressly required hereunder), filing of claims with a
                      court in the event of receivership or bankruptcy of the
                      Company, protest or notice with respect to the Additional
                      Secured Obligations, all setoffs and counterclaims and all
                      presentments, demands for performance, notices of non-
                      performance, protests, notices of protest, notices of
                      dishonor and notices of acceptance of this Agreement, the
                      benefits of all statutes of limitation, and all other
                      demands (except as expressly required hereunder)
                      whatsoever (and shall not require that the same be made on
                      the Company as a condition precedent to Airways'
                      obligations hereunder);

               (ii)   all notices of the existence, creation or incurring of new
                      or additional indebtedness, arising either from additional
                      financial accommodations extended to the Company or
                      otherwise;

               (iii)  all notices that the principal amount, or any portion
                      thereof, and/or any interest on any instrument or document
                      evidencing all or any part of the

                                       3
<PAGE>

                      Additional Secured Obligations is due (except as expressly
                      required hereunder), notices of any and all proceedings to
                      collect from the maker, any endorser or any guarantor of
                      all or any part of the Additional Secured Obligations, or
                      from any other Person, and, to the extent permitted by
                      law, notices of exchange, sale, surrender or other
                      handling of any security or collateral given to the
                      Collateral Trustee to secure payment of all or any part of
                      the Additional Secured Obligations; and

               (iv)   any defense based upon any requirement of Law which
                      provides that the obligation of a surety must be neither
                      larger in amount nor in other respects more burdensome
                      than that of the principal;

     (b)       Without limiting the generality of the foregoing or any other
               provision hereof, Airways hereby waives, to the fullest extent
               permitted by applicable law in accordance with Section 2856 of
               the California Civil Code, all rights and benefits under
               California Civil Code Sections 2787 to 2855, inclusive (or any
               similar laws in other jurisdictions) and all rights and benefits
               of California Civil Code Sections 2899 and 3433 (or any similar
               laws in any other jurisdiction). In addition, without limiting
               the generality of the foregoing or any other provision hereof,
               Airways hereby waives, in accordance with Section 2856 of the
               California Civil Code, all rights and defenses (including,
               without limitation, all rights and defenses arising out of an
               election of remedies by the Collateral Trustee or any Holder)
               that Airways may have because the Additional Secured Obligations
               are secured by real property. This means, among other things:

               (i)    any Holder may act against Airways under the Collateral
                      Trust Agreement without first foreclosing on any real or
                      personal property collateral pledged to or for the benefit
                      of the Collateral Trustee or any Holder; and

               (ii)   if any Holder forecloses on any real property collateral
                      pledged by the Company:

                      (A)    the amount of the debt may be reduced only by the
                             price for which that collateral is sold at the
                             foreclosure sale, even if the collateral is worth
                             more than the sale price; and

                      (B)    any Holder may collect from Airways even if any
                             Holder, by foreclosing on the real property
                             collateral, has destroyed any right Airways may
                             have to collect from the Company.

This is an unconditional and irrevocable waiver of any rights and defenses
Airways may have because the Additional Secured Obligations are secured by real
property.  These rights and defenses include, but are not limited to, any rights
or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of
Civil Procedure (or any similar laws in any other jurisdiction).  In accordance
with Section 16 below, this Agreement shall be governed by, and shall be
construed and enforced in accordance with, the internal laws (as opposed to the
conflicts

                                       4
<PAGE>

of laws provisions other than those contained in New York General Obligations
Law Section 5-1401) and decisions of the State of New York. This Section 4(b)
and other referenced provisions of California law are included solely out of an
abundance of caution, and shall not be construed to mean that any of the
referenced provisions of California law are in any way applicable to this
Agreement or to any of the Additional Secured Obligations.

     (c)  The Holders are hereby authorized, without notice or demand and
          without affecting the liability of Airways hereunder, from time to
          time, (i) to renew, extend, accelerate or otherwise change the time
          for payment of, or other terms relating to, all or any part of the
          Additional Secured Obligations, or to otherwise modify, amend or
          change the terms of any of the Transaction Documents; (ii) to accept
          partial payments on all or any part of the Additional Secured
          Obligations; (iii) to take and hold security or collateral for the
          payment of all or any part of the Additional Secured Obligations, this
          Agreement, or any other guaranties of all or any part of the
          Additional Secured Obligations or other liabilities of the Company,
          (iv) to exchange, enforce, waive and release any such security,
          collateral or guaranties; (v) to apply such security or collateral and
          direct the order or manner of sale thereof as in their reasonable
          discretion they may determine; and (vi) to settle, release, exchange,
          enforce, waive, compromise or collect or otherwise liquidate all or
          any part of the Additional Secured Obligations, this Agreement, any
          other guaranty of all or any part of the Additional Secured
          Obligations, and any security or collateral for the Additional Secured
          Obligations or for any such guaranty. Any of the foregoing may be done
          in any manner, without affecting or impairing the Obligations of
          Airways hereunder.

     5.   Representations and Warranties.  Airways hereby represents and
          ------------------------------
warrants to the Holders that each of the following statements is true, correct
and complete:

     (a)  Airways (i) is a corporation duly organized, validly existing and in
          good standing under the laws of the jurisdiction of its incorporation,
          (ii) has the power and authority to own its properties and assets and
          to transact the businesses in which it presently is, or proposes to
          be, engaged and (iii) is duly qualified and is authorized to do
          business and is in good standing in each jurisdiction where it
          presently is, or proposes to be, engaged in business, except in
          jurisdictions where the failure to be so qualified, authorized or in
          good standing has not had and could not reasonably be expected to have
          a Material Adverse Effect;

     (b)  Airways has all requisite power and authority to enter into, deliver
          and perform its obligations under each of the Transaction Documents to
          which it is a party and to consummate the transactions contemplated
          thereby.  All corporate action necessary for the execution, delivery
          and performance by Airways of any of the Transaction Documents has
          been taken;

     (c)  Each of the Transaction Documents to which Airways is a party has been
          duly authorized by Airways, and this Agreement is, and, when executed
          and delivered, each other Transaction Document to which Airways is a
          party will be, a legal,

                                       5
<PAGE>

          valid and binding obligation of Airways, enforceable in accordance
          with its terms, except that the enforcement thereof may be subject to
          (i) bankruptcy, insolvency, reorganization, receivership, moratorium,
          fraudulent conveyance or other similar laws now or hereafter in effect
          relating to creditors' rights generally and (ii) general principles of
          equity (whether applied by a court of law or equity) and the
          discretion of the court before which any proceeding therefor may be
          brought.

     (d)  Airways is not in violation of its certificate of incorporation or
          bylaws (the "Charter Documents"). The Guarantor is not (i) in
          violation of any Federal, state, local or foreign statute, law
          (including, without limitation, common law) or ordinance, or any
          judgment, decree, rule, regulation or order (collectively, "Applicable
          Law") of any Governmental Authority other than as disclosed in the
          Holdings SEC Documents or violations that could not, singly or in the
          aggregate, reasonably be expected to have a Material Adverse Effect,
          or (ii) in breach of or default under any bond, debenture, note or
          other evidence of indebtedness, indenture, mortgage, deed of trust,
          lease or any other agreement or instrument to which it is a party or
          by which it or its property is bound (collectively, "Applicable
          Agreements"), other than with respect to clause (ii) only, breaches or
          defaults that could not, singly or in the aggregate, reasonably be
          expected to have a Material Adverse Effect. There exists no condition
          that, with the passage of time or otherwise, would (i) constitute a
          violation of such Charter Documents or Applicable Laws, (ii)
          constitute a breach of or default under any Applicable Agreement or
          (iii) result in the imposition of any penalty or the acceleration of
          any indebtedness, other than, with respect to this clause (iii) only,
          breaches, penalties or defaults that could not, singly or in the
          aggregate, reasonably be expected to have a Material Adverse Effect.
          All Applicable Agreements are in full force and effect and are legal,
          valid and binding obligations, and no default has occurred or is
          continuing thereunder, other than such defaults that could not, singly
          or in the aggregate, reasonably be expected to have a Material Adverse
          Effect.

     (f)  No consent, authorization, permit, notice or filing is required in
          connection with the execution, delivery and performance of this
          Agreement, any Transaction Document to which Airways is a party or the
          continuing operations of Airways, except (i) those that have been
          obtained or made and (ii) filings necessary to create, perfect or
          retain the perfection or priority of Liens of the Holders against the
          Collateral.

     (g)  The representations and warranties of Airways contained in the
          Transaction Documents to which it is a party are true and correct.

     (h)  Airways has validly submitted to the jurisdiction of the courts of the
          State of New York and the federal courts located in the City of New
          York.

     (i)  The choice of law of the State of New York to govern this Agreement is
          valid under the law of the jurisdiction of incorporation of Airways,
          and a court in such

                                       6
<PAGE>

          jurisdiction would uphold such choice of law in any suit on this
          Agreement brought in such court.

     6.   Setoff.  In addition to and not in limitation of all rights of
          ------
offset that any Holder may have under applicable law, upon the occurrence and
during the continuance of any Event of Default, and whether or not any Holder
has made any demand or the Additional Secured Obligations of the Company or
Airways have matured, each Holder shall have the right to appropriate and apply
to the payment of the Additional Secured Obligations (a) all deposits and other
obligations then or thereafter owing by such Holder to Airways and (b) any
moneys, credits or other property belonging to Airways, at any time held by or
coming into the possession of such Holder or any of its Affiliates in each case
to the extent the same are the subject of the Collateral Trust Agreement.

     7.   Financial Information. The Guarantor hereby assumes responsibility for
          ---------------------
keeping itself informed of the financial condition of the Company an d any and
all endorsers and/or guarantors of all or any part of the Additional Secured
Obligations, and of all other circumstances bearing upon the risk of non-payment
of the Additional Secured Obligations, or any part thereof, that diligent
inquiry would reveal, and Airways hereby agrees that none of the Holders shall
have any duty to advise Airways of information known to any of them regarding
such condition or any such circumstances. In the event that any Holder, in its
sole discretion, undertakes at any time or from time to time to provide any such
information to Airways, such Holder shall be under no obligation (a) to
undertake any investigation not a part of its regular business routine, (b) to
disclose any information which such Holder, pursuant to accepted or reasonable
commercial finance or banking practices, wishes to maintain confidential or (c)
to make any other or future disclosures of such information or any other
information to Airways.

     8.   No Marshaling; Reinstatement. The Guarantor consents and agrees that
          ----------------------------
none of the Holders shall be under any obligation to marshal any assets in favor
of Airways or any other party or against or in payment of any or all of the
Additional Secured Obligations. The Guarantor further agrees that, to the extent
that the Company, Airways or any guarantor of all or any part of the Additional
Secured Obligations makes a payment or payments to any Holder, or such Holder
receives any proceeds of Collateral, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to the Company, Airways such other
guarantor, or any other Person, or their respective estates, trustees, receivers
or any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then, to the extent of such payment or repayment, the part of
the Additional Secured Obligations which has been paid, reduced or satisfied by
such amount shall be reinstated and continued in full force and effect as of the
time immediately preceding such initial payment, reduction or satisfaction as if
such payment or repayment had not been made. The Guarantor hereby agrees that it
will indemnify the Holders on demand for all costs and expenses (including
without limitation reasonable legal fees) incurred by such parties in connection
with such return of a payment or of Collateral proceeds by the Holder.

     9.   Subrogation, Contribution, Etc.  Until the Additional Secured
          ------------------------------
Obligations have been paid in full in cash, Airways hereby agrees not to assert
(a) any claim, right or remedy, direct or indirect, that Airways now has or may
hereafter have against the Company or any of its

                                       7
<PAGE>

assets in connection with the performance of its obligations hereunder, in each
case whether such claim, right or remedy arises in equity, under contract, by
statute (including, without limitation, under Section 509 of the Bankruptcy Code
or Section 2847, 2848 or 2849 of the California Civil Code), under common law or
otherwise and including without limitation (i) any right of subrogation,
reimbursement or indemnification that Airways now has or may hereafter have
against the Company, (ii) any right to enforce, or to participate in, any claim,
right or remedy that any Holder now has of may hereafter have against the
Company and (iii) any benefit of, and any right to participate in, any
collateral or security now or hereafter held by any Holder, and (b) any right of
contribution Airways may have against any guarantor of all or any part of the
Additional Secured Obligations (including, without limitation, any such right of
contribution under Section 2848 of the California Civil Code). The Guarantor
further agrees that, to the extent the foregoing agreement with respect to its
rights of subrogation, reimbursement, indemnification and contribution as set
forth herein is found by a court of competent jurisdiction to be void or
voidable for any reason, any rights of subrogation, reimbursement or
indemnification Airways may have against the Company or against any collateral
or security, and any rights of contribution Airways may have against any
guarantor, shall be subordinated to the payment of the Additional Secured
Obligations as set forth in Section 10.

     10.  Subordination.  Airways agrees that any and all claims of Airways
          -------------
against the Company, any endorser or any guarantor of all or any part of the
Additional Secured Obligations, or against any of their respective properties,
shall be subordinate and subject in right of payment to the prior payment, in
full and in cash, of all Additional Secured Obligations; provided, that the
Company may make payments to the Airways at any time or times when the Company
does not have any outstanding Additional Secured Obligations which are then due
and payable.  Notwithstanding any right of Airways to ask, demand, sue for, take
or receive any payment from the Company, all rights, liens and security
interests of Airways, whether now or hereafter arising and howsoever existing,
in any assets of the Company (whether constituting part of the security or
collateral given to any Holder to secure payment of all or any part of the
Additional Secured Obligations or otherwise) shall be and hereby are
subordinated to the rights of the Holders in those assets.  Except as permitted
by the Note Agreement, Airways shall have no right to possession of any such
asset or to foreclose upon any such asset, whether by judicial action or
otherwise, unless and until all of the Additional Secured Obligations shall have
been fully performed or paid in cash.  If all or any part of the assets of the
Company, or the proceeds thereof, are subject to any distribution, division or
application to the creditors of the Company, whether partial or complete,
voluntary or involuntary, and whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding, or if the business of the Company is dissolved or if
(except as permitted by the Note Agreement) substantially all of the assets of
the Company are sold, then, and in any such event, any payment or distribution
of any kind or character, either in cash, securities or other property, which
shall be payable or deliverable upon or with respect to any Indebtedness of the
Company to Airways ("Company Indebtedness") shall be paid or delivered directly
to the Holders for application on any of the Additional Secured Obligations, due
or to become due, until the Additional Secured Obligations shall have first been
fully paid in cash.  Airways irrevocably authorizes and empowers each Holder to
demand, sue for, collect and receive every such payment or distribution and give
acquittance therefor and to make and present for and on

                                       8
<PAGE>

behalf of Airways such proofs of claim and take such other action, in the
Holder's own name or in the name of Airways or otherwise, as such Holder may
deem necessary or advisable for the enforcement of this Agreement. Each Holder
may vote such proofs of claim in any such proceeding, receive and collect any
and all dividends or other payments or disbursements made on Company
Indebtedness in whatever form the same may be paid or issued and apply the same
on account of any of the Additional Secured Obligations. Subject to the provisos
to the first sentence of this Section 10, should any payment, distribution,
security or instrument or proceeds thereof be received by Airways upon or with
respect to the Company Indebtedness prior to the performance or payment in full
in cash of all of the Additional Secured Obligations, Airways shall receive and
hold the same in trust, as trustee, for the benefit of the Holders, and shall
forthwith deliver the same to the Holders, in precisely the form received
(except for the endorsement or assignment of Airways where necessary), for
application to any of the Additional Secured Obligations, due or not due, and,
until so delivered, the same shall be held in trust by Airways as the property
of the Holders. If Airways fails to make any such endorsement or assignment to
the Holders, the Required Holders or any of their respective officers or
employees are hereby irrevocably authorized to make the same. Airways agrees
that until the Additional Secured Obligations have been performed and paid in
full in cash, Airways will not assign or transfer to any Person any claim
Airways has or may have against the Company.

          11.  Enforcement; Amendments; Waivers.  No delay on the part of any of
               --------------------------------
the Holders  in the exercise of any right or remedy arising under this
Agreement, the Note Agreement, any of the other Transaction Documents or
otherwise with respect to all or any part of the Additional Secured Obligations,
the Collateral or any other guaranty of or security for all or any part of the
Additional Secured Obligations shall operate as a waiver thereof, and no single
or partial exercise by any such Person of any such right or remedy shall
preclude any further exercise thereof.  No modification or waiver of any of the
provisions of this Agreement shall be binding upon the Holders, except for such
modifications and waivers made in accordance with the Note Agreement.  Failure
by any of the Holders at any time or times hereafter to require strict
performance by the Company, Airways, any guarantor of all or any part of the
Additional Secured Obligations or any other Person of any of the provisions,
warranties, terms and conditions contained in any of the Transaction Documents
now or at any time or times hereafter executed by such Persons and delivered to
any Holder shall not waive, affect or diminish any right of such Holder at any
time or times hereafter to demand strict performance thereof and such right
shall not be deemed to have been waived by any act or knowledge of any Holder,
or their respective agents, officers or employees, unless such waiver is
contained in an instrument in writing, directed and delivered to the Company or
Airways, as applicable, specifying such waiver, and is signed by the party or
parties necessary to give such waiver under the Note Agreement.  No waiver of
any Event of Default by any Holder shall operate as a waiver of any other Event
of Default or the same Event of Default on a future occasion, and no action by
any Holder permitted hereunder shall in any way affect or impair any Holder's
rights and remedies or the Additional Secured Obligations of Airways under this
Agreement.  Any determination by a court of competent jurisdiction of the amount
of any principal and/or interest owing by the Company to the any of the Holders
shall be conclusive and binding on Airways irrespective of whether Airways was a
party to the suit or action in which such determination was made.

          12.  Effectiveness; Termination.  This Agreement shall become
               --------------------------
effective upon its

                                       9
<PAGE>

execution by Airways and shall continue in full force and effect and may not be
terminated or otherwise revoked until the Additional Secured Obligations shall
have been fully performed or paid in cash (except to the extent Airways is
released from its Additional Secured Obligations hereunder in accordance with
the Note Agreement). The Guarantor hereby expressly waives the benefits of
Section 2815 of the California Civil Code (or any similar law in any other
jurisdiction) purporting to allow a guarantor to revoke a continuing guaranty
with respect to any transactions occurring after the date of the guaranty. If,
notwithstanding the foregoing, Airways shall have any right under applicable law
to terminate or revoke its obligations under this Agreement, Airways agrees that
such termination or revocation shall not be effective until a written notice of
such revocation or termination, specifically referring hereto, signed by
Airways, is actually received by the Holders. Such notice shall not affect the
right and power of any Holder to enforce rights arising prior to receipt thereof
by the Holders. If any Holder grants any accommodations or takes other action
after Airways terminates or revokes this Agreement but before such Holder
receives such written notice, the rights of such Holder with respect thereto
shall be the same as if such termination or revocation had not occurred.

     13.  Successors and Assigns.  This Agreement shall be binding upon
          ----------------------
Airways and upon its successors and permitted assigns and shall inure to the
benefit of the Holders and their respective successors and permitted assigns
under the Note Agreement; all references herein to the Company and to Airways
shall be deemed to include their respective successors and assigns.  The
successors of Airways and the Company shall include, without limitation, their
respective receivers, trustees or debtors-in-possession.

     14.  Advice of Counsel.  Airways represents and warrants that it has
          -----------------
consulted with its legal counsel regarding all waivers under this Agreement,
including without limitation those under Section 4 and Sections 16 through 19
hereof, that it believes that it fully understands all rights that it is waiving
and the effect of such waivers, that it assumes the risk of any misunderstanding
that it may have regarding any of the foregoing, and that it intends that such
waivers shall be a material inducement to the Holders to extend the indebtedness
guaranteed hereby.

     15.  Notices. All notices and correspondences hereunder shall be in
          -------
writing and sent by certified or registered mail, return receipt requested, by
facsimile transmission or by overnight delivery service, with all charges
prepaid, as follows:

     (a)  if to the Holders:

          Boeing Capital Loan Corporation
          c/o Entity Services
          2325-B Renaissance Drive, Suite 8
          Las Vegas, Nevada 89119
          Attention: Ms. Kristine Epps
          Telephone: (702) 740-4244
          Facsimile: (702) 966-4247

          with a copy to:

                                      10
<PAGE>

          Boeing Capital Loan Corporation
          500 Naches Ave. S.W., 3/rd/ Floor
          MC 6Y-11
          Renton, Washington 98055
          Attention: Legal Department
          Facsimile: (425) 393-2903

          with a copy to:

          Sidley & Austin
          555 West Fifth Street
          Los Angeles, Ca 90019
          Attention: Robert W. Kadlec
          Telephone: (213) 896-6000
          Facsimile: (213) 896-6600

(b)       if to Airways, to
          AirTran Airways, Inc.
          9955 AirTran Boulevard
          Orlando, Florida 32827
          Telephone: (407) 251-5600
          Facsimile: (407) 251-5567

          with copies to:

          Smith, Gambrell & Russell, LLP
          Suite 3100
          1230 Peachtree St., NE
          Atlanta, GA 30309
          Attention: Howard E. Turner or John R. Schneider
          Facsimile: (404) 685-6894 or (404) 685-6961

All such notices and correspondence shall be deemed given (i) if sent by
certified or registered mail, three Business Days after being postmarked, (ii)
if sent by overnight delivery service, when received at the above stated
addresses or when delivery is refused and (iii) if sent by facsimile
transmission, upon receipt of such transmission.

          16.  GOVERNING LAW.  THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
               -------------
THIS AGREEMENT AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS
OTHER THAN THOSE CONTAINED IN NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401)
AND DECISIONS OF THE STATE OF NEW YORK.

                                      11
<PAGE>

          17.  SUBMISSION TO JURISDICTION.  ALL DISPUTES AMONG AIRWAYS AND THE
               --------------------------
HOLDERS, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, AND THE
COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE
HOLDERS SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO
PROCEED AGAINST AIRWAYS OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED BY
THE HOLDERS IN GOOD FAITH TO ENABLE THE HOLDERS TO REALIZE ON SUCH PROPERTY, OR
TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDERS.  AIRWAYS
AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-
CLAIMS IN ANY PROCEEDING BROUGHT BY THE HOLDERS.  AIRWAYS WAIVES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE HOLDERS HAVE
COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.

          18.  JURY TRIAL.  AIRWAYS, THE HOLDERS EACH HEREBY WAIVE ANY RIGHT TO
               ----------
A TRIAL BY JURY.  INSTEAD, ANY DISPUTES WILL BE RESOLVED IN A BENCH TRIAL.

          19.  LIMITATION OF LIABILITY.  NONE OF THE HOLDERS SHALL HAVE ANY
               -----------------------
LIABILITY TO AIRWAYS (WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR
LOSSES SUFFERED BY THE GUARANTOR OR ITS SUBSIDIARIES, AND THE GUARANTOR HEREBY
WAIVES AND RELEASES ANY CLAIMS, IN CONNECTION WITH, ARISING OUT OF, OR IN ANY
WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT,
OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION HEREWITH, UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON ANY
SUCH HOLDER, THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS CONSTITUTING
GROSS NEGLIGENCE, WILLFUL MISCONDUCT, BREACH OF CONTRACT OR KNOWING OR GROSSLY
NEGLIGENT VIOLATIONS OF APPLICABLE REQUIREMENTS OF LAW.  AIRWAYS AGREES NOT TO
ASSERT ANY CLAIM AGAINST ANY OF ANY HOLDER ON ANY THEORY OF LIABILITY FOR
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF, OR IN ANY
WAY IN CONNECTION WITH, THE COMMITMENTS, THE OBLIGATIONS OR ANY OTHER MATTERS
GOVERNED BY THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.

          20.  Severability.  Wherever possible, each provision of this
               ------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement.

          21.  Collateral.  Airways hereby acknowledges and agrees that its
               ----------
Additional Secured Obligations under this Agreement are secured pursuant to the
terms and provisions of the

                                      12
<PAGE>

Collateral Documents to which it is a party.

          22.  Merger.  This Agreement represents the final agreement of Airways
               ------
with respect to the matters contained herein and may not be contradicted by
evidence of prior or contemporaneous agreements, or subsequent oral agreements,
between Airways and any Holder.

          23.  Construction.
               ------------

          (a)  The parties acknowledge that each party and its counsel have
               reviewed and revised this Agreement and that the normal rule of
               construction to the effect that any ambiguities are to be
               resolved against the drafting party shall not be employed in the
               interpretation of this Agreement or any amendments hereto.

          (b)  The words "hereof", "herein" and "hereunder" and words of like
               import when used in this Agreement shall refer to this Agreement
               as a whole and not to any particular provision of this Agreement.

          (c)  All references in this Agreement in the singular shall be deemed
               to include the plural where the context so requires, and vice
               versa, unless otherwise specified.

          24.  Recourse Only to Security.  To secure payment of Airways'
               -------------------------
obligations under this Agreement, concurrently with the execution of this
Agreement, Airways has entered into Collateral Documents pursuant to which
Airways has granted to the Collateral Trustee for the benefit of the Holders a
security interest in the Collateral.  Notwithstanding any provisions in this
Agreement to the contrary, the personal liability of Airways to pay the
Additional Secured Obligations shall be limited to the Collateral.

          25.  Execution in Counterparts.  This Agreement may be executed in any
               -------------------------
number of counterparts and by different 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.

                    [REMAINDER OF PAGE INTENTIONALLY BLANK]

                                      13
<PAGE>

          IN WITNESS WHEREOF, this agreement has been duly executed by AirTran
Airways, Inc. as of the day and year first set forth above.

                              AIRTRAN AIRWAYS, INC.
                              a Delaware corporation

                              By:___________________________________
                              Name:  Steven A. Rossum
                              Title: Vice President and Treasurer

Acknowledged and agreed to
as of the 12/th/ day of April, 2001

BOEING CAPITAL LOAN CORPORATION,
AS THE INITIAL PURCHASER

By:
Name:
Title:
<PAGE>

                                   EXHIBIT F

                                FORM OF OPINION
<PAGE>

                                April 12, 2001

To the Persons
Listed on Schedule A Hereto

Ladies and Gentlemen:

          We have acted as special counsel to AirTran Holdings, Inc., a Nevada
corporation ("Holdings"), AirTran Airways, Inc., a Delaware corporation
              --------
("Airways"), and AirTran Airways 717 Leasing Corporation, a Delaware corporation
---------
("717 Leasing"), in connection with that certain Purchase Agreement, dated as of
  -----------
April 12, 2001, by and among Holdings, Airways and Boeing Capital Loan
Corporation (the "Purchase Agreement") and the transactions contemplated thereby
                  ------------------
and that certain Note Agreement, dated as of April 12, 2001, by and between
Holdings and each of the Purchasers Named in the Purchaser Schedule attached
thereto (the "Holdings Note Agreement") and the transactions contemplated
              -----------------------
thereby.  This opinion is rendered to you at the request of Holdings and Airways
pursuant to Section 3.4(a) of the Note Agreement and Section 9(a)(viii)(E) of
the Purchase Agreement.  Capitalized terms used herein without definition have
the same meanings as in the Purchase Agreement and/or the Note Agreement.

          In our capacity as special counsel, we have examined originals, or
copies certified or otherwise identified to our satisfaction, of the following
documents:

          (a)  The Purchase Agreement;

          (b)  The Indenture;

          (c)  The Series A Notes issued pursuant to the Purchase Agreement;

          (d)  The Collateral Support Agreement;
<PAGE>

[X]To the Persons
Listed on Schedule A Hereto
April 12, 2001
Page 2

          (e)  The Issuer Pledge and Security Agreement;

          (f)  The Collateral Trust Agreement;

          (g)  The Warrant Agreement;

          (h)  The Warrants;

          (i)  The Note Registration Rights Agreement;

          (j)  The Warrant and Convertible Note Registration Rights Agreement;

          (k)  The Aircraft Mortgage and Security Agreement;

          (l)  The Mortgage;

          (m)  The Holdings Note Agreement;

          (n)  The Series A Notes issued pursuant to the Holdings Note Agreement
          ---  (the "Holdings Series A Notes"); and
                      ----------------------

          (o)  The Series B Notes issued pursuant to the Holdings Note Agreement
          ---  (the "Holdings Series B Notes").
                     -----------------------

          The documents referred to in clauses (a) through (p) above are
collectively referred to herein as the "Transaction Documents."
                                        ---------------------

          We have also examined the originals, photocopies or conformed copies
of such records of Holdings and Airways and such agreements and certificates of
public officials, certificates of officers and representatives of such parties
and such other documents as we have deemed relevant and necessary as a basis for
the opinion hereinafter expressed. In all our examinations of documents, we have
assumed the genuineness of all signatures on original documents, the
authenticity of all documents submitted to us as originals, the conformity to
the originals of all copies submitted to us as conformed or photocopies, and the
authenticity of the originals of such latter documents. As to various questions
of fact material to our opinion, we have relied, without independent
investigation or verification thereof, upon statements of representatives of
Holdings, Airways and 717 Leasing and others, upon representations of Holdings,
Airways and 717 Leasing and others contained in the Transaction Documents, and
upon certificates of officers of Holdings,
<PAGE>

[X]To the Persons
Listed on Schedule A Hereto
April 12, 2001
Page 3

Airways and 717 Leasing and certificates of public officials. We also have
assumed (i) the valid authorization, execution, and delivery of the Transaction
Documents by all parties thereto (other than Holdings and Airways), (ii) that
except as expressly set forth in paragraphs 1 and 2 below, each party to the
Transaction Documents is validly existing and is in good standing under the laws
of the jurisdiction of its organization with the corporate or other
organizational power to perform its obligations thereunder, (iii) that each of
the Transaction Documents constitutes the legal, valid and binding obligation of
each party thereto (other than Holdings, Airways or 717 Leasing), enforceable
against each such other party in accordance with its terms, (iv) that all
parties to the Transaction Documents will at all times act in a commercially
reasonable manner, in good faith and in compliance with the implied covenant of
good faith and fair dealing, (v) that the Mortgage and any Financing Statements
give a correct address of the Collateral Trustee from which information
concerning the purported security interest perfected thereby may be obtained,
(vi) that Airways has rights in the Mortgaged Property in which Airways purports
to grant a security interest to the Collateral Trustee, and (vii) that each of
Airways, Holdings, 717 Leasing has rights in the Collateral in which such party
purports to grant a security interest to the Collateral Trustee under any
Transaction Documents.

          Subject to the foregoing and the other matters set forth herein, it is
our opinion that, as of the date hereof:

     1.   Holdings is validly existing and in good standing under the Nevada
Revised Statutes (the "NRS"). As used in this paragraph, "good standing" means
                       ---
that all required filings and registrations have been made under the applicable
filing and annual registration provisions of the NRS and that any filing fees
due and payable thereunder have been paid. Holdings has the corporate power and
authority (i) to own, lease and operate its properties and to conduct its
business as described in the Holdings SEC Documents and the Purchase Agreement,
(ii) to execute, deliver and perform the Purchase Agreement, Holdings Note
Agreement, the Warrant and Convertible Notes Registration Rights Agreement, the
Warrant Agreement, and the Collateral Documents to which it is a party and (iii)
to issue, deliver and sell the Holdings Series A Notes and the Holdings Series B
Notes as contemplated by the Holdings Note Agreement and the Warrants as
contemplated by the Purchase Agreement.

     2.   Airways is validly existing and in good standing under the Delaware
General Corporation Law (the "DGCL"). As used in this paragraph, "good standing"
                              ----
means that all required filings and registrations have been made under the
applicable filing and annual registration provisions of the DGCL and that any
filing fees due and payable thereunder have been paid. Airways has the corporate
power and authority (i) to own, lease and operate its properties and to conduct
its business as described in the Holdings SEC Documents, the Purchase Agreement
and the Indenture, (ii) to execute, deliver and perform the Purchase Agreement,
Indenture, the Note Registration Rights Agreement, the Collateral Documents to
which it is a party, the Collateral
<PAGE>

[X]To the Persons
Listed on Schedule A Hereto
April 12, 2001
Page 4

   Support Agreement, and (iii) to issue, deliver and sell the Series A Notes as
   contemplated by the Purchase Agreement and the Indenture.

     3.   Each of Holdings and Airways is in good standing in each jurisdiction
identified on Schedule B hereto, which are those jurisdictions identified to us
by Holdings and Airways as jurisdictions where the ownership, leasing or
operation of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have,
singly or in the aggregate, a Material Adverse Effect (taking into account in
determining materiality, the opinions of officers and other representatives of
Holdings and Airways). As used in this paragraph, "good standing" means that all
required filings and registrations have been made under the applicable filing
and annual registration provisions of the applicable business corporation
statutes and that any filing fees due and payable thereunder have been paid.

     4.   The capitalization of Holdings is as follows:

          Preferred Stock.  Five million (5,000,000) shares of preferred stock,
          ---------------
     and, to the best of our knowledge, none of such shares of preferred stock
     have been issued prior to the date hereof; and

          Common Stock.  One billion (1,000,000,000) shares of Common Stock, par
          ------------
     value of one-tenth of one cent ($.001) per share (the "Common Stock"), and,
                                                            ------------
     to the best of our knowledge,  66,583,000 shares of such Common Stock , as
     of March 31, 2001, were issued and are outstanding.

     5.   To the best of our knowledge, all of the issued and outstanding shares
of capital stock of Airways have been duly and validly authorized and are fully
paid and nonassessable, and are owned by Holdings, directly or indirectly, free
and clear of any Lien.

     6.   To the best of our knowledge, there are no outstanding subscriptions,
rights, warrants, options, calls, convertible securities, commitments for sale
or Liens related to or entitling any person to purchase or otherwise acquire any
shares of the capital stock of, or other ownership interest in Holdings or
Airways other than the Warrants, the Holdings Series B Notes and as disclosed in
the Holdings SEC Documents (except for subsequent issuances, if any, as
contemplated by employee stock options and benefit plans referred to in the
Holdings SEC Documents).

     7.   No authorization, approval, consent or order of, or filing with, any
Governmental Authority of the State of New York, the United States (other than
as may be required under the securities or blue sky laws of the various states,
as to which we express no opinion), or under the DGCL or the NRS is required for
the issuance and sale of the Series A Notes, Warrants,
<PAGE>

[X]To the Persons
Listed on Schedule A Hereto
April 12, 2001
Page 5

   Holdings Series A Notes or Holdings Series B Notes pursuant to the Purchase
   Agreement, the Warrant Agreement or the Holdings Note Agreement,
   respectively.

     8.   Indenture has been duly authorized, executed and delivered by Airways,
and, assuming due authorization, execution and delivery by the Indenture
Trustee, constitutes a valid and binding agreement of Airways, enforceable
against Airways in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent conveyances and transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally and except as
enforcement is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law) (which
limitations are hereinafter collectively referred to as the "Enforceability
                                                             --------------
Exceptions").
----------

     9.   The Purchase Agreement has been duly authorized, executed and
delivered by Holdings and Airways and constitutes a valid and binding agreement
of each of Holdings and Airways enforceable against each of Holdings and Airways
in accordance with its terms, except as enforcement may be limited as described
in the Enforceability Exceptions.

     10.  The Holdings Note Agreement has been duly authorized, executed and
delivered by Holdings and constitutes a valid and binding agreement of Holdings
enforceable against Holdings in accordance with its terms, except as enforcement
may be limited as described in the Enforceability Exceptions.

     11.  The Warrant Agreement has been duly authorized, executed and delivered
by Holdings and, assuming due authorization, execution and delivery by the
Warrant Agent, constitutes a valid and binding agreement of Holdings enforceable
against Holdings in accordance with its terms, except as enforcement may be
limited as described in the Enforceability Exceptions.

     12.  The Collateral Support Agreement has been duly authorized and, when
the Holdings Series A Notes and Holdings Series B Notes are executed and
authenticated in accordance with the provisions of the Note Agreement and
delivered to and paid for by the Purchasers thereof in accordance with the terms
of the Note Holdings Agreement, will be entitled to the benefits of the Holdings
Note Agreement and will constitute a valid and binding obligation of Airways,
enforceable against Airways in accordance with its terms, except as enforcement
may be limited as described in the Enforceability Exceptions.

     13.  The Note Registration Rights Agreement has been duly authorized,
executed and delivered by Airways and, assuming due authorization, execution and
delivery by the Initial Purchasers, constitutes a valid and binding agreement of
Airways, enforceable against Airways in accordance with its terms, except as
enforcement may be limited as described in the
<PAGE>

[X]To the Persons
Listed on Schedule A Hereto
April 12, 2001
Page 6

   Enforceability Exceptions and except as rights of indemnification and
   contribution thereunder may be limited by applicable law.

     14.  The Warrant and Convertible Note Registration Rights Agreement has
been duly authorized, executed and delivered by Holdings and, assuming due
authorization, execution and delivery by the Purchasers under the Holdings Note
Agreement and the Initial Purchasers under the Purchase Agreement, constitutes a
valid and binding agreement of Holdings, enforceable against Holdings in
accordance with its terms, except as enforcement may be limited as described in
the Enforceability Exceptions and except as rights of indemnification and
contribution thereunder may be limited by applicable law.

     15.  The Series A Notes have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and delivered
to and paid for by the Initial Purchasers in accordance with the terms of the
Purchase Agreement, will be entitled to the benefits of the Indenture and will
constitute valid and binding obligations of Airways, enforceable against it in
accordance with their terms, except as enforcement may be limited as described
in the Enforceability Exceptions.

     16.  The Airways Series B Senior Notes have been duly authorized by Airways
and, when issued, authenticated and delivered in accordance with the terms of
the Indenture and delivered in the Exchange Offer contemplated by the Note
Registration Rights Agreement, will be entitled to the benefits of the Indenture
and will constitute valid and binding obligations of Airways, enforceable in
accordance with their terms, except as enforcement may be limited as described
in the Enforceability Exceptions.

     17.  The Airways Series C Senior Notes have been duly authorized by Airways
and, when issued, authenticated and delivered in accordance with the terms of
the Indenture and delivered upon conversion of the Airways Series A Notes, will
be entitled to the benefits of the Indenture and will constitute valid and
binding obligations of Airways, enforceable in accordance with their terms,
except as enforcement may be limited as described in the Enforceability
Exceptions.

     18.  The Airways Series D Senior Notes have been duly authorized by Airways
and, when issued, authenticated and delivered in accordance with the terms of
the Indenture and when delivered either (a) in the Exchange Offer contemplated
by the Note Registration Rights Agreement or (b) upon conversion of the Airways
Series B Notes, will be entitled to the benefits of the Indenture and will
constitute valid and binding obligations of Airways, enforceable in accordance
with their terms, except as enforcement may be limited as described in the
Enforceability Exceptions.

     19.  The Holdings Series A Notes and Holdings Series B Notes have been duly
authorized
<PAGE>

[X]To the Persons
Listed on Schedule A Hereto
April 12, 2001
Page 7

   and, when executed in accordance with the provisions of the Holdings Note
   Agreement and delivered to and paid for by the Purchasers thereof in
   accordance with the terms of the Holdings Note Agreement, will be entitled to
   the benefits of the Holdings Note Agreement and will constitute valid and
   binding obligations of Holdings, enforceable against it in accordance with
   their terms, except as enforcement may be limited as described in the
   Enforceability Exceptions.

     20.  Each of the Collateral Trust Agreement, the Aircraft Mortgage and
Security Agreement, the Issuer Pledge and Security Agreement, and the Mortgage
has been duly authorized, executed and delivered by Airways and, assuming due
authorization, execution and delivery by the Collateral Trustee, constitutes a
valid and binding agreement of each of Airways and 717 Leasing, enforceable
against each of Airways and 717 Leasing in accordance with their terms, except
as enforcement may be limited as described in the Enforceability Exceptions.

     21.  The shares of Common Stock issuable upon conversion of the Convertible
Notes when and if issued, upon such conversion in accordance with the
Convertible Note and the Holdings Note Agreement, will be duly issued, fully
paid and nonassessable. The shares of Common Stock issuable upon exercise of the
Warrants when and if issued, upon such exercise and payment of the exercise
price in accordance with the Warrant Agreement and the Warrant, will be duly
issued, fully paid and nonassessable.

     22.  Assuming the accuracy of the representations, warranties and covenants
of the Initial Purchasers set forth in the Purchase Agreement and the Purchasers
set forth in the Note Agreement, (i) no registration of the Series A Notes, the
Holdings Series A Notes, the Holdings Series B Notes, the Collateral Support
Agreement, the Warrants under the Securities Act of 1933, as amended (the
"Securities Act"), is required and (ii) no qualification of the Indenture under
 --------------
the Trust Indenture Act of 1939, as amended (the "TIA"), is required, in each
                                                  ---
case in connection with the offer, sale and delivery of the Holdings Series A
Notes, the Holdings Series B Notes, Collateral Support Agreement, the Series A
Notes or the Warrants.

     23.  Neither the execution and delivery by Airways of the Transaction
Documents to which it is a party, nor the consummation by Airways of the
transactions contemplated thereby: (a) violates Airway's Charter Documents, (b)
violates any law or regulation (including any applicable order or decree of any
Governmental Authority) of the United States or of the State of New York, known
to us as applicable to Airways, the violation of which would result in a
Material Adverse Effect (taking into account in determining materiality, the
opinions of officers and other representatives of Airways); (c) to the best of
our knowledge, conflicts with or results in the breach or termination of,
constitutes a default under or accelerates or permits the acceleration of any
performance required by any indenture, mortgage, deed of trust, lease, agreement
or other instrument known to us to which Airways is a party or by which Airways
or
<PAGE>

[X]To the Persons
Listed on Schedule A Hereto
April 12, 2001
Page 8

     any of the property of Airways is bound; (d) to the best of our knowledge,
     results in the creation or imposition of any Lien upon any of the assets of
     Airways (except for the Liens created by the Transaction Documents,
     Permitted Liens and Identified Liens); or (e) requires the consent or
     approval of, or, except for (A) the filings referred to in paragraph 27
     hereof and (B) the filing of the Aircraft Mortgage and Security Agreement
     in the aircraft registry maintained by the Federal Aviation Administration
     in Oklahoma City, Oklahoma, any filing or registration with, any
     Governmental Authority of the United States or of the State of New York.

       24.  Neither the execution and delivery by Holdings of the Transaction
Documents to which it is a party, nor the consummation by Holdings of the
transactions contemplated thereby: (a) violates Holding's Charter Documents, (b)
violates any law or regulation (including any applicable order or decree of any
Governmental Authority) of the United States or of the State of New York, known
to us as applicable to Holdings, the violation of which would result in a
Material Adverse Effect (taking into account in determining materiality, the
opinions of officers and other representatives of Holdings); (c) to the best of
our knowledge, conflicts with or results in the breach or termination of,
constitutes a default under or accelerates or permits the acceleration of any
performance required by any indenture, mortgage, deed of trust, lease, agreement
or other instrument to which Holdings is a party or by which Holdings or any of
the property of Holdings is bound; (d) to the best of our knowledge, results in
the creation or imposition of any Lien upon any of the assets of Holdings
(except for the Liens created by the Transaction Documents, Permitted Liens and
Identified Liens); or (e) requires the consent or approval of, or, except for
(A) the filings referred to in paragraph 27 hereof and (B) the filing of the
Aircraft Mortgage and Security Agreement in the aircraft registry maintained by
the Federal Aviation Administration in Oklahoma City, Oklahoma, any filing or
registration with, any Governmental Authority of the United States or of the
State of New York.

       25.  To the best of our knowledge, (i) neither of Holdings nor Airways is
in violation of its respective Charter Documents and (ii) Holdings has filed all
material contracts required to be filed with or in connection with the Holdings
SEC Documents.

       26.  Upon delivery pursuant to the Indenture to the Collateral Trustee of
certificates representing the Pledged Shares (as defined in the Issuer Pledge
and Security Agreement), together with undated stock powers duly endorsed in
blank, and assuming that the Collateral Trustee at all times holds the Pledged
Shares and that the Collateral Trustee takes possession of the Pledged Shares in
good faith and without notice of any adverse claim (as such term is used in
Section 8-302 of the UCC in effect in the State of New York), the Issuer Pledge
and Security Agreement creates a valid and perfected security interest in the
Pledged Shares in favor of the Collateral Trustee, on behalf of and for the
benefit of the holders of Holdings Series A Notes, the Holdings Series B Notes
and the Series A Notes, subject to no other equal or prior consensual
<PAGE>

[X]To the Persons
Listed on Schedule A Hereto
April 12, 2001
Page 9

    security interest which can be perfected under the UCC in favor of any other
    person except as set forth in the Collateral Trust Agreement.

       27.  The provisions of the Issuer Pledge and Security Agreement are
sufficient to grant to the Collateral Trustee on behalf of the Holders of
Secured Debt (as defined in the Collateral Trust Agreement) a security interest
in all right, title and interest of Airways in the Collateral. Assuming that the
"Financing Statements" have been filed in the "Filing Offices" and have not
subsequently been released, terminated or modified, the Collateral Trustee's
security interest in the Collateral has been perfected to the extent such
security interest may be perfected under the (New York) Uniform Commercial Code
by the filing of the Financing Statements.

       28.  The Mortgage is in proper form to create a valid lien under Florida
law in favor of the Collateral Trustee upon the interest of Airways in the real
property described therein. The recordation of the Mortgage in the "Official
Records" of the county where the premises described therein are located is the
only recordation of filing necessary to give constructive notice of such lien to
subsequent purchasers and mortgages of the real property described therein.

       29.  Assuming the accuracy of the representations of Holdings and Airways
in the Transaction Documents as to the use of the proceeds of the transactions
contemplated thereby, neither the consummation of the transactions contemplated
by the Purchase Agreement, the Holdings Note Agreement nor the sale, issuance,
execution or delivery of the Series A Notes, Holdings Series A Notes or Holdings
Series B Notes will violate Regulation T, U or X of the Board of Governors of
the Federal Reserve System.

       30.  To the best of our knowledge, neither Holdings nor Airways is an
"investment company" registered or required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended.

       31.  To the best of our knowledge, neither Holdings nor Airways is a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.

       32.  The Indenture complies as to form in all material respects with the
requirements of the TIA and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder. It is not necessary in
connection with the offer, sale and delivery of the Series A Notes to the
Initial Purchasers in the manner contemplated by the Purchase Agreement or in
connection with the Exempt Resales to qualify the Indenture under the TIA.

            Although we are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Holdings 10-K or the
<PAGE>

[X]To the Persons
Listed on Schedule A Hereto
April 12, 2001
Page 10

exhibits thereto and, taking into account in determining materiality, the
opinions of officers and other representatives of Holdings, in the course of our
participation in the preparation by Holdings of the Holdings 10-K prior to the
date hereof, no facts have come to our attention which would cause us to believe
that the Holdings 10-K as of the date thereof, contained any untrue statement of
a material fact or omitted to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading (provided that we express no opinion or belief regarding
the financial statements and related schedules and other financial and
statistical data contained in the Holdings 10-K).

          The opinions expressed above are subject to the following additional
assumptions, qualifications, limitations and exceptions: (a) with respect to the
good standing or due qualification of Holdings and Airways to transact business
as a foreign corporation in any state, the opinions herein are given exclusively
in reliance upon certificates and other written statements of public officials
from such states to such effect; (b) no opinion is expressed herein with respect
to the enforceability of any provision of the Transaction Documents providing
for (i) indemnification for or contribution with respect to securities laws
liabilities to the extent that the enforceability of such provisions may be
limited by applicable federal and state securities laws and general principles
of public policy; (ii) any waiver of the right to jury trial or service with
process by service upon a designated third party or (iii) any waiver of any
other constitutional or statutory right; (c) no opinion is expressed herein as
to the right, title or interest of any party in or to any of the Collateral or,
except as expressly provided in paragraphs 26 and 27 above, as to the perfection
or priority of any security interest or lien on the Collateral; (d) in
connection with the provisions of the Transaction Documents whereby Holdings or
Airways submits to the jurisdiction of (i) the United States District Court for
the Southern District of New York, we note the limitations of 28 U.S.C. (S)(S)
1331 and 1332 on Federal court jurisdiction, and we also note that such
submissions cannot supersede such court's discretion in determining whether to
transfer an action from one Federal court to another under 28 U.S.C. (S) 1404(a)
and (ii) the New York courts in New York County, we note that such submission
cannot supersede that court's discretion in determining whether to transfer the
place of trial under NYCPLR (S) 510; (e) no opinion is expressed herein as to
any law relating to permissible rates of interest or the computation or
disclosure of interest or any fraudulent transfer laws; (f) such opinions are
subject to the possible unenforceability of provisions requiring indemnification
for, or providing exculpation, release or exemption from liability for action or
inaction, to the extent such action or inaction involves gross negligence or
willful misconduct or to the extent contrary to public policy; (g) such opinions
are subject to the possible unenforceability of waivers or advance consents that
have the effect of waiving statutes of limitations, marshaling of assets or
similar requirements and to the effect of course of dealing, course of
performance, or the like that would modify the terms of an agreement or the
respective rights or obligations under an agreement; (h) such opinions are
subject to the possible unenforceability of provisions that enumerated remedies
are not exclusive
<PAGE>

[X]To the Persons
Listed on Schedule A Hereto
April 12, 2001
Page 11

or that a party has the right to pursue multiple remedies without regard to
other remedies elected or that all remedies are cumulative; (i) such opinions
are subject to the effect of laws requiring mitigation of damages, the possible
unenforceability of provisions that the provisions of an agreement are severable
or that modifications thereto may be made only in writing and the possible
unenforceability of provisions permitting the exercise, under certain
circumstances, of rights without notice or without providing opportunity to cure
failures to perform; (j) the provisions of the Transaction Documents that permit
any other party to take actions or to make determinations may be subject to
requirements that such actions or determinations be reasonable and taken or made
in good faith; (k) the qualification of such opinions for Enforceability
Exceptions also includes the following concepts: (A) principles governing the
availability of specific performance, injunctive relief and other traditional
equitable remedies, (B) principles affording traditional equitable defenses, (C)
impracticability or impossibility of performance, (D) the effect of obstruction,
failure to perform or otherwise act in accordance with an agreement by any
person other than Holding or Airways and (E) unconscionability; (l) we have
assumed that the Transaction Documents and the transactions contemplated thereby
are not within the prohibitions of Section 405 of the Employee Retirement Income
Security Act of 1974; and (m) with respect to Holdings' or Airways' rights in or
title to any Collateral, we express no opinion.

          Whenever the opinions expressed above are qualified by the phrase "to
the best of our knowledge," the phrase "known to us" or a phrase of similar
import, it indicates that, during the course of our representation of the
Holdings and Airways, and each of them, in connection with the subject
transaction, no facts have come to the attention of lawyers who have directly
worked on the subject transaction that would cause us to believe that such
opinions are incorrect. The quoted phrases or any phrase of similar import does
not include any information not within the current awareness of lawyers who have
directly worked on the subject transaction that might be revealed if a canvas of
other lawyers in our firm were made, if our firm's files were diligently
searched or if any other investigation were made.

          Our opinions expressed in this letter are limited to the federal laws
of the United States of America, the laws of the State of New York, the DGCL,
the NRS and, as to the opinion in paragraph 28 hereof, the laws of the State of
Florida. Our opinions are rendered only with respect to the laws and the rules,
regulations and orders under such laws as currently in effect. Although we are
not admitted to practice law in the States of New York, Delaware or Nevada, as
to the laws of the State of New York and the DGCL and NRS, we have made such
examination of such laws as we have deemed necessary to form the basis of this
opinion. We have also relied, with your permission, upon the opinion addressed
to you of even date herewith of Richard P. Magurno, Senior Vice President and
General Counsel of Holdings, Airways and 717 Leasing with respect to matters
contained therein to the extent relevant to our opinions herein.
<PAGE>

[X]To the Persons
Listed on Schedule A Hereto
April 12, 2001
Page 12

          This opinion is rendered only to the addressees and is solely for the
addressees' benefit  in connection with the transactions contemplated by the
Transaction Documents and may not be relied upon by you for any other purpose,
or used, circulated, quoted or relied upon by any other person, firm or
corporation for any purpose, without our prior written consent.

                              Very truly yours,

                              SMITH, GAMBRELL & RUSSELL, LLP

                              By:
                                    Howard E. Turner

<PAGE>

                                  SCHEDULE A

          Boeing Capital Loan Corporation, as Purchaser of the Holdings Notes
          c/o Entity Services
          2325-B Renaissance Drive, Suite 8
          Las Vegas, NV 89119

          Boeing Capital Loan Corporation, as Purchaser of the Airways Notes
          c/o Entity Services
          2325-B Renaissance Drive, Suite 8
          Las Vegas, NV 89119

          Wilmington Trust Company, as Collateral Trustee
          Rodney Square North
          1100 North Market Street
          Wilmington, DE 19890
          Attn.: Corporate Trust Administration

<PAGE>

                                  SCHEDULE B

                                QUALIFICATIONS
                                --------------

HOLDINGS
--------

Florida
Georgia
Nevada
New Jersey

AIRWAYS
-------

Delaware
Florida
Georgia
Louisiana
Michigan
Minnesota
New Jersey
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Texas
Virginia
<PAGE>

                                  EXHIBIT F-1

                    FORM OF OPINION OF FAA SPECIAL COUNSEL
<PAGE>

                                   EXHIBIT G

                           FORM OF AIRCRAFT MORTGAGE
<PAGE>

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

                   AIRCRAFT MORTGAGE AND SECURITY AGREEMENT

                          dated as of April 12, 2001

                                    between

                             AIRTRAN AIRWAYS, INC.

                                      and

                           WILMINGTON TRUST COMPANY,
              not in its individual capacity, except as otherwise
               provided herein, but solely as Collateral Trustee
                                 and Mortgagee

--------------------------------------------------------------------------------
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                                            <C>
ARTICLE I DEFINITIONS                                                                                           4

ARTICLE II [INTENTIONALLY OMITTED]                                                                              4

ARTICLE III [INTENTIONALLY OMITTED]                                                                             4

ARTICLE IV OWNER'S COVENANTS, REPRESENTATIONS AND WARRANTIES                                                    4
 4.01  Liens                                                                                                    4
 4.02  Possession; Operation and Use; Maintenance; Registration; Markings; Spare Parts                          4
 4.03  Inspection                                                                                              13
 4.04  Replacement and Pooling of Parts; Alterations, Modifications, and Additions; Substitution of Engines    13
 4.05  Loss, Destruction, or Requisition; Sale of any Aircraft, Airframe, Engines or Parts                     17
 4.06  Insurance                                                                                               23

ARTICLE V EVENTS OF DEFAULT; REMEDIES                                                                          24
 5.01  Event of Default                                                                                        24
 5.02  Remedies                                                                                                24
 5.03  Return of Aircraft, etc.                                                                                24
 5.04  Remedies Cumulative                                                                                     25
 5.05  Discontinuance of Proceedings                                                                           26
 5.06  Appointment of Receiver                                                                                 26
 5.07  Mortgagee Authorized to Execute Bills of Sale, etc.                                                     26

ARTICLE VI MORTGAGEE'S DUTIES                                                                                  26
 6.01  No Duties Except as Specified in Mortgage or Instructions                                               26
 6.02  No Action Except Under Mortgage or Instructions                                                         27

ARTICLE VII THE MORTGAGEE                                                                                      27
 7.01  Acceptance of Trusts and Duties                                                                         27
 7.02  Absence of Duties                                                                                       27
 7.03  No Representations or Warranties as to Aircraft or Documents                                            27

ARTICLE VIII INDEMNIFICATION                                                                                   28

ARTICLE IX RESIGNATION OF MORTGAGEE; APPOINTMENT OF
</TABLE>
<PAGE>

<TABLE>
<S>                                                                          <C>
  SUCCESSOR                                                                  28

ARTICLE X SUPPLEMENTS AND AMENDMENTS                                         28

ARTICLE XI MISCELLANEOUS                                                     28
   11.01  Termination of Mortgage; Partial Termination of Mortgage           28
   11.02  No Legal Title to Collateral in Holders                            28
   11.03  Sale of Aircraft by Mortgagee Is Binding                           29
   11.04  Mortgage for Benefit of the Company, Mortgagee, and the Holders    29
   11.05  Notices                                                            29
   11.06  Severability                                                       29
   11.07  No Oral Modification or Continuing Waiver                          29
   11.08  Successors and Assigns                                             29
   11.09  Headings                                                           30
   11.10  Normal Commercial Relations                                        30
   11.11  Governing Law; Jurisdiction; Service of Process                    30
   11.12  Counterpart Originals                                              30
   11.13  Bankruptcy                                                         30
</TABLE>

Annexes and Schedules

Annex A - Definitions
Annex B - Insurance

Schedule 1 - Description of Airframes and Engines
Schedule 2 - Permitted Countries
Schedule 3 - Locations of Spare Parts
Schedule 4 - Encumbered Engines

AIRCRAFT MORTGAGE AND SECURITY AGREEMENT                                  PAGE 3
<PAGE>

                   AIRCRAFT MORTGAGE AND SECURITY AGREEMENT

     This AIRCRAFT MORTGAGE AND SECURITY AGREEMENT dated as of April 12, 2001
(as the same may be amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms hereof, this "Mortgage"), between
AIRTRAN AIRWAYS, INC., a Delaware corporation (the "Company"), and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, not in its individual capacity,
except as otherwise provided herein, but solely as Collateral Trustee and
mortgagee (together with its successors and assigns, in such capacity,
"Mortgagee") under this Mortgage for the Holders of the Secured Debt referred to
below.

                                   Recitals:

     A.   WHEREAS, the Company, the Subsidiary Guarantors (this and other
capitalized terms shall have the meanings set forth or incorporated by reference
in Article I) and the Indenture Trustee are parties to the Indenture;

     B.   WHEREAS, the Company, AirTran Holdings, Inc., a Nevada corporation
("Holdings"), and Boeing Capital Loan Corporation, as initial purchaser, are
parties to the Company Note Purchase Agreement;

     C.   WHEREAS, Holdings, Mortgagee and the purchasers named therein are
parties to the Holdings Note Purchase Agreement;

     D.   WHEREAS, the Company, the Subsidiary Grantors, the subsidiaries of the
Company listed therein and Mortgagee have entered into the Collateral Trust
Agreement to evidence the creation of the Trust Estate;

     E.   WHEREAS, in connection with the Indenture, the Company Note Purchase
Agreement and the Holdings Note Purchase Agreement, the Company and the other
Grantors will, concurrently with the execution of the Collateral Trust
Agreement, enter into this Mortgage and the other Security Documents, to secure
the Secured Debt on the terms and conditions set forth therein and herein;

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company agrees, for the
benefit of each Holder, as follows:

                                GRANTING CLAUSE

     NOW, THEREFORE, THIS MORTGAGE WITNESSETH, that, to secure the prompt
payment, observance and performance of the Secured Debt, and in consideration of
the premises and of the covenants herein, and for other good and valuable
consideration the receipt and
<PAGE>

adequacy of which are hereby acknowledged, the Company hereby grants to
Mortgagee (and its successors in trust and assigns), for the security and
benefit of the Holders, a first priority security interest in, and a first
mortgage Lien on, all the Company's right, title, and interest in, to, and under
the following described property, rights, and privileges, whether existing or
hereafter acquired (which, collectively, together with all property hereafter
specifically subject 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 Airframes and Engines as more particularly
described in Schedule 1, whether or not any such Engine is installed on or
attached to an Airframe or any other airframe, including all Parts included
within the definitions of "Airframe" or "Engine", including all substitutions,
renewals, and replacements of and additions, improvements, accessions, and
accumulations to the Airframes and Engines (other than additions, improvements,
accessions, and accumulations excluded from the definition of Parts), and all
Aircraft Documents;

     (2)  the Spare Parts and other equipment and inventory, wherever located,
whether now or hereafter existing or acquired, used or useable in connection
with the operation and/or maintenance of any Aircraft, any Engine or any B717
Aircraft;

     (3)  each Lease Assignment and each assigned Permitted Lease (to the extent
assigned under the applicable Lease Assignment), and all rents, maintenance
reserves, supplemental rent or other payments of any kind made under such
assigned Permitted Lease (collectively, "Rent") (to the extent assigned under
such Lease Assignment) and all rights, powers, privileges, options, collateral,
and other benefits of the Company under such assigned Permitted Lease, exclusive
of, in each case, Excluded Payments;

     (4)  any assignable warranty or indemnity, express or implied, as to title,
materials, workmanship, design, or patent infringement or related matters with
respect to any Airframe, the Engines, the Spare Parts or any other property
described in these Granting Clauses, exclusive of, in each case, Excluded
Payments;

     (5)  all proceeds from the requisition of title to or use of any Aircraft
or Engine by any Government Entity, or from any other disposition of an Aircraft
by the Company, or from Mortgagee's sale or other disposition of any Aircraft,
Airframe or Engine, or other property described in any of these Granting Clauses
pursuant to the terms of this Mortgage, and all insurance proceeds with respect
to any Aircraft, Airframe or Engine, or any part thereof, but excluding any
insurance maintained by the Company and not required under (S) 4.06;

     (6)  all rents, revenues, and other proceeds collected by Mortgagee
pursuant to (S) 5.03(b), and all money and securities from time to time
deposited or required to be deposited with Mortgagee by or for the account of
the Company pursuant to any terms of this Mortgage held or required to be held
by Mortgagee hereunder; and

     (7)  all proceeds of the foregoing.

                                                                          PAGE 5
<PAGE>

     Provided, that notwithstanding any of the foregoing provisions, if no Event
of Default exists, (a) Mortgagee shall not take or cause to be taken any action
contrary to the Company's right hereunder to quiet enjoyment of the Collateral,
and to possess, use, retain, and control the Collateral and all revenues,
income, and profits derived therefrom, and (b) the Company shall have the right,
to the exclusion of Mortgagee, to exercise in the Company's name all rights and
powers under, and to retain any recovery or benefit resulting from the
enforcement of, any warranty or indemnity relating to the Collateral, and (c)
the Company shall have the right to the exclusion of Mortgagee, with respect to
each assigned Permitted Lease, to exercise in the Company's name all rights and
powers of the lessor and to retain all Rent and other payments due thereunder.

                                HABENDUM CLAUSE

     To have and to hold all and singular the aforesaid property unto Mortgagee,
and its successors and assigns, in trust for the benefit and security of the
Holders as provided in the Collateral Trust Agreement, and for the uses and
purposes, and subject to the terms and provisions, in this Mortgage.

     Anything herein to the contrary notwithstanding, the Company shall remain
liable under the Mortgagee Agreements to perform all of the obligations that it
assumes thereunder, except to the extent prohibited or excluded from doing so
pursuant to the terms and provisions thereof, and Mortgagee and the Holders
shall have no obligation or liability under the Mortgagee Agreements by reason
of or arising out of the assignment hereunder, nor shall Mortgagee or the
Holders be required or obligated in any manner to perform or fulfill any of the
Company's obligations under or pursuant to the Mortgagee 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 Company hereby constitutes Mortgagee the true and lawful attorney of
the Company, 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 Company 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 Rent and insurance and requisition proceeds) due
and to become due under or arising out of the Mortgagee 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 that
Mortgagee deems necessary or advisable in connection with this Mortgage;
provided, that Mortgagee shall not exercise any such rights except during the
existence of an Event of Default.

     Upon Mortgagee's written request, the Company will promptly and duly
execute and deliver (or cause to be duly executed and delivered) any and all
such further instruments and documents (including UCC continuation statements)
as Mortgagee reasonably deems necessary to perfect, preserve, or protect the
mortgage, security interests, and assignments created or intended to be created
hereby, or to obtain for Mortgagee the full benefits of the assignment

                                                                          PAGE 6
<PAGE>

hereunder and of the rights and powers herein granted.

     Any and all property described or referred to in the granting clauses
hereof which the Company acquires in the future shall ipso facto, and without
any other conveyance, assignment, or act on the part of the Company or
Mortgagee, become and be subject to the Lien herein granted as fully and
completely as though specifically described herein, but nothing in this
paragraph shall modify or change the Company's obligations in the foregoing
paragraphs.

     The Company and Mortgagee further agree as follows:

                             ARTICLE I DEFINITIONS

     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.

                      ARTICLE II [INTENTIONALLY OMITTED]

                      ARTICLE III [INTENTIONALLY OMITTED]

         ARTICLE IV OWNER'S COVENANTS, REPRESENTATIONS AND WARRANTIES

     4.01 Liens

     The Company will not directly or indirectly create, incur, assume, or
suffer to exist any Lien on the Aircraft including any Airframe or Engine or any
other Collateral, title to any of the foregoing, or any interest of the Company
therein, except Permitted Liens.  The Company shall promptly, at its own
expense, take such action as may be necessary duly to discharge (by bonding or
otherwise) any Lien other than a Permitted Lien arising at any time.

     4.02 Possession; Operation and Use; Maintenance; Registration; Markings;
Spare Parts

     (a)  General.  Except as otherwise expressly provided herein, the Company
          -------
shall be entitled to operate, use, locate, employ, or otherwise utilize or not
utilize any Airframe, Engine or Part in any lawful manner or place in accordance
with the Company's business judgment.

     (b)  Possession.  The Company shall not, without Mortgagee's prior written
          ----------
consent, lease or otherwise in any manner deliver, transfer, or relinquish
possession of any Aircraft, Airframe or Engine, or install any Engine, or permit
any Engine to be installed on any airframe other than the Airframe for which it
was purchased except that the Company may, without such prior written consent:

          (1)  subject or permit any Permitted Lessee to subject (aa) any
     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 the
     Company or such Permitted Lessee in the ordinary course of business;
     provided, that no such agreement or arrangement requires the transfer of
     title

                                                                          PAGE 7
<PAGE>

     to any such Engine and if the Company's title to any such Engine is
     divested nonetheless 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 the Company shall comply with (S) 4.04(e) in respect
     thereof;

               (2)  deliver or permit any Permitted Lessee to deliver possession
     of any Aircraft, Airframe, Engine, or any Part (aa) to the manufacturer
     thereof or to any third-party maintenance provider for testing, service,
     repair, maintenance, or overhaul work on such Aircraft, Airframe, Engine,
     or Part, or, to the extent required or permitted by (S) 4.04, for
     alterations or modifications in or additions to such Aircraft, Airframe, or
     Engine, or (bb) to any Person for the purpose of transport to a Person
     referred to in the preceding clause (aa);

               (3)  install or permit any Permitted Lessee to install an Engine
     on an airframe owned by the Company or such Permitted Lessee free and clear
     of all Liens, except (aa) Permitted Liens and those that do not apply to
     the Engines, and (bb) the rights of third parties under normal interchange
     or pooling agreements and arrangements of the type permitted under (S)
     4.02(b)(1);

               (4)  install or permit any Permitted Lessee to install an Engine
     on an airframe leased to the Company or such Permitted Lessee, or purchased
     or owned by the Company or such Permitted Lessee, subject to a security
     agreement, conditional sale, or other secured financing arrangement, but
     only if (aa) such airframe is free and clear of all Liens, except (i) the
     rights of the parties to such lease, or any such secured financing
     arrangement, covering such airframe, and (ii) Liens of the type permitted
     by clause (3) of this (S) 4.02(b), and (bb) the Company or Permitted Lessee
     has received from the lessor, secured party, or conditional seller, in
     respect of such airframe, a written agreement (which may be a copy of the
     lease, security agreement, conditional sale agreement, 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 the installation of such Engine on such airframe at any time
     while such Engine is subject to the Lien of this Mortgage;

               (5)  install or permit any Permitted Lessee to install an Engine
     on an airframe owned by or leased to the Company or such Permitted Lessee
     subject to a conditional sale or other security agreement under
     circumstances where neither clause (3) nor clause (4) of this (S) 4.02(b)
     applies; provided, that any such installation shall be deemed an Event of
     Loss with respect to such Engine, and the Company shall comply with (S)
     4.04(e) in respect thereof;

               (6)  transfer or permit any Permitted Lessee to transfer
     possession of any Aircraft, Airframe, or Engine to the U.S. Government, in
     which event the Company shall promptly notify Mortgagee in writing of any
     such transfer of possession (and, in the case of any transfer pursuant to
     CRAF, such notification shall identify by name, address, and telephone
     numbers the Contracting Office Representative or Representatives for the
     Air Mobility Command of the United States Air Force to whom notices must be
     given and to

                                                                          PAGE 8
<PAGE>

     whom requests or claims must be made to the extent applicable under CRAF);

               (7)  enter into a Wet Lease with respect to any Aircraft or
     Airframe or any other aircraft on which an Engine may be installed (which
     shall not be considered a transfer of possession hereunder); provided, that
     the Company's obligations hereunder shall continue in full force and effect
     notwithstanding any Wet Lease;

               (8)  if no Significant Default or Event or Default exists, and
     subject to the paragraph immediately following clause (9) below, enter into
     a lease with respect to any Aircraft, Airframe, or Engine to any Permitted
     Air Carrier or Permitted Manufacturer who is not then subject to any
     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; but
     only if, in the case only of a lease to a Permitted Foreign Air Carrier or
     non-U.S. Permitted Manufacturer, the Company furnishes Mortgagee a
     favorable opinion, in form and substance reasonably satisfactory to
     Mortgagee, of independent counsel, selected by the Company and reasonably
     satisfactory to Mortgagee, located in the country of domicile of such
     Permitted Foreign Air Carrier or non-U.S. Permitted Manufacturer, that (aa)
     the terms of such lease are the legal, valid, and binding obligations of
     the parties thereto, enforceable under the laws of such jurisdiction, (bb)
     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
     of the proposed lease, (cc) the validity, priority, and perfection of
     Mortgagee's Lien in respect of such Aircraft, Airframe, and Engines will be
     recognized and enforceable in such jurisdiction, (dd) 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 such Aircraft, Airframe, or Engines in the event
     of the requisition by such government of such title (unless the Company
     provides insurance in the amounts required with respect to hull insurance
     under this Mortgage covering the requisition of title to such Aircraft,
     Airframe, or Engines by the government of such jurisdiction so long as such
     Aircraft, Airframe, or Engines are subject to such lease), (ee) such
     Permitted Air Carrier's or Permitted Manufacturer's agreement that its
     rights under the lease are subject and subordinate to all the terms of this
     Mortgage is enforceable against such Permitted Air Carrier or Permitted
     Manufacturer under applicable law, (ff) there is no strict tort liability
     imposed on passive lenders or lessors, except such tort liability not of
     materially greater scope or magnitude than might be imposed on such passive
     lender or lessor under the prevailing rule among the states of the United
     States, and except liabilities that the Company or a Permitted Lessee has
     agreed to insure against at its expense in a manner and to the extent
     customarily insured by major international air carriers operating in such
     jurisdiction, and (gg) Mortgagee and the Holders shall not be subjected to
     any adverse Tax consequences as a result of such lease for which the
     Company is not required to indemnify such Person, unless the Company agrees
     to indemnify such Person therefor by means of an indemnity agreement and
     security therefor reasonably satisfactory to such Person;

          (9)  If no Significant Default or Event of Default exists, enter into
     a lease or sublease with respect to any Aircraft, Airframe or Engine which
     does not comply with

                                                                          PAGE 9
<PAGE>

     any of clauses (1) through (8) of this (S) 4.02(b) and, in such event,
     delivery of any such Aircraft, Airframe or Engine under such lease or
     sublease shall be deemed to constitute an Event of Loss with respect to
     such Aircraft, Airframe or Engine and the Company shall comply with (S)
     4.05(a), in the case of an Aircraft or Airframe, or (S) 4.04(e), in the
     case of an Engine, in each case prior to or concurrently with the
     commencement of such lease or sublease.

provided, that (1) the rights of any transferee who receives possession by
reason of a transfer permitted by this (S) 4.02(b) (other than by a transfer of
an Aircraft, Airframe or Engine which is deemed an Event of Loss) shall be
subject and subordinate to this Mortgage and to Mortgagee's rights, powers and
remedies hereunder, including (x) Mortgagee's right to repossess such Aircraft
pursuant to (S) 5.02, (y) Mortgagee's right to terminate and avoid such lease,
delivery, transfer or relinquishment of possession if an Event of Default
exists, and (z) the right to require such Person to deliver the applicable
Aircraft, Airframe, and Engines subject to such transfer forthwith if an Event
of Default exists, (2) the Company shall remain primarily liable for the
performance this Mortgage and all the terms and conditions of this Mortgage
shall remain in effect, and (3) no lease or transfer of possession otherwise in
compliance with this (S) 4.02(b) shall (aa) result in any registration or
reregistration of an Aircraft (except to the extent permitted by (S) 4.02(e)) or
the maintenance, operation, or use thereof except in compliance with (S) 4.02(c)
and (S) 4.02(d), or (bb) permit any action not permitted to the Company
hereunder.

     In the case of any lease permitted under this (S) 4.02(b) (other than a
lease of an Aircraft, Airframe or Engine that is deemed an Event of Loss), the
Company will include in such lease appropriate provisions which (x) make such
lease expressly subject and subordinate to this Mortgage, including Mortgagee's
right to avoid such lease in the exercise of its rights to repossession of the
applicable Airframe and Engines hereunder; (y) require the Permitted Lessee to
comply with (S) 4.06, to the extent that the Company does not obligate itself
therein to do so; and (z) require that the Airframe or any Engine subject
thereto be used in accordance with the limitations applicable to the Company's
possession and use provided in this Mortgage and provide for the maintenance and
inspection of the Aircraft in the same manner in all material respects as the
applicable provisions of this Mortgage. No lease permitted under this (S)
4.02(b) shall be entered into unless (i) the Company provides written notice to
Mortgagee (such notice in the event of a lease to a U.S. Air Carrier to be given
promptly after entering into any such lease, and, in the case of a lease to any
other Permitted Air Carrier or a Permitted Manufacturer, 10 days in advance of
entering into such lease); (ii) the Company furnishes to Mortgagee evidence
reasonably satisfactory to Mortgagee that the insurance required by (S) 4.06 is
in effect; (iii) all necessary documents are 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 such Aircraft
under this Mortgage; (iv) no Permitted Lessee may sublease any Airframe or any
Engine, except that a Permitted Manufacturer may sublease to any Permitted
Lessee to whom a lease would be permitted under this (S) 4.02; provided that (A)
such sublease shall not permit any sub-subleasing of such Aircraft, such
Airframe, or any Engine (and the Company shall ensure that the same does not
occur), (B) such sublease shall be assigned to the Company to secure such
Permitted Manufacturer's obligations under its lease, and (C) the Company shall
comply, and shall cause such sublease to comply, with all requirements of this
(S) 4.02 as if such sublease were a direct lease from the Company to the
sublessee; (v) the

                                                                         PAGE 10
<PAGE>

Permitted Lessee shall not be eligible to assert, or shall have effectively
waived, any right to sovereign immunity; and (vi) Mortgagee receives evidence
that all necessary approvals from any Government Entity required for such
Airframe or any Engine or engine (as applicable) to be imported to and, to the
extent reasonably obtainable and reasonably requested, exported from the
applicable country of domicile upon repossession of such equipment by Mortgagee
shall have been obtained prior to the importation of the imported item(s) under
any such Permitted Lease. The Company shall reimburse Mortgagee for its
reasonable out-of-pocket fees and Expenses (including reasonable fees and
disbursements of counsel) incurred in connection with any such lease. Except as
otherwise provided herein and without in any way relieving the Company from its
primary obligation for the performance of its obligations under this Mortgage,
the Company may in its sole discretion permit a lessee to exercise any or all
rights which the Company would be entitled to exercise under (S) 4.02 and (S)
4.04, and may cause a lessee to perform any or all of the Company's obligations
under Article IV, and Mortgagee agrees to accept actual and full performance
thereof by a lessee in lieu of performance by the Company.

     In addition to the foregoing requirements, before the commencement of any
Permitted Lease, the Company shall deliver to Mortgagee: (i) a notice stating
the identity of the lessee, (ii) a certificate of a Responsible Officer of the
Company stating that no Significant Default or Event or Default exists and that
such lease complies with this (S) 4.02, (iii) the consent of the Permitted
Lessee to the assignment of its Permitted Lease pursuant to the final paragraph
of this (S) 4.02(b), in a form reasonably satisfactory to Mortgagee, (iv) if
required by the final paragraph of this (S) 4.02(b), the Lease Assignment
referred to therein, and a supplement to the Mortgage and Financing Statements
or similar documents under the applicable Laws of the country of the Permitted
Lessee confirming the perfected first-priority security interest of Mortgagee in
such Permitted Lease, duly executed and delivered and duly filed or recorded in
all appropriate places, and (v) the original chattel paper copy of the Permitted
Lease, and any lease supplements executed therewith, duly executed by the
applicable Permitted Lessee and the Company. In addition, the Company shall also
deliver to Mortgagee: (i) within 20 Business Days after the commencement of such
Permitted Lease, a copy of all Permitted Lease Documents, duly certified by a
Responsible Officer of each of the Company and the applicable Permitted Lessee
to be true, complete and correct copies of the originals thereof, and (ii)
within 10 Business Days after the execution thereof by both parties, the
original chattel paper copy of any amendments to the Permitted Lease (or any
other Permitted Lease Document) that may be entered into from time to time after
the commencement of such Permitted Lease, duly executed by such Permitted Lessee
and the Company. No relinquishment of possession of any Airframe, Engine, or
Part shall in any way discharge or diminish any of the Company's obligations.

     Mortgagee hereby agrees for the benefit of each lessor, conditional seller,
or secured party of any engine leased, purchased, or owned by the Company or any
Permitted Lessee subject to a lease, conditional sale, or other security
agreement that Mortgagee, each Holder, and their respective successors and
assigns will not acquire or claim, as against such lessor, conditional seller,
or secured party, any right, title, or interest in any engine as the result of
the installation of such engine on an Airframe at any time while such engine is
subject to such lease, conditional sale, or other security agreement and owned
by such lessor or conditional seller or subject to a security interest in favor
of such secured party.

                                                                         PAGE 11
<PAGE>

     The Company shall enter into a "Lease Assignment" in form and substance
customary in the airline industry with respect to each Permitted Lease of an
Airframe having a term of one or more years. In furtherance of the provisions of
this paragraph, the Company agrees that each Permitted Lease for more than one
year of an Airframe (x) shall contain a provision to the effect that the
Permitted Lessee agrees to pay all amounts due under the Permitted Lease,
including Rent (exclusive of Excluded Payments), to Mortgagee after the
Permitted Lessee receives written notice from Mortgagee to such effect (until
the Permitted Lessee receives written notice from Mortgagee to contrary effect)
and stating that a Default or Event or Default exists under this Mortgage, and
(y) shall be accompanied by such Financing Statements, if any, as shall, in
Mortgagee's reasonable opinion, be required to perfect and protect the security
interests of Mortgagee in the Company's right, title and interest in and to such
Permitted Lease.

          (c)  Operation and Use. The Company shall not operate, use, or locate
               -----------------
any Aircraft, Airframe, or Engine, or allow any Aircraft, Airframe, or Engine to
be operated, used, or located, (1) in any area excluded from coverage by any
insurance required by (S) 4.06, except in the case of a requisition by the U.S.
Government where the Company obtains indemnity in lieu of such insurance from
the U.S. Government, or insurance from the U.S. Government, against
substantially the same risks and for at least the amounts of the insurance
required by (S) 4.06 covering such area, or (2) in any recognized area of
hostilities unless covered in accordance with (S) 4.06 by war risk insurance, or
in either case unless such Aircraft, Airframe, or 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 the Company diligently and in good faith
proceeds to remove such Aircraft from such area. The Company shall not permit
any Aircraft, Airframe, or Engine 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 such
Aircraft, such Airframe, or any Engine, except (i) immaterial or non-recurring
violations with respect to which corrective measures are taken promptly by the
Company or Permitted Lessee 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 the
Company or Permitted Lessee in any reasonable manner which does not involve any
material risk of the sale, forfeiture, or loss of any Aircraft, Airframe, or
Engine, any material risk of criminal liability or material civil penalty
against Mortgagee or any Holder or impair Mortgagee's or any Holder's interest
in such Aircraft, Airframe, or Engine.

          (d)  Maintenance and Repair. At its own cost and expense, the Company
               ----------------------
shall cause each Aircraft, Airframe, and Engine to be maintained, serviced,
repaired, and overhauled in accordance with (1) maintenance standards required
by, or substantially as stringent as those required by, either the FAA or the
central aviation authority of Australia, Canada, France, Germany, Japan, New
Zealand or the United Kingdom for each Aircraft, Airframe, and Engine (the
"Maintenance Program"), so as (aa) to keep each Aircraft, Airframe, and Engine
in as good operating condition as on the Issuance Date, ordinary wear and tear
excepted, and (bb) to keep each Aircraft in such operating condition as may be
necessary to enable the applicable airworthiness certification of such Aircraft
to be maintained under the regulations of the FAA or

                                                                         PAGE 12
<PAGE>

other Aviation Authority then having jurisdiction over the operation of such
Aircraft (but in any event in accordance with the Maintenance Program), 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 (2) except during
periods when a Permitted Lease is in effect, the same standards as the Company
uses with respect to similar aircraft of similar size in its fleet operated by
the Company 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. The Company further agrees that each Aircraft,
Airframe, and Engine will be maintained, used, serviced, repaired, overhauled,
or inspected in compliance with applicable Laws with respect to the maintenance
of each such Aircraft and in compliance with each applicable airworthiness
certificate, license, and registration relating to each such Aircraft, Airframe,
or 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 the Company 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
such Aircraft, Airframe, or Engines or the interest of Mortgagee or any Holder
therein, or any risk of criminal liability or material civil penalty against
Mortgagee or any Holder; provided, that no contest shall excuse the failure to
maintain the airworthiness certification for the Aircraft in good standing
without Mortgagee's written consent (except while any such Aircraft is
grounded), nor shall the pendency of any contest prevent a prohibition of use
from becoming an Event of Loss. The Company shall maintain or cause to be
maintained the Aircraft Documents in English (except that, during the term of
any Permitted Lease to a Permitted Lessee that is not a U.S. Air Carrier, such
Permitted Lessee may maintain Aircraft Documents in the primary language of the
country in which such Permitted Lessee is located, and such Aircraft Documents
shall be translated into English on an ongoing basis and no less frequently than
once each year).

          (e)  Registration. So long as any Secured Debt is outstanding, the
               ------------
Company shall cause each Aircraft to be and to remain duly registered in its
name under the Transportation Code, except as otherwise permitted by this (S)
4.02(e). Each Holder and Mortgagee hereby agree, for the Company's benefit that,
subject to (S) 4.02(b) of this Mortgage, the Company shall be entitled to
register an Aircraft, or cause an Aircraft to be registered, in a country other
than the United States, if Mortgagee receives at least 30 days' prior written
notice of such proposed reregistration, and if:

               (1) no Significant Default or Event or Default exists at the time
     of such reregistration;

               (2) such reregistration is made in connection with a Permitted
     Lease to a Permitted Lessee and shall be effected in the name of the
     Company if reasonably possible or, if required by applicable Law, in the
     name of such Permitted Lessee;

               (3) such country is a country with which the United States then
     maintains

                                                                         PAGE 13
<PAGE>

     normal diplomatic relations or, if Taiwan, the United States then
     maintains diplomatic relations at least as good as those in effect on the
     Issuance Date;

               (4)  any exchange permits necessary to allow all Rent and other
     payments provided for under the Permitted Lease Documents shall be in full
     force and effect, and any import or export permits necessary to take such
     Aircraft into such country and shall be in full force and effect or
     obtained as promptly as practicable;

               (5)  all insurance required to be maintained by the Company under
     the terms of this Mortgage shall be in full force and effect and with
     substantially equivalent coverages before, at the time of, and after such
     reregistration (including any increase in changes in types of insurance to
     take into account differences in applicable Laws), and Mortgagee receives a
     certificate of the Company's or a Permitted Lessee's insurance broker to
     such effect;

               (6)  Mortgagee receives evidence reasonably satisfactory to it
     that such country imposes, or the Company agrees to cause such Aircraft to
     be maintained in accordance with, a Maintenance Program as required by (S)
     4.02(d) of this Mortgage;

               (7)  no Liens (except Permitted Liens) on the Collateral shall
     arise by reason of such reregistration, and this Mortgage shall continue as
     a first-priority perfected Lien on such Aircraft;

               (8)  any export licenses and certificates of deregistration
     required in connection with any repossession or return of such Aircraft
     should be able to be obtained in the normal course, without material delay,
     and without material burden (however, the Company shall be responsible for
     the cost of such export licenses and certificates);

               (9)  such Aircraft has been duly certificated as to type and
     airworthiness by the appropriate aviation authority of such country;

               (10) Mortgagee receives an opinion of independent counsel or
     counsels (subject to customary exceptions) reasonably satisfactory to
     Mortgagee, addressed to Mortgagee, to the effect that:

               (A)  such country recognizes the Company's ownership interest in
          such Aircraft;

               (B)  Mortgagee's rights and interests under this Mortgage will be
          recognized, and there will be available remedies, in each case, by
          enforcement of the provisions of this Mortgage or otherwise under the
          laws of such jurisdiction (or the laws of the jurisdiction to which
          the laws of such jurisdiction would refer as the applicable governing
          law) sufficient to realize the practical benefits of the security
          interest granted hereunder to the Mortgagee by the Company in such
          Aircraft;

               (C)  after giving effect to such change in registration, the Lien
          of this Mortgage

                                                                         PAGE 14
<PAGE>

          on the Company's right, title, and interest in and to such Aircraft
          shall continue as a valid and duly perfected first-priority security
          interest and all filing, or other action necessary to protect the same
          shall have been accomplished (or, if such opinion cannot be given at
          the time of such proposed change in registration because such change
          in registration is not yet effective, (1) the opinion shall detail
          what filing, recording, or other action is necessary, and (2)
          Mortgagee shall receive a certificate from the Company that all
          necessary preparations to accomplish such filing, recording, and other
          action have been made, and such filing, recording, and other action
          will be accomplished, and a supplemental opinion to that effect shall
          be delivered to Mortgagee promptly after the effective date of such
          change in registration);

               (D) it is not necessary, solely as a consequence of such change
          in registration and without giving effect to any other activity of
          Mortgagee (or any Affiliate of Mortgagee), for Mortgagee to qualify to
          do business in such jurisdiction as a result of such reregistration in
          order to exercise any rights or remedies with respect to such Aircraft
          pursuant to this Mortgage;

               (E) neither Mortgagee nor any Holder will be subjected to any
          adverse Tax consequences as a result of such reregistration for which
          the Company is not required to indemnify such Person, unless the
          Company agrees to indemnify such Person therefor by means of an
          indemnity agreement reasonably satisfactory to such Person (and
          Holdings guarantees such indemnity); and

               (F) to the effect set forth in clauses (4), (7) and (8), subject
          to then-customary assumptions, exceptions, and limitations, and
          stating that such country maintains normal diplomatic relations with
          the United States.

          In addition, as a condition to any change in registration of an
     Aircraft or Airframe the Company shall have given to Mortgagee assurances
     reasonably satisfactory to Mortgagee:

               (1) that the provisions of (S) 4.06 of this Mortgage have been
     complied with respect to such Aircraft or Airframe after giving effect to
     such reregistration;

               (2) of the Company's payment of reasonable out-of-pocket Expenses
     of Mortgagee in connection with such change of registry, including (aa) the
     reasonable fees and disbursements of counsel to Mortgagee, (bb) any filing
     or recording fees, Taxes, or similar payments incurred in connection with
     the change of registration of such Aircraft and the creation and perfection
     of the security interest therein in favor of Mortgagee for the benefit of
     Holders, and (cc) all costs and Expenses incurred in connection with any
     filings necessary to continue in the United States the perfection of the
     security interest in such Aircraft in favor of Mortgagee for the benefit of
     Holders; and

               (3) to the effect that the tax and other indemnities in favor of
     each Person named as an indemnitee hereunder afford each such Person
     substantially the same

                                                                         PAGE 15
<PAGE>

     protection as provided before such change of registration (or the Company
     agrees to provide additional indemnities that, together with such original
     indemnities, in the reasonable judgment of Mortgagee, afford such
     protection).

The Company shall also cause this Mortgage to be duly recorded and at all times
maintained of record as a first-priority perfected mortgage (subject to
Permitted Liens) on such Aircraft, Airframe, and the Engines (except to the
extent such perfection or priority cannot be maintained as a result of the
failure by Mortgagee to execute and deliver any necessary documents).

             (f)  Markings. If permitted by applicable Law, on or reasonably
                  --------
promptly after the Issuance Date, the Company will cause to be affixed to, and
maintained in, the cockpit of each 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, as
Mortgagee." Such placards may be removed temporarily, if necessary, in the
course of maintenance of any Airframe or Engine. If any such placard is damaged
or becomes illegible, the Company shall promptly replace it with a placard
complying with the requirements of this (S) 4.02(f).

             (g)  Spare Parts.  The Company represents and warrants that (1)
                  -----------
substantially all its Spare Parts are located at one of the locations identified
in Schedule 3 hereto (except those Spare Parts installed on an Aircraft or being
repaired, maintained or inspected in accordance with the provisions hereof); (2)
the Company has good, indefeasible and merchantable title to such Spare Parts
and such Spare Parts are not subject to any Lien except for the Lien granted to
Mortgagee and Permitted Liens, and (3) the repossession, sale or other
disposition of such Spare Parts by Mortgagee following an Event of Default shall
not require the consent of any Person.  The Company further covenants that no
substantial portion of the Spare Parts shall at any time be stored at any
location other than a location identified on Schedule 3 without 15 days' prior
written notice to Mortgagee setting forth the new location.

     4.3 Inspection

         (a)   At all reasonable times, Mortgagee, a single representative of
the Holders and their authorized representatives (the "Inspecting Parties") may
not more than once every 12 months (unless an Event of Default exists, then at
any time and from time to time) inspect each Aircraft and the Aircraft
Documents, and any such Inspecting Party may make copies of such Aircraft
Documents not reasonably deemed confidential by the Company or a Permitted
Lessee.

         (b)   Any inspection of an 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 such Aircraft, and no such inspection shall
interfere with the Company's or any Permitted Lessee's maintenance or operation
of such Aircraft, Airframe, or 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.

                                                                         PAGE 16
<PAGE>

          (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 (S) 4.03(a)), unless an Event of Default exists, then any such inspection
(including the cost of such copies) shall be at the Company's expense.

     4.04 Replacement and Pooling of Parts; Alterations, Modifications, and
Additions; Substitution of Engines

          (a)  Replacement of Parts.  Except as otherwise provided herein, the
               --------------------
Company, at its own cost and expense, will promptly replace (or cause to be
replaced) all Parts that are from time to time incorporated or installed in or
attached to an Aircraft, and that become worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair, or permanently rendered unfit for
use for any reason whatsoever. In addition, the Company, at its own cost and
expense, may 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, that, except as otherwise
provided herein, the Company will replace or cause the replacement of 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 (S) 4.04(c), and shall be in good operating condition. The Company
shall use good faith efforts to ensure that (except in the case of replacement
property installed on the basis of operational exigencies) all replacement parts
have a value, remaining useful life, and utility that is not substantially less
than the value, remaining useful life, and utility of the Parts replaced
(assuming such replaced Parts were in the condition required hereunder).

          (b)  Parts.  Subject to (S) 11.01 and except as otherwise provided
               -----
herein, any Part at any time removed from any Airframe or Engine shall remain
subject to the Lien of this Mortgage, no matter where located, until it is
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. As soon as a replacement Part is incorporated or
installed in or attached to any Airframe or any Engine as provided in (S)
4.04(a), without further act, (1) the replaced Part shall thereupon be free and
clear of all rights of Mortgagee and shall no longer be a Part hereunder, and
(2) such replacement Part shall become subject to this Mortgage and be part of
such Airframe or Engine for all purposes hereof to the same extent as the Parts
originally incorporated or installed in or attached to such Airframe or Engine;
provided, notwithstanding anything herein to the contrary, all Spare Parts are
and shall remain subject to the Lien of this Mortgage until such time as the
Lien over such Spare Parts is released in accordance with the terms of (S)
11.01.

          (c)  Pooling of Parts.  Any Part removed from an Aircraft may be
               ----------------
subjected by the Company or a Permitted Lessee to a normal pooling arrangement
customary in the airline industry and entered into in the ordinary course of
business of the Company 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 (S) 4.04(a) and (S) 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 any Airframe
or Engine may be owned by any third

                                                                         PAGE 17
<PAGE>

party, subject to a normal pooling arrangement, so long as the Company or a
Permitted Lessee, as promptly thereafter as reasonably possible, either (1)
causes such replacement part to become subject to the Lien of this Mortgage,
free and clear of all Liens except Permitted Liens, at which time such
replacement part shall become a Part, or (2) replaces (or causes to be replaced)
such replacement part by incorporating or installing in or attaching to such
Aircraft a further replacement Part owned by the Company free and clear of all
Liens except Permitted Liens and which shall become subject to the Lien of this
Mortgage in accordance with (S) 4.04(b).

          (d)  Alterations, Modifications, and Additions. The Company shall make
               -----------------------------------------
(or cause to be made) alterations and modifications in and additions to each
Aircraft 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 any
such operation of such Aircraft, to the extent made mandatory in respect of such
Aircraft (a "Mandatory Modification"); provided, that (i) the Company or a
Permitted Lessee may, in good faith and by appropriate procedures, 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 such
Aircraft and does not involve a material risk of sale, forfeiture, or loss of
such Aircraft or the interest of Mortgagee or any Holder therein, or a material
risk of material civil penalty or a material risk of criminal liability being
imposed on Mortgagee or any Holder or (ii) the Company need not make any
Mandatory Modification if, acting reasonably and in good faith, it concludes
that making any such modification would be commercially unreasonable taking into
account the value of the Aircraft, Airframe or Engine and the projected cost of
such modification and the Company decides thereafter to part-out, sell, exchange
or otherwise dispose of such Aircraft, Airframe or Engine or otherwise withdraw
such Aircraft, Airframe or Engine from service. In addition, the Company may
make or permit to be made such alterations and modifications in and additions to
an Airframe or any Engine (each an "Optional Modification") as the Company or a
Permitted Lessee, in its good faith, deems desirable in the proper conduct of
its business or to remarket the Aircraft, including removal of Parts which the
Company deems are obsolete or no longer suitable or appropriate for use in such
Aircraft or conversion of any Aircraft to a cargo configuration; provided, that
no such Optional Modification shall (1) in any material respect diminish the
fair market value, utility, or useful life of any Aircraft or Engine below its
fair market value, utility, or useful life immediately before such Optional
Modification (assuming such Aircraft or Engine was in the condition required by
this Mortgage immediately before such Optional Modification), or (2) cause any
Aircraft to cease to have a standard certificate of airworthiness. Except as
otherwise provided herein, all Parts (other than Removable Parts) incorporated
or installed in or attached to an Aircraft as a result of such Optional
Modification shall, without further act, become subject to this Mortgage. The
Company or any Permitted Lessee may, at any time so long as an Airframe or any
Engine is subject to the Lien of this Mortgage, 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 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 (S) 4.02(d) or the first sentence of this (S)
4.04(d), and (iii) such Part can be removed from such Airframe or any Engine
without diminishing in any material respect the fair market value, utility, or
remaining useful life

                                                                         PAGE 18
<PAGE>

which such Airframe or any Engine would have had at the time of removal had such
removal not been effected, assuming such Aircraft was otherwise maintained in
the condition required by this Mortgage and such Removable Part had not been
incorporated or installed in or attached to such Aircraft. No Removable Part
shall be subject to the Lien of this Mortgage; except that any Part not removed
before the repossession by Mortgagee hereunder of the Airframe or Engine on
which it is incorporated, installed, or attached shall at that time, without
further act, become a part of such Airframe or Engine and be subject to the Lien
of this Mortgage. Removable Parts may be leased from or financed by third
parties other than Mortgagee.

          (e)  Substitution of Engines. If an Event of Loss to an Engine occurs
               -----------------------
under circumstances in which no Event of Loss to an Airframe occurs, the Company
shall (i) promptly (and in any event within 10 days after such occurrence)
notify Mortgagee of such Event of Loss and (ii) within 120 days of the
occurrence of such Event of Loss either substitute a Replacement Engine for such
Engine, free and clear of Liens (other than Permitted Liens not of record) or,
provided no Significant Default or Event of Default shall exist, give written
notice to Mortgagee that the Company has elected to treat the Event of Loss as a
Disposition pursuant to (S) 4.05(f). In such event, immediately upon the earlier
of (x) receipt by Mortgagee of such notice or (y) the effectiveness of such
substitution and in either case without further act, (1) the Engine subject to
such Event of Loss shall thereupon be free and clear of all rights of Mortgagee
and the Lien of this Mortgage and shall no longer be an Engine hereunder, and
(2) if replacement is elected by the Company, upon replacement of the Engine
subject to the Event of Loss, such Replacement Engine shall become subject to
this Mortgage and be part of the applicable Aircraft for all purposes hereof to
the same extent as the replaced Engine and all insurance proceeds received by
Mortgagee shall be paid over to or at the direction of the Company. In addition,
Mortgagee shall, at the Company's cost and expense, execute and deliver such
releases or other documents to evidence the release of the Lien of this Mortgage
on the Engine subject to the Event of Loss as the Company may reasonably
request. If replacement is elected by the Company, any Replacement Engine shall
be an engine manufactured by Engine Manufacturer that is the same or improved
model as the Engine to be replaced thereby (but in any event the same or
improved model as the other Engine then installed on such Aircraft), and that is
suitable for installation and use on the applicable Airframe, and that has a
value and utility (without regard to hours and cycles remaining until overhaul)
of not less than 80% of the Engine to be replaced thereby (assuming that such
Engine had been maintained in accordance with this Mortgage). The Company's
right to make a replacement hereunder shall be subject to the fulfillment (which
may be simultaneous with such replacement) of the following conditions precedent
at the Company's sole cost and expense, and Mortgagee agrees to cooperate with
the Company to the extent necessary to enable it timely to satisfy such
conditions:

               (1)  an executed counterpart of each of the following documents
     shall be delivered to Mortgagee:

                    (aa) a supplement to this Mortgage covering the Replacement
          Engine, which shall be duly filed for recordation pursuant to the
          Transportation Code or such other applicable law of the jurisdiction
          other than the United States in which the aircraft of which such
          Engine is a part is registered in accordance with (S) 4.02(e);

                                                                         PAGE 19
<PAGE>

                    (bb) a full warranty (as to title) bill of sale, covering
          the Replacement Engine, executed by the former owner thereof in favor
          of the Company (or, at the Company's option, other evidence of the
          Company's ownership of such Replacement Engine, reasonably
          satisfactory to Mortgagee); and

                    (cc) Financing Statements covering the security interests
          created by this Mortgage (or any similar statements or other documents
          required to be filed or delivered pursuant to the laws of the
          jurisdiction in which such Aircraft may be registered) as are deemed
          necessary or desirable by counsel for Mortgagee to protect the
          security interests of Mortgagee in the Replacement Engine;

               (2)  The Company shall cause to be delivered to Mortgagee an
     opinion of independent counsel to the effect that the Lien of this Mortgage
     continues to be in full force and effect with respect to the Replacement
     Engine, and such evidence of compliance with the insurance provisions of
     (S) 4.06 with respect to such Replacement Engine as Mortgagee reasonably
     requests; and

               (3)  The Company shall have furnished to Mortgagee an opinion of
     the Company's aviation law counsel reasonably satisfactory to Mortgagee and
     addressed to Mortgagee as to the due filing for recordation of the
     supplement to this Mortgage with respect to such Replacement Engine under
     the Transportation Code or such other applicable law of the jurisdiction
     other than the United States in which such Aircraft is registered in
     accordance with (S) 4.02(e) and the due filing of any Financing Statements
     or other filings reasonably requested by Mortgagee with respect to such
     Replacement Engine under applicable Law.

     Upon satisfaction of all conditions to such substitution, (x) Mortgagee
shall execute and deliver to the Company such documents and instruments,
prepared at the Company's expense, as the Company reasonably requests to
evidence the release of such replaced Engine from the Lien of this Mortgage, (y)
Mortgagee shall assign to the Company all claims that Mortgagee may have against
any other Person relating to any Event of Loss giving rise to such substitution,
and (z) the Company shall receive all insurance proceeds (other than those
reserved to others under (S) 4.06(b)) and proceeds in respect of any Event of
Loss giving rise to such replacement to the extent not previously applied to the
purchase price of the Replacement Engine as provided in (S) 4.05(d).

     4.05 Loss, Destruction, or Requisition; Sale of any Aircraft, Airframe,
Engines or Parts

          (a)  Event of Loss to an Aircraft. If an Event of Loss to an Airframe
               ----------------------------
(and any Engine(s) installed thereon) occurs, the Company shall promptly (and in
any event within 10 days after such occurrence, or, if later, within 10 days
after the determination that an Event of Loss has occurred) notify Mortgagee of
such Event of Loss and within 60 days after notice of such Event of Loss is
required, notify Mortgagee in writing of the Company's election to either (i)
replace such Airframe (and any Engines installed thereon) as provided under (S)
4.05(a)(1), (ii) make payment in respect of such Event of Loss as provided under
(S) 4.05(a)(2) or (iii) treat

                                                                         PAGE 20
<PAGE>

such Event of Loss as a Disposition pursuant to (S) 4.05(f) (and if the Company
does not notify Mortgagee of such election within such time period, the Company
shall be deemed to have elected to treat the Event of Loss as a Disposition
pursuant to (S) 4.05(f)).

               (1)  If the Company elects to replace such Airframe (and any
     Engines installed thereon) (and the Company shall not, without consent of
     the Mortgagee, be entitled to elect to replace such Airframe if, at the
     time that Mortgagee receives the notice referred to above, a Significant
     Default or Event or Default exists) the Company shall, subject to the
     satisfaction of the conditions in (S) 4.05(c), as promptly as possible and
     in any event within 180 days after the occurrence of such Event of Loss,
     cause to be subjected to the Lien of this Mortgage, in replacement of such
     Airframe with respect to which the Event of Loss occurred, a Replacement
     Airframe and, for each Engine installed on such Airframe when it suffered
     the Event of Loss, if any, a Replacement Engine therefor, such Replacement
     Airframe and any Replacement Engine(s) to be free and clear of all Liens
     except Permitted Liens not of record, 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 Mortgage);
     provided, that if the Company does not perform its obligation to effect
     such replacement under this clause (1) during the 180-day period, it shall
     pay the amounts required to paid pursuant to and within the time frame
     specified in clause (2) below.

               (2)  If the Company elects to make a payment for such Event of
     Loss to such Airframe, the Company shall make a payment to Mortgagee (or
     notify and direct the Mortgagee that an amount of insurance proceeds held
     by Mortgagee be so applied) for purposes of redeeming one or more Notes (in
     whole or in part) on a date on or before the Business Day following the
     earlier of (aa) the 180th day after the occurrence of such Event of Loss,
     and (bb) the fourth Business Day after the receipt of insurance proceeds
     with respect to such Event of Loss (but in any event not earlier than the
     date of the Company's election under (S) 4.05(a) to make payment under this
     (S) 4.05(a)(2)); and upon the earlier of the receipt by Mortgagee of (i)
     insurance proceeds with respect to such Event or Loss, (ii) such payment or
     (iii) receipt of notice by the Mortgagee that the Company has elected to
     treat the Event of Loss as a Disposition pursuant to (S) 4.05(f), Mortgagee
     shall, at the Company's cost and expense, release from the Lien of this
     Mortgage such Airframe and any Engines installed thereon, by executing and
     delivering to the Company or its insurers all documents that the Company
     reasonably requests to evidence such release. The amount of any such
     payment (or insurance proceeds held by Mortgagee applied in payment) shall
     be equal to the Agreed Value for such Airframe and any Engines installed
     thereon. Upon any such payment (or such application of insurance proceeds)
     by the Company, any excess insurance proceeds plus any gain realized
     thereon as a result of investments required to be made pursuant to Section
     4.3 of the Collateral Trust Agreement shall be promptly paid over to the
     Company provided no Significant Default or Event of Default shall have
     occurred and then be continuing.

               (3)  If the Company elects the replacement option in clause (1)
     above and has not effected such replacement within 60 days after the Event
     of Loss occurred, then the

                                                                         PAGE 21
<PAGE>

     Company shall immediately pay to Mortgagee the amounts required pursuant to
     clause (2) less insurance proceeds received by the Mortgagee, to be held as
     security for the Company's obligations under clause (1). If the Company
     elects the replacement option in clause (1) above, and pays the deposit
     required by the preceding sentence, and has not effected such replacement
     within 180 days after the Event of Loss occurred, then such deposit shall
     be applied to the Company's obligations under clause (2), and the Company
     shall pay any remaining amounts due under clause (2) .

          (b)  Effect of Replacement.  If the Company provides a Replacement
               ---------------------
Airframe and any Replacement Engine(s) as provided for in (S) 4.05(a), then (1)
the Lien of this Mortgage shall continue with respect to such Replacement
Airframe and any Replacement Engine(s) as though no Event of Loss had occurred;
(2) Mortgagee shall (at the Company's cost and expense) release from the Lien of
this Mortgage the replaced Airframe and Engines (if any) by executing and
delivering to the Company such documents and instruments as the Company
reasonably requests to evidence such release; and (3) in the case of a
replacement upon an Event of Loss, Mortgagee shall assign to the Company all
claims Mortgagee may have against any other Person arising from the Event of
Loss, and the Company shall receive all insurance proceeds (other than those
reserved to others under (S) 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 any Replacement Engine(s) as provided in (S)
4.05(d).

          (c)  Conditions to Airframe and Engine Replacement.  The Company's
               ---------------------------------------------
right to substitute a Replacement Airframe and any Replacement Engine(s) as
provided in (S) 4.05(a) is subject to the fulfillment, at the Company's sole
cost and expense, in addition to the conditions in (S) 4.05(a), of the following
conditions precedent:

               (1)  on the date when the Replacement Airframe and any
     Replacement Engine(s) are subjected to the Lien of this Mortgage (the
     "Replacement Closing Date"), Mortgagee receives 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):

                    (aa) a supplement to this Mortgage, in form and substance
          reasonably satisfactory to Mortgagee, covering the Replacement
          Airframe and any Replacement Engine(s), which is being duly filed for
          recordation pursuant to the Transportation Code or such other
          applicable law of such jurisdiction other than the United States in
          which the Replacement Airframe and any Replacement Engine(s) are to be
          registered in accordance with (S) 4.02(e);

                    (bb) an FAA Bill of Sale (or a comparable document, if any,
          of another Aviation Authority, if applicable) covering the Replacement
          Airframe (and any Replacement Engine(s), if required by such
          comparable document) executed by the former owner thereof in favor of
          the Company;

                    (cc) a full warranty (as to title) bill of sale, covering
          the Replacement Airframe and any Replacement Engine(s), executed by
          the former

                                                                         PAGE 22
<PAGE>

          owner thereof in favor of the Company (or, at the Company's option,
          other evidence of the Company's ownership of such Replacement Airframe
          and any Replacement Engine(s), reasonably satisfactory to Mortgagee);
          and

                    (dd) 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 any
          Replacement Engine(s) may be registered in accordance with (S)
          4.02(e)) as counsel for Mortgagee deems necessary or desirable by to
          protect the security interests of Mortgagee in the Replacement
          Airframe and any Replacement Engine(s);

               (2)  the Replacement Airframe and any Replacement Engine(s) are
     of the same model as such Airframe or Engines, or an improved model of such
     aircraft or engines of the manufacturer thereof (and, in the case of a
     Replacement Engine, the same model as the other Engine then installed on
     such Airframe), shall have a value and utility (without regard to hours or
     cycles remaining until the next regular maintenance check) at least equal
     to, and are in as good operating condition and repair as, the Airframe and
     any Engine(s) replaced (assuming such Airframe and Engine(s) had been
     maintained in accordance with this Mortgage);

               (3)  Mortgagee (acting directly or by authorization to its
     special counsel) receives reasonably satisfactory evidence as to the
     compliance with (S) 4.06 with respect to the Replacement Airframe and any
     Replacement Engine(s);

               (4)  on the Replacement Closing Date, (aa) the Company causes the
     Replacement Airframe and any Replacement Engine(s) to be subjected to the
     Lien of this Mortgage free and clear of Liens (other than Permitted Liens),
     (bb) the Replacement Airframe has been duly certified by the FAA as to type
     and (upon registration) is eligible to receive an airworthiness certificate
     in accordance with this Mortgage, and (cc) application for registration of
     the Replacement Airframe in accordance with (S) 4.02(e) is being duly made
     with the FAA or other applicable Aviation Authority and the Company has
     authority to operate the Replacement Airframe;

               (5)  Mortgagee (at the Company's expense) receives (directly or
     through its special counsel) (aa) an opinion of independent counsel,
     addressed to Mortgagee, to the effect that the Replacement Airframe and any
     Replacement Engine(s) has been or are being duly made subject to the Lien
     of this Mortgage and that (assuming the matters covered by the opinion in
     the following clause (bb)) all necessary action has been taken to perfect
     such Lien, the Subsidiary Guarantees and Guarantor Confirmation are in full
     force and effect, 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 before such replacement, the benefits of Section 1110 were not
     available to Mortgagee in respect of the Airframe or Engine being replaced,
     and (bb) an opinion of the Company's aviation law counsel reasonably
     satisfactory to and addressed to Mortgagee as to the due registration of
     any such Replacement Airframe, the absence of Liens of record at the FAA as
     to any such

                                                                         PAGE 23
<PAGE>

     Replacement Airframe and Replacement Engine(s) (other than the Lien of this
     Mortgage), and the due filing for recordation of each supplement to this
     Mortgage with respect to such Replacement Airframe and any Replacement
     Engine(s) under the Transportation Code 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 (S) 4.02(e), and the due filing of
     any Financing Statements or other filings reasonably requested by Mortgagee
     with respect to such Replacement Airframe or Replacement Engine(s) under
     applicable Law;

               (6)  if requested by Mortgagee, furnish Mortgagee with evidence
     reasonably satisfactory to it of the value, utility, remaining useful life,
     and estimated residual value of, and good title to, such Replacement
     Airframe and any such Replacement Engine(s) (including an appraisal by a
     qualified independent appraiser selected by the Company and reasonably
     acceptable to the Mortgagee of such value, utility, remaining useful life
     and estimated residual value);

               (7)  assign to Mortgagee the benefit of any assignable
     manufacturers, and vendors, warranties with respect to such Replacement
     Airframe and such Replacement Engine(s);

               (8)  furnish Mortgagee with a Guarantor Confirmation, duly
     executed and delivered by each Subsidiary Guarantor;

               (9)  furnish Mortgagee with a certificate of the Company
     certifying compliance with this (S) 4.05(c) and to the effect that, upon
     consummation of such replacement, no Significant Default or Event or
     Default will exist; and

               (10) take such other action as Mortgagee reasonably requests in
     order that such Replacement Airframe and any such Replacement Engine(s) be
     subjected to the Lien of this Mortgage to the same extent as such Airframe
     and any Engine(s) replaced thereby.

     The Company shall cause an airworthiness certificate, with respect to such
Replacement Airframe, to be duly issued under the Transportation Code promptly
after such substitution.

          (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 the Company from any Government Entity
or any other Person in respect of any Event of Loss will be held by Mortgagee
and applied as follows:

               (1)  If such amounts are received with respect to an Airframe,
     and any Engine installed thereon at the time of such Event of Loss, upon
     the Company's compliance with the applicable terms of (S) 4.05(a)(1) and
     (S) 4.05(c) with respect to the Event of Loss for which such amounts are
     received or receipt by the Mortgagee of the Company's election to treat
     such Event of Loss as a Disposition pursuant to (S) 4.05(f), such amounts
     shall be paid over to, or (if received after such compliance) retained by,
     the Company;

                                                                         PAGE 24
<PAGE>

               (2)  If such amounts are received with respect to an Engine
     (other than an Engine installed on such Airframe at the time such Airframe
     suffers an Event of Loss), upon the Company's compliance with the
     applicable terms of (S) 4.04(e) with respect to the Event of Loss for which
     such amounts are received or receipt by the Mortgagee of the Company's
     election to treat such Event of Loss as a Disposition pursuant to (S)
     4.05(f), such amounts shall be paid over to, or (if received after such
     compliance) retained by, the Company;

               (3)  If such amounts are received, in whole or in part, with
     respect to an Airframe, and the Company makes, has made or is deemed to
     have made the election in (S) 4.05(a)(2), such amounts shall be applied as
     follows:

                    first, if the sum described in (S) 4.05(a)(2) has not then
                    -----
          been paid in full by the Company, 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 the Company.
                    ------

               (4)  If such amounts are received with respect to Spare Parts
     (and such Spare Parts were not installed on an Airframe at the time such
     Airframe suffers an Event of Loss), such amounts shall be paid over to or
     retained by the Company.

          (e)  Requisition for Use.  If any Government Entity requisitions the
               -------------------
use of any Airframe, any Engine(s) or engine(s) installed on such Airframe while
such Airframe is subject to the Lien of this Mortgage and such requisition does
not constitute an Event of Loss, the Company shall promptly notify Mortgagee of
such requisition, and all of the Company's obligations under this Mortgage shall
continue to the same extent as if such requisition had not occurred. Any
payments received by Mortgagee or the Company or a Permitted Lessee from such
Government Entity with respect to such requisition of use shall be paid over to,
or retained by, the Company. If an Event of Loss to an Engine results from the
requisition for use by a Government Entity of such Engine (but not such
Airframe), the Company will replace such Engine hereunder by complying with (S)
4.04(e) or elect to treat the Event of Loss as a Disposition under (S) 4.05(f),
and any payments received by Mortgagee or the Company from such Government
Entity with respect to such requisition following such compliance shall be paid
over to, or retained by, the Company.

          (f)  Sale of Aircraft, Airframes, Engines or Parts.  Notwithstanding
               ---------------------------------------------
anything herein to the contrary, provided no Significant Default or Event of
Default shall exist, the Company may sell, exchange or otherwise dispose of any
Aircraft, Airframe, Engine or Part that it deems surplus to its needs, obsolete,
or otherwise undesirable for use in its business (a "Disposition"), so long as
(i) the Company receives consideration at the time of such Disposition at least
equal to the fair market value (including as to the value of all non-cash
consideration), as determined in good faith by the Board of Directors or an
Officer of the Company, of the assets subject to such Disposition and (ii) if
any non-cash consideration is subject to a lien or encumbrance at the time of
acquisition thereof, the fair market value of such non-cash consideration, plus
the amount of any consideration in the form of cash or Cash Equivalents, less
the amount of all obligations

                                                                         PAGE 25
<PAGE>

secured by such lien or encumbrance, is not less than the fair market value of
the Aircraft, Airframe, Engine and/or Part subject to such Disposition. If at
least eighty percent (80%) of the consideration thereof received by the Company
is not in the form of cash or Cash Equivalents, the Company shall subject to the
Lien of this Mortgage any aircraft, aircraft engines or other flight equipment
acquired in exchange ("Exchanged Flight Equipment") for the Aircraft, Airframe
or Engine subject to a Disposition unless any lien or encumbrance existing on
the Exchanged Flight Equipment at the time of acquisition thereof and to which
the Company takes subject prohibits the Company from subjecting the Exchanged
Flight Equipment to the Lien of this Mortgage. In the event the Company subjects
to the Lien of this Mortgage any Exchanged Flight Equipment, the Lien of this
Mortgage shall constitute a first priority security interest in such Exchanged
Flight Equipment unless the Company acquires the Exchanged Flight Equipment
subject to a prior lien, in which event, the Lien of this Mortgage shall be
junior only to such prior lien and such prior lien shall constitute a Permitted
Lien in respect of the Exchanged flight Equipment only. If the Company engages
in a Disposition, the Company may use the Net Available Cash from such
Disposition, within one (1) year after the later of such Disposition and the
receipt of such Net Available Cash (such later date, the "Trigger Date"), to (i)
permanently repay or prepay any then outstanding Senior Indebtedness of the
Company or any Restricted Subsidiary or (ii) invest or acquire (or enter into a
legally binding commitment to invest in or acquire) Additional Assets; provided
that the transaction subject to any such commitment be consummated within 180
days after the date of such commitment. If any such legally binding commitment
to invest in or acquire such Additional Assets is terminated, then the Company
may, within 90 days after such termination or the Trigger Date, whichever is
later, use such Net Available Cash as provided in clause (i) or (ii) without
giving effect to the parenthetical contained in such clause (ii)) above. The
amount of such Net Available Cash not so used as set forth above in this
paragraph constitutes "Excess Proceeds." When the aggregate amount of Excess
Proceeds (together with any "Excess Proceeds" under the Indenture) exceeds the
Asset Disposition Basket, the Company shall, within 30 days thereof, apply all
such Excess Proceeds as and to the extent required under Section 5.19(b) of the
Indenture and Section 4 of the Holdings Note Purchase Agreement.

         (g) Certain Payments to be Held As Security.  Any amount referred to in
             ---------------------------------------
this (S) 4.05 or (S) 4.06 which is payable or creditable to, or retainable by,
the Company shall not be paid or credited to or retained by the Company if at
the time of such payment, credit, or retention a Significant Default or an Event
of Default exists, but shall be paid to and held by Mortgagee as security for
the Secured Debt, and at such time as no Significant Default or Event of Default
exists, such amount and any gain realized as a result of investments required to
be made pursuant to (S) 6.06 shall (to the extent not theretofore applied as
provided herein) be paid over to the Company.

    4.06 Insurance

         (a) The Company's Obligation to Insure.  The Company 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 this (S) 4.06 shall limit or
         -------------------------
prohibit (a) the

                                                                         PAGE 26
<PAGE>

Company 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, 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 the Company pursuant to this (S) 4.06 and Annex B.

     (c) Indemnification by Government in Lieu of Insurance.  During any period
         --------------------------------------------------
of requisition or transfer of an Aircraft or any part thereof by or to the U.S.
Government or any other Government Entity, Mortgagee shall accept, in lieu of
insurance against any risk with respect to such Aircraft described in Annex B,
indemnification from, or insurance provided by, the U.S. Government, or upon
Mortgagee's written consent, another 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 the Company (or any Permitted Lessee)
may continue to maintain, in accordance with this (S) 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 (S) 4.06.

     (d) Application of Insurance Proceeds. All insurance proceeds received as a
         ---------------------------------
result of the occurrence of an Event of Loss to any Aircraft or any Engine or
other loss to any Spare Parts under policies required to be maintained by the
Company pursuant to this (S) 4.06 will be applied in accordance with (S) 4.05(d)
or (S) 4.05(f) .  All proceeds of insurance required to be maintained by the
Company, in accordance with this (S) 4.06 and (S) B of Annex B, in respect of
any property damage or loss not constituting an Event of Loss with respect to
any Aircraft, any Airframe, any Engine or any Spare Parts will be held by
Mortgagee and applied concurrently with repairs or replacement to pay (or to
reimburse the Company) for repairs (which may be applied in progress payments as
such repairs are made) 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, the Company.

                     ARTICLE V EVENTS OF DEFAULT; REMEDIES

     5.01 Event of Default

     "Event of Default" means an "Event of Default" (as defined in the
Collateral Trust Agreement).

     5.02 Remedies

     (a) If an Event of Default exists, then, and in every such case, 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 Article III of the Collateral Trust
Agreement, 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 Company and all Persons
claiming under it wholly or partly therefrom; provided, that Mortgagee shall
give the Company 10 days' prior written notice of its intention to sell one or
more of the Aircraft or other Collateral (or any part

                                                                         PAGE 27
<PAGE>

thereof). Without limiting any of the foregoing, Mortgagee may exercise any
right of sale of any Aircraft available to it, even if it will not have taken
possession of such Aircraft and will not have possession thereof at the time of
such sale.

     (b)  The Holders shall be entitled, at any sale pursuant to this (S) 5.02,
to credit against any purchase price bid at such sale by such Holder all or any
part of the unpaid Secured Debt owed to such Holder.

     (c)  If the Collateral (or any part thereof) is sold pursuant to any
judgment or decree of any court or otherwise in connection with the enforcement
of this Mortgage, the unpaid Secured Debt shall immediately become due and
payable without presentment, demand, protest, or notice, all of which are hereby
waived.

     5.03 Return of Aircraft, etc.

          (a)   If an Event of Default exists and the Secured Debt has been
accelerated, at Mortgagee's request, the Company shall promptly execute and
deliver to Mortgagee such instruments of title and other documents as Mortgagee
shall request to enable Mortgagee or an agent or representative designated by
Mortgagee, at such time or times and place or places as Mortgagee shall specify,
to obtain possession of all or any part of the Collateral to which Mortgagee
shall at the time be entitled hereunder.  If the Company for any reason fails to
execute and deliver such instruments and documents after such request by
Mortgagee, Mortgagee may (1) obtain a judgment conferring on Mortgagee the right
to immediate possession and requiring the Company to execute and deliver such
instruments and documents to Mortgagee, to the entry of which judgment the
Company hereby specifically consents to the fullest extent permitted by Law, and
(2) pursue all or part of such Collateral wherever it may be found, and enter
any of the premises of the Company 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 Mortgage.

          (b) Upon every such taking of possession, 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, modification, or alteration to and of the Collateral, as it deems
proper. In each such case, 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 Company relating to the
Collateral, as Mortgagee deems 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 Mortgagee shall determine,
and 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 Mortgagee's right under any provision of this Mortgage to
collect and receive all cash held by, or required to be deposited with,
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

                                                                         PAGE 28
<PAGE>

business thereof, and to make all payments which Mortgagee is required or elects
to make (if any) for Taxes, assessments, insurance, or other proper charges upon
the Collateral or any part thereof (including the employment of engineers and
accountants to examine, inspect, and make reports upon the Company's properties
and books and records), and all other payments which Mortgagee is required or
authorized to make under any provision of this Mortgage, as well as just and
reasonable compensation for the services of Mortgagee, and of all Persons
properly engaged and employed by Mortgagee with respect hereto.

     5.04 Remedies Cumulative

     Each and every right, power, and remedy given to Mortgagee 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 often and in such order as Mortgagee deems expedient,
and the exercise or the beginning of the exercise of any right, 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
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 Company or to be an acquiescence
therein.

     5.05 Discontinuance of Proceedings

     If Mortgagee institutes any proceeding to enforce any right, power, or
remedy under this Mortgage by foreclosure, entry, or otherwise, and such
proceedings are discontinued or abandoned for any reason or is determined
adversely to Mortgagee, then and in every such case the Company and 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 Company or Mortgagee shall continue as if no
such proceedings had been instituted.

     5.06 Appointment of Receiver

     If an Event of Default exists and the Secured Debt has been accelerated,
Mortgagee shall, as a matter of right, be entitled to the appointment of a
receiver (who may be 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 Company 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 Mortgagee with respect to the Collateral.

     5.07 Mortgagee Authorized to Execute Bills of Sale, etc.

     The Company irrevocably appoints, while an Event of Default exists,
Mortgagee as the Company's true and lawful attorney-in-fact (which appointment
is coupled with an interest), in

                                                                         PAGE 29
<PAGE>

the Company's 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, the Company 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 Mortgagee or any purchaser, the Company shall
ratify and confirm any such sale, assignment, transfer, or delivery, by
executing and delivering to Mortgagee or such purchaser all bills of sale,
assignments, releases, and other proper instruments to effect such ratification
and confirmation as designated in any such request.

                       ARTICLE VI     MORTGAGEE'S DUTIES

     6.01 No Duties Except as Specified in Mortgage or Instructions

     Mortgagee shall not have any duty or obligation to use, operate, store,
lease, control, manage, sell, dispose of, or otherwise deal with any 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 this Mortgage or in the Collateral
Trust Agreement or as expressly provided in written instructions from Holders as
provided in this Mortgage or in the Collateral Trust Agreement; and no implied
duties or obligations shall be read into this Mortgage against Mortgagee.  Trust
Company 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 Section 5.6 of the
Collateral Trust Agreement) promptly take such action as may be necessary duly
to discharge all Liens on any part of the Collateral which result from claims
against Trust Company not related to the administration of the Collateral or any
other transaction pursuant to this Mortgage or any document included in the
Collateral.

     6.02 No Action Except Under Mortgage or Instructions

     Mortgagee will not use, operate, store, lease, control, manage, sell,
dispose of, or otherwise deal with any Aircraft or any other part of the
Collateral except in accordance with the powers granted to, or the authority
conferred upon, Mortgagee pursuant to this Mortgage or and in the Collateral
Trust Agreement and in accordance with the express terms hereof and thereof.

                         ARTICLE VII    THE MORTGAGEE

     7.01 Acceptance of Trusts and Duties

     Mortgagee accepts the duties hereby created and applicable to it, agrees to
perform them (but only upon the terms of this Mortgage and the Collateral Trust
Agreement) and agrees to receive and disburse all money constituting part of the
Collateral in accordance with the terms hereof and the Collateral Trust
Agreement.  Trust Company shall not be answerable or accountable under any
circumstances, except as provided in the Collateral Trust Agreement.

     7.02 Absence of Duties

     Except in accordance with written instructions furnished pursuant to the
Collateral Trust

                                                                         PAGE 30
<PAGE>

Agreement, Mortgagee shall have no duty (a) to see to any registration of any
Aircraft or any recording or filing of this Mortgage or any other document, or
to see to the maintenance of any such registration, recording, or filing, (b) to
see to any insurance on any Aircraft or to effect or maintain any such
insurance, whether or not the Company is in default with respect thereto, (c) to
see to the payment or discharge of any lien or encumbrance of any kind against
any part of the Collateral, (d) to confirm, verify, or inquire into the failure
to receive any financial statements from the Company, or (e) to inspect any
Aircraft at any time or ascertain or inquire as to the performance or observance
of any of the Company's covenants herein or any Permitted Lessee's covenants
under any assigned Permitted Lease with respect to any such Aircraft.

     7.3   No Representations or Warranties as to Aircraft or Documents

     Neither Mortgagee nor Trust Company makes, nor shall either be deemed to
have made, and each hereby expressly disclaims, any representation or warranty
(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 any Aircraft or
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.  Neither Mortgagee nor
Trust Company makes, nor shall either be deemed to have made, any representation
or warranty as to the validity, legality, or enforceability of this Mortgage, or
as to the correctness of any statement in any thereof, except for Trust
Company's representations and warranties expressly made in this Mortgage.  The
Holders make no representation or warranty hereunder whatsoever.

                         ARTICLE VIII INDEMNIFICATION

     Mortgagee shall be indemnified by the Company to the extent and in the
manner provided in Section 5.6 of the Collateral Trust Agreement.

         ARTICLE IX RESIGNATION OF MORTGAGEE; APPOINTMENT OF SUCCESSOR

     The institution acting as Mortgagee or any successor thereto may resign or
be removed in accordance with Section 6.7 of the Collateral Trust Agreement.

                     ARTICLE X SUPPLEMENTS AND AMENDMENTS

     This Mortgage may be amended, supplemented and modified in accordance with
Section 8.1 of the Collateral Trust Agreement.

                           ARTICLE XI MISCELLANEOUS

     11.1  Termination of Mortgage; Partial Termination of Mortgage

           (a) Termination of Mortgage. Upon the occurrence of either of the
               -----------------------
events specified in Section 7.1 of the Collateral Trust Agreement, Mortgagee
shall release the Collateral in accordance with Sections 7.2 and 7.3 of the
Collateral Trust Agreement.

                                                                         PAGE 31
<PAGE>

           (b) Partial Termination of Mortgage.  Upon (or concurrently with) a
               -------------------------------
Disposition of an Aircraft, an Airframe or an Engine in accordance with (S)
4.05(f), and payment in full of any amounts due and outstanding following such
disposition, and provided that no other Secured Debt is then past due and
outstanding, Mortgagee shall release such Aircraft, Airframe or Engine in
accordance with Article 7.4 of the Collateral Trust Agreement.  For any Part
that has been (i) sold or otherwise disposed of in the ordinary course of the
Company's business or (ii) refurbished in accordance with the terms hereof and
the maintenance facility performing such refurbishment replaces such Part with a
refurbished replacement part, then, in the case of either clause (i) or clause
(ii) above, the Lien of this Mortgage shall automatically be released without
further act with respect to such Part.

     Except as otherwise provided in this (S) 11.01, this Mortgage and the
trusts created hereby shall continue in full force and effect in accordance with
the terms hereof.

     11.2  No Legal Title to Collateral in Holders

     No Holder shall have legal title to any part of the Collateral.  No
transfer, by operation of law or otherwise, of any right, title, and interest of
any Holder in and to the Collateral or hereunder shall 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.

     11.3  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 Mortgagee made pursuant to
this Mortgage shall bind the Holders and shall be effective to transfer or
convey all right, title, and interest of Mortgagee, the Company, 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 Mortgagee.

     11.4  Mortgage for Benefit of the Company, Mortgagee, and the Holders

     Nothing in this Mortgage, whether express or implied, shall give any Person
other than the Company, Mortgagee and the Holders any legal or equitable right,
remedy, or claim under or in respect of this Mortgage.

     11.5  Notices

     Unless otherwise expressly specified or permitted by the terms hereof, all
notices, requests, demands, authorizations, directions, consents, waivers, or
other communications 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 Section 8.2 of the Collateral Trust
Agreement.

     11.6  Severability

                                                                         PAGE 32
<PAGE>

     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.

     11.7   No Oral Modification or Continuing Waiver

     No term or provision of this Mortgage may changed, waived, discharged, or
terminated orally, but only by an instrument in writing signed by the Company
and Mortgagee, in compliance with Section 8.1 of the Collateral Trust Agreement.
Any waiver of the terms hereof shall be effective only in the specific instance
and for the specific purpose given.

     11.8   Successors and Assigns

     All covenants and agreements herein shall bind and benefit 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 Holder shall bind the successors and assigns of such Holder.
Each Holder by its acceptance of a Note agrees to be bound by this Mortgage.

     11.9   Headings

     The headings of the 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.

     11.10  Normal Commercial Relations

     Anything in this Mortgage to the contrary notwithstanding, Trust Company
may conduct any banking or other financial transactions, and have banking or
other commercial relationships, with the Company, fully to the same extent as if
this Mortgage were not in effect, including the making of loans or other
extensions of credit to the Company for any purpose whatsoever, whether related
to any of the transactions contemplated hereby or otherwise.

     11.11  Governing Law; Jurisdiction; Service of Process

     This Mortgage shall be construed and interpreted and the rights of the
parties shall be determined in accordance with the laws of the State of New
York, as applied to contracts made and performed within the State of New York,
including, without limitation, Sections 5-1401 and 5-1402 of the New York
General Obligations Laws and New York Civil Practice Laws and Rules 327(b).  The
Company and Mortgagee hereby irrevocably submit to the jurisdiction of any New
York state court sitting in the Borough of Manhattan in The City of New York
(without prejudice to any right of removal to federal court) or any federal
court sitting in the Borough of Manhattan in The City of New York in respect of
any suit, action or proceeding arising out of or relating to this Mortgage, and
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, jurisdiction of the aforesaid courts.  Each of the Company and
Mortgagee

                                                                         PAGE 33
<PAGE>

irrevocably waives, to the fullest extent it may effectively do so under
applicable law, trial by jury and any objection that it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in any such court and any claim that any such suit, action or proceeding brought
in such court has been brought in an inconvenient forum. Each of the Company and
Mortgagee irrevocably consents, to the fullest extent it may effectively do so
under applicable law, to the service of process of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, at its address set forth herein,
such service to become effective 30 days after such mailing. Nothing herein
shall affect the right of the Company or the Mortgagee to serve process in any
other manner permitted by law or to commence legal proceedings or otherwise
proceed against the other in any other jurisdiction.

     11.12  Counterpart Originals

     This Mortgage may be executed in separate counterparts (or upon separate
signature pages bound together into one or more counterparts), each fully-
executed set of which shall be an original.

     11.13  Bankruptcy

     The Company and Mortgagee intend that Mortgagee shall be entitled to the
benefits of Section 1110 with respect to the right to take possession of any
Aircraft, Airframe, Engines, and Parts as provided herein to the fullest extent
such benefits are available with respect to any such Aircraft, Airframe, Engine
or Parts in the event of a case under Chapter 11 of the Bankruptcy Code in which
the Company is a debtor.  In any instance where more than one construction is
possible of the terms and conditions hereof, a construction which would preserve
such benefits shall control over any construction which would not preserve such
benefits as otherwise provided herein.

                           (Signature page follows.)

                                                                         PAGE 34
<PAGE>

     IN WITNESS WHEREOF, the Company and Mortgagee have executed this Aircraft
Mortgage and Security Agreement as of the date set forth in the preamble.

                                                AIRTRAN AIRWAYS, INC.

                                                By:_____________________________
                                                Name:
                                                Title:

                                                WILMINGTON TRUST COMPANY, not in
                                                its individual capacity, except
                                                as otherwise provided herein,
                                                but solely as Collateral Trustee
                                                and Mortgagee hereunder

                                                By:_____________________________
                                                Name:
                                                Title:
<PAGE>

                                    ANNEX A

                     GENERAL PROVISIONS AND DEFINED TERMS

          (a)  In the Mortgage, unless otherwise expressly provided, a reference
               to:

               (1)   each of "the Company", "Mortgagee", "Holder", and any other
     Person includes any successor in interest to it and any permitted
     transferee, permitted purchaser, or permitted assignee of it;

               (2)   any agreement or other document (including any annex,
     schedule, or exhibit thereto, or any other part thereof) includes that
     agreement or other document as amended, supplemented, or otherwise modified
     from time to time in accordance with its terms, and any agreement or other
     document entered into in substitution or replacement therefor;

               (3)   any provision of any Law includes any such provision as
     amended, modified, supplemented, substituted, reissued, or reenacted before
     the Issuance Date, and thereafter from time to time;

               (4)   "Agreement", "this Agreement", "hereby", "herein",
     "hereto", "hereof", "hereunder", and words of similar import, when used in
     the Mortgage, refer to the Mortgage as a whole and not to any particular
     provision thereof;

               (5)   "including", "include", and terms or phrases of similar
     import means "including [etc.], without limitation"; and

               (6)   a reference to a "section" or "(S)", an "Exhibit", an
     "Annex", or a "Schedule" in the Mortgage, is a reference to a section of,
     or an exhibit, an annex, or a schedule to, such Mortgage.

          (b)  Each exhibit, annex, and schedule to the Mortgage is incorporated
in, and is a part of, such Mortgage.

          (c)  Unless otherwise defined or specified in the Mortgage, all
accounting terms therein shall be construed and all accounting determinations
thereunder shall be made in accordance with GAAP.

          (d)  Headings used in the Mortgage are for convenience only, and shall
not in any way affect the construction of, or be taken into consideration in
interpreting, such Mortgage.

     Additional Assets: means (i) any property or assets utilized in the airline
business or any business that is substantially related, ancillary or
complementary thereto (including an Investment
<PAGE>

in any Person engaged in any such business), (ii) the Capital Stock of a Person
that becomes a Restricted Subsidiary as a result of the acquisition of such
Capital Stock by the Company or another Restricted Subsidiary or (iii) Capital
Stock constituting a minority interest in any Person that at such time is a
Restricted Subsidiary.

     Additional Insureds: defined in (S) E(1) of Annex B to the Mortgage.

     Affiliate: defined in the Collateral Trust Agreement.

     Agreed Value: with respect to (1) a McDonnell Douglas Model DC-9 Aircraft,
$3,000,000 per year, and (2) a Boeing Model 737 Aircraft, $4,000,000 per year;
provided, that each such value shall decrease by 8% per year , such decrease to
be effective on the first anniversary of the date hereof and on such subsequent
anniversary thereafter.

     Aircraft: each Airframe and the Engines installed thereon.

     Aircraft Documents: all technical data, manuals, and log books, and all
inspection, modification, and overhaul records and other service, repair,
maintenance, and technical records that the relevant Aviation Authority requires
to be maintained with respect to each Aircraft, each Engine and any Part,
including all required additions, renewals, revisions, and replacements of any
such materials, in each case in whatever form and by whatever means or medium
(including microfiche, microfilm, paper, or computer disk) such materials are
maintained or retained by or on behalf of the Company.

     Airframe: (1) each of the three owned Boeing Model 737-200A aircraft and
the 27 owned McDonnell Douglas Model DC-9-32 aircraft (excluding Engines or
engines from time to time installed thereon) manufactured by the respective
Airframe Manufacturer and identified by Airframe Manufacturer's model number,
United States registration number, and Airframe Manufacturer's serial number in
Schedule 1 to the Mortgage, or (2) any Replacement Airframe, including in either
case any and all Parts incorporated or installed in or attached or appurtenant
to such airframe, and any and all Parts removed from such airframe, unless the
Lien of the Mortgage does not apply to such Parts in accordance with (S) 4.04 of
the Mortgage.  Upon substitution of a Replacement Airframe under and in
accordance with the Mortgage, such Replacement Airframe shall become subject to
the Mortgage and shall be an "Airframe" for all purposes of the Mortgage, and
the replaced Airframe shall cease to be subject to the Mortgage and shall cease
to be an "Airframe."

     Airframe Manufacturer: (1) with respect to the 27 owned McDonnell Douglas
Model DC-9 aircraft and the B717 Aircraft, McDonnell Douglas Corporation, a
Maryland corporation and wholly owned subsidiary of The Boeing Company, a
Delaware corporation, and (2) with respect to the three owned Boeing Model 737
aircraft, The Boeing Company, a Delaware corporation.

     Approved Insurers: defined in (S) 41 of Annex B to the Mortgage.

     Asset Disposition Basket: as of any date, an amount equal to (a)
$10,000,000 less (b) the sum of the designated value for each Encumbered Engine
as set forth on Schedule 4 to the
<PAGE>

Mortgage, provided, that, upon (1) Mortgagee's receipt of copies of executed
payoff letters, UCC-3 termination statements, mortgage releases, lease
terminations or other terminations or releases for the termination of, and
release of such Engine from, any Lien applicable to such Engine, and (2) the
filing with the FAA and in other appropriate filing offices of such releases or
terminations, in each case as Mortgagee shall reasonably request, the amount of
the Asset Disposition Basket shall be increased by the designated value of such
Encumbered Engine as set forth on Schedule 4 to the Mortgage (but in any event
not to exceed $10,000,000).

     Aviation Authority: the FAA or, if the applicable Aircraft is registered
with any other Government Entity under and in accordance with (S) 4.02(e) of the
Mortgage, such other Government Entity.

     B717 Aircraft: the Boeing Model 717 Aircraft leased or owned by the
Company.

     Bankruptcy Code: the United States Bankruptcy Code, 11 U.S.C. (S) 101 et
seq., as the same may be amended from time to time, and any successor statute
thereto.

     Bankruptcy Default: any event which is, or after notice or passage of time
or both would be, any of the following events:  (1) the Company or any
Significant Subsidiary of the Company that is a Restricted Subsidiary, pursuant
to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an involuntary
case, (iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property, (iv) makes a general assignment for the
benefit of its creditors, or (v) admits in writing its inability to pay debts as
the same become due; or (2) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (i) is for relief against the Company or
any Significant Subsidiary which is a Restricted Subsidiary in an involuntary
case, (ii) appoints a Custodian of the Company or any Significant Subsidiary
which is a Restricted Subsidiary or for all or substantially all of their
property, or (iii) orders the liquidation of the Company, or any Significant
Subsidiary which is a Restricted Subsidiary.

     Bankruptcy Law: the Bankruptcy Code or any similar federal, state or
foreign law for the relief of debtors.

     Board of Directors: the board of directors of the Company or any committee
of such board duly authorized to act in respect of any particular matter.

     Business Day: defined in the Collateral Trust Agreement.

     Capital Stock: defined in the Collateral Trust Agreement.

     Cash Equivalents: defined in the Indenture or, if the Indenture shall no
longer be in full force and effect, then as such term was defined therein
immediately prior to its ceasing to be in full force and effect.

     Citizen of the United States: defined in (S) 40102(a)(15) of the
Transportation Code and in the FARs.
<PAGE>

     Collateral: defined in the Granting Clause of the Mortgage.

     Collateral Trust Agreement: that certain Collateral Trust Agreement (as the
same may be amended, restated, supplemented or otherwise modified from time to
time in accordance with the terms thereof), dated as of the date hereof, by and
among the Company, the Subsidiary Grantors listed therein, any subsidiaries of
the Company listed therein, and Mortgagee.

     Company: defined in the preamble to the Mortgage.

     Company Note Purchase Agreement: defined in the Collateral Trust Agreement.

     Corporate Trust Office: Mortgagee's principal office, located at
Mortgagee's address for notices under Section 8.2 of the Collateral Trust
Agreement, or such other office at which Mortgagee's corporate trust business
shall be administered and which Mortgagee specifies by notice in writing to the
Company and each Holder.

     CRAF: the Civil Reserve Air Fleet Program established pursuant to 10 U.S.C.
(S) 9511 - 13, or any similar substitute program.

     Custodian: defined in the Indenture or, if the Indenture shall no longer be
in full force and effect, then as such term was defined therein immediately
prior to its ceasing to be in full force and effect.

     Default: (1) any event or condition that, with the giving of notice or the
lapse of time, would become an Event of Default, or (2) any Event of Default.

     Disposition: defined in (S) 4.05(f) of the Mortgage.

     Dollars, United States Dollars, or $: the lawful currency of the United
States.

     Encumbered Engine: each Engine described on Schedule 4 hereto.

     Engine: (1) each of the engines manufactured by Engine Manufacturer and
identified by Engine Manufacturer's model number and Engine Manufacturer's
serial number in Schedule 1 to the Mortgage and originally installed on an
Airframe on the Issuance Date, (2) each Spare Engine, or (3) any Replacement
Engine, in any case whether or not from time to time installed on such Airframe
or installed on any other airframe or aircraft, including (for clauses (1), (2)
and (3)) any and all Parts incorporated or installed in or attached or
appurtenant to such engine, and any and all Parts removed from such engine,
unless the Lien of the Mortgage does not apply to such Parts in accordance with
(S) 4.04 of the Mortgage. Upon substitution of a Replacement Engine under and in
accordance with the Mortgage, such Replacement Engine shall become subject to
the Mortgage and shall be an "Engine" for all purposes of the Mortgage, and the
replaced Engine shall cease to be subject to the Mortgage and shall cease to be
an "Engine".

     Engine Manufacturer: United Technologies Corporation, Pratt & Whitney
Division, a Delaware corporation, in the case of Engines appertaining to the
Airframes described on Schedule 1 to the Mortgage, and Rolls-Royce Deutschland
in the case of Engines appertaining to
<PAGE>

B717 Aircraft.

     Event of Default: defined in (S) 5.01 of the Mortgage.

     Event of Loss with respect to any Aircraft, any Airframe, or any Engine:
any of the following circumstances, conditions, or events with respect to such
property, for any reason whatsoever:

     (1)   the destruction of such property, damage to such property beyond
           economic repair, or rendition of such property permanently unfit for
           normal use by the Company;

     (2)   the actual or constructive total loss of such property, or any damage
           to such property, or requisition of title or use of 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;

     (3)   any theft, hijacking, or disappearance of such property for a period
           of 120 consecutive days or more;

     (4)   any seizure, condemnation, confiscation, taking, or requisition of
           use of such property by any Government Entity or purported Government
           Entity (other than a requisition of use by a U.S. Government Entity)
           for a period exceeding 180 consecutive days; or any taking of title
           of such property by any Government Entity or purported Government
           Entity (whether by seizure, condemnation, confiscation, requisition,
           or otherwise);

     (5)   as a result of any law, rule, regulation, order, or other action by
           the Aviation Authority or by any Government Entity of the government
           of registry of such Aircraft or by any Government Entity otherwise
           having jurisdiction over the operation or use of such Aircraft, the
           use of such property in the normal course of the Company's business
           of passenger air transportation is prohibited for a period of 180
           consecutive days, unless, before the expiration of such 180-day
           period, the Company undertakes and is diligently carrying forward
           such steps as are necessary or desirable to permit the normal use of
           such property by the Company, but in any event if such use is
           prohibited for a continuous period of one year.

     Excess Proceeds: defined in (S) 4.05(f) of the Mortgage.

     Excluded Payments: liability insurance proceeds under any insurance policy
insuring the Company, Holdings or any of their respective affiliates against
third party claims.

     Expenses: any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses, and
disbursements (including reasonable fees and disbursements of legal counsel,
accountants, appraisers, inspectors, or other professionals, and costs of
investigation).

     FAA: the Federal Aviation Administration of the United States or any
Government Entity
<PAGE>

succeeding to the functions of such Federal Aviation Administration.

     FAA Bill of Sale:  a bill of sale for an Aircraft on AC Form 8050-2 (or
such other form as may be approved by the FAA).

     FARs:  the Federal Aviation Regulations issued or promulgated pursuant to
the Transportation Code from time to time.

     Financing Statements:  UCC-1 (and, where appropriate, UCC-3) financing
statements covering the Collateral, by the Company, as debtor, showing Mortgagee
as secured party, or as otherwise may be requested by Mortgagee in connection
with a Permitted Lease, for filing in Florida and each other jurisdiction where
(in Mortgagee's opinion) filing is necessary to perfect its Lien on the
Collateral.

     GAAP:  generally accepted accounting principles as set forth in the
statements of financial accounting standards issued by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants, as
varied by any applicable financial accounting rules or regulations issued by the
SEC, and applied on a basis consistent with prior periods except as may be
disclosed in the pertinent Person's financial statements.

     Government Entity:  (1) 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 (2) any other government entity having
jurisdiction over any matter contemplated by the Mortgage or relating to the
observance or performance of the obligations of any of the parties to the
Mortgage.

     Grantors:  defined in the Collateral Trust Agreement.

     Guarantor Confirmation:  an agreement, in form and substance reasonably
satisfactory to the Holders, under which each Subsidiary Guarantor confirms its
obligations under its Subsidiary Guarantee after giving effect to the
transactions necessitating the delivery of that agreement.

     Holders:  defined in the Collateral Trust Agreement

     Holdings:  defined in Recital B to the Mortgage.

     Holdings Note Purchase Agreement:  defined in the Collateral Trust
Agreement.

     Indebtedness:  defined in the Indenture or, if the Indenture shall no
longer be in full force and effect, then as such term was defined therein
immediately prior to its ceasing to be in full force and effect.

     Indenture:  defined in the Collateral Trust Agreement.

     Inspecting Parties:  defined in (S) 4.03(a) of the Mortgage.

                                                                         PAGE 41
<PAGE>

     Insurance Broker:  defined in (S) F of Annex B to the Mortgage.

     Investment:  defined in the Indenture or, if the Indenture shall no longer
be in full force and effect, then as such term was defined therein immediately
prior to its ceasing to be in full force and effect.

     Issuance Date:  April 12, 2001.

     Law:  (1) any constitution, treaty, statute, law, decree, regulation,
order, rule, or directive of any Government Entity, and (2) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.

     Lease Assignment:  defined in (S) 4.02(b) of the Mortgage.

     Lien:  any mortgage, pledge, lien, charge, claim, encumbrance, lease, or
security interest affecting the title to or any interest in property.

     Mandatory Modification:  defined in (S) 4.04(d) of the Mortgage.

     Maintenance Program:  defined in (S) 4.02(d) of the Mortgage.

     Minimum Liability Insurance Amount:  $550,000,000, unless a majority of
major U.S. Air Carriers routinely insure at a lower level aircraft with similar
or greater passenger capacity as those operated by the Company, in which event,
at such lower level as routinely insured by a majority of such major U.S. Air
Carriers.

     Moody's:  Moody's Investors Service, Inc.

     Mortgage:  Aircraft Mortgage and Security Agreement, dated as of April 13,
2001, between the Company and Mortgagee.

     Mortgagee Agreements:  any Lease Assignment or assigned Permitted Lease
contemplated by subclause (3) of the Granting Clause in the Mortgage, and any
other contract, agreement, or instrument from time to time assigned or pledged
under the Mortgage.

     Mortgagee:  Wilmington Trust Company, a Delaware banking corporation, not
in its individual capacity but solely as mortgagee under the Mortgage.

     Net Available Cash:  defined in the Indenture or, if the Indenture shall no
longer be in full force and effect, then as such term was defined therein
immediately prior to its ceasing to be in full force and effect.

     Note:  any note issued pursuant to the Company Note Purchase Agreement or
the Holdings Note Purchase Agreement.

     Officer:  means the chief executive officer, president or a vice president
in the disciplines of finance, accounting or law.

                                                                         PAGE 42
<PAGE>

     Optional Modification:  defined in (S) 4.04(d) of the Mortgage.

     Parts:  all appliances, parts, components, instruments, appurtenances,
accessories, furnishings, seats, and other equipment of whatever nature,
including the Spare Parts (other than (1) Engines or engines, and (2) any
Removable Part leased by the Company from a third party or subject to a security
interest granted to a third party), from time to time installed or incorporated
in or attached or appurtenant to any Airframe or any Engine.

     Permitted Air Carrier:  any Permitted Foreign Air Carrier or U.S. Air
Carrier.

     Permitted Country:  any country listed on Schedule 2 to the Mortgage;
except any such country that, when the pertinent lease or other transfer begins,
does not maintain normal diplomatic relations with the United States (or, in the
case of Taiwan, diplomatic relations at least as good as those in effect on the
Issuance Date), is involved in internal or external war or military conflict, or
is a country with which it would constitute a breach of Law for Mortgagee or any
Holder to engage directly or indirectly in business.

     Permitted Foreign Air Carrier:  any air carrier that (1) has its principal
executive offices in any Permitted Country, and (2) is authorized to conduct
commercial airline operations and to operate jet aircraft similar to the
Aircraft to be leased to such air carrier pursuant to a Permitted Lease under
the applicable Laws of such Permitted Country.

     Permitted Lease:  a lease or sublease permitted under any of clauses (1)
through (8) of (S) 4.02(b) of the Mortgage.

     Permitted Lease Documents:  the lease agreement entered into in connection
with a Permitted Lease, together with all other documents, certificates or
instruments executed or delivered in connection therewith, and any amendments,
supplements, or restatements of any of the foregoing that may be from time to
time executed or delivered in connection therewith.

     Permitted Lessee:  the lessee under a Permitted Lease.

     Permitted Lien:  (1) the rights of Mortgagee under the Mortgage, or of any
Permitted Lessee under any Permitted Lease; (2) Liens attributable to or arising
by, through or under Trust Company or Mortgagee; (3) the rights of others under
agreements or arrangements to the extent expressly permitted by (S) 4.02(b) or
(S) 4.04 of the Mortgage; (4) Liens of Taxes either not yet due or being
contested in good faith by appropriate proceedings, which shall have effectively
stayed any execution or other enforcement of such Lien against the Collateral,
provided such Liens and such proceedings do not involve a material risk of the
sale, forfeiture, or loss of any Aircraft, any Airframe, any Engine, or the
interest of Mortgagee or any Holder therein, or impair the Lien of the Mortgage;
(5) materialmen's, mechanics', workers', repairers', employees', or other like
Liens arising in the ordinary course of business for amounts the payment of
which either is not yet delinquent for more than 60 days or is being contested
in good faith by appropriate proceedings, which shall have effectively stayed
any execution or other enforcement of such Lien, provided such Liens and such
proceedings do not involve a material risk of the sale, forfeiture, or loss of
any Aircraft, any Airframe, any Engine, or the interest of Mortgagee or any

                                                                         PAGE 43
<PAGE>

Holder therein, or impair the Lien of the Mortgage; (6) Liens arising out of any
judgment or award against the Company (or any Permitted Lessee), if, within 60
days after the entry thereof, that judgment or award is discharged or vacated,
or has its execution stayed pending appeal, or is discharged, vacated, or
reversed within 60 days after the expiration of such stay, and if during any
such 60-day period there is not, or any such judgment or award does not involve,
a material risk of the sale, forfeiture, or loss of any Aircraft, any Airframe,
any Engine, or the interest of Mortgagee or any Holder therein, or impair the
Lien of the Mortgage; or (7) any other Lien with respect to which the Company
(or any Permitted Lessee) provides a bond, cash collateral, or other security
adequate as to amount and terms in the opinion of Mortgagee.

     Permitted Manufacturer:  any manufacturer of commercial jet airframes or
commercial jet aircraft engines, or subsidiary of any such manufacturer, that
has its principal executive offices in the United States or a Permitted Country.

     Person or person:  an 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.

     Purchase Agreement:  defined in Recital A to the Mortgage.

     Removable Part:  defined in (S) 4.04(d) of the Mortgage.

     Rent:  defined in the Granting Clause of the Mortgage.

     Replacement Airframe:  an airframe substituted for an Airframe pursuant to
(S) 4.05(a) of the Mortgage.

     Replacement Closing Date:  defined in (S) 4.05(c) of the Mortgage.

     Replacement Engine:  an engine substituted for an Engine pursuant to (S)
4.04(e) of the Mortgage.

     Responsible Officer:  (1) any Officer of such Person, (2) any other officer
of such Person customarily bearing responsibility for matters relating to the
transactions contemplated by the Mortgage, or (3) any officer of such Person
specifically authorized to take responsibility for any matter relating to the
transactions contemplated by the Mortgage.

     Restricted Subsidiary:  defined in the Collateral Trust Agreement.

     SEC:  the Securities and Exchange Commission of the United States, or any
Government Entity succeeding to the functions of such Securities and Exchange
Commission.

     Section 1110:  11 U.S.C. (S) 1110 of the Bankruptcy Code, or any successor
or analogous section of the federal bankruptcy law in effect from time to time.

     Secured Debt:  defined in the Collateral Trust Agreement.

                                                                         PAGE 44
<PAGE>

     Security Documents:  defined in the Collateral Trust Agreement.

     Senior Indebtedness:  defined in the Indenture or, if the Indenture shall
no longer be in full force and effect, then as such term was defined therein
immediately prior to its ceasing to be in full force and effect.

     Significant Default:  (1) the Company's or Holdings' failure to pay any
amount of principal of or interest on any Note when due, (2) any Bankruptcy
Default or (3) any Event of Default.

     Significant Subsidiary:  defined in SEC Regulation S-X.

     Similar Aircraft:  an aircraft of the same make and similar model to the
subject Aircraft, i.e., another Boeing Model DC-9 aircraft in the case of an
Aircraft consisting of a Boeing Model DC-9 series aircraft and another Boeing
Model 737 in the case of an Aircraft consisting of a Boeing Model 737 aircraft.

     Spare Engine:  each of the engines manufactured by Engine Manufacturer,
identified by Engine Manufacturer's model number and Engine Manufacturer's
serial number in Schedule 1 and not originally installed on an Airframe on the
Issuance Date.

     Spare Parts:  the Company's aircraft spare parts, including each of the
following:  (1) expendables, (2) pipeline spares and other non-capital, rotable
airframe and engine components, and (3) capital units and other parts that will
normally last the life of the aircraft, such as spare control surfaces, landing
gears, avionics units and engine accessories, in each case, whether now existing
or acquired after the Issuance Date.

     Spares Insured Value:  defined in (S) D of Annex B to the Mortgage.

     Standard & Poor's:  Standard & Poor's Ratings Services.

     Subsidiary Guarantee:  defined in the Collateral Trust Agreement.

     Taxes:  all taxes, levies, imposts, duties, fees, charges, assessments, or
withholdings of any nature whatsoever imposed by any Taxing Authority, and any
penalties, additions to tax, fines, or interest thereon or additions thereto.

     Taxing Authority:  any federal, state, or local government or other taxing
authority in the United States, any foreign government or political subdivision
or taxing authority thereof, any international taxing authority, or any
territory or possession of the United States or taxing authority thereof.

     Threshold Amount:  $2,000,000.

     Transportation Code:  subtitle VII of title 49, United States Code.

     Trigger Date:  defined in (S) 4.05(f) of the Mortgage.

                                                                         PAGE 45
<PAGE>

     Trust Company:  Wilmington Trust Company, a Delaware banking corporation,
not in its capacity as Mortgagee under the Mortgage but in its individual
capacity.

     Trust Estate:  defined in the Collateral Trust Agreement.

     UCC:  the Uniform Commercial Code as in effect in any applicable
jurisdiction.

     United States or U.S.:  the United States of America; provided, that for
geographic purposes, "United States" means the 50 states and the District of
Columbia of the United States of America.

     U.S. Air Carrier:  any United States air carrier who is a Citizen of the
United States holding an air carrier operating certificate issued by the
Secretary of Transportation pursuant to chapter 447 of the Transportation Code
for aircraft capable of carrying 10 or more individuals or 6000 pounds or more
of cargo, and as to whom there is in force an air carrier operating certificate
issued pursuant to FAR Part 121, or who may operate as an air carrier by
certification or otherwise under any successor or substitute provisions therefor
or in the absence thereof.

     U.S. Government:  the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.

     Wet Lease:  any arrangement whereby the Company or a Permitted Lessee
agrees to furnish any Aircraft, Airframe, or Engine to a third party pursuant to
which such Aircraft, Airframe, or Engine is at all times in the operational
control of the Company or such Permitted Lessee, provided, that the Company's
obligations under the Mortgage shall continue in full force and effect
notwithstanding any such arrangement.

                                                                         PAGE 46

<PAGE>

                                    ANNEX B

                                   INSURANCE

     The terms defined in Annex A to the Mortgage, when capitalized as in Annex
A, have the same meanings when used in this "Insurance" Annex.  Annex A also
contains rules of usage that control construction in this "Insurance" Annex.

A.   Liability Insurance

     1.   Except as provided in (S) A2 below, the Company will carry or cause to
be carried at all times, at no expense to Mortgagee or any Holder, comprehensive
airline legal liability insurance (including passenger liability, property
damage, and contractual liability insurance) with respect to each Aircraft,
Airframe and Engine, which is (a) 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 operated by the Company of the same type and operating on
similar routes as such Aircraft, and (y) the Minimum Liability Insurance Amount
per occurrence; (b) of the type and covering the same risks as from time to time
applicable to aircraft operated by the Company of the same type as such
Aircraft; and (c) 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 any Aircraft is on the ground and not in
operation, the Company may carry or cause to be carried, in lieu of the
insurance required by (S) A1 above, insurance otherwise conforming with the
provisions of (S) A1 except that (a) 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 operated by the Company of the same
type as such Aircraft which are on the ground and not in operation, and (b) 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 operated by the Company of the same
type which are on the ground and not in operation.

B.   Hull Insurance

     1.   Except as provided in (S) B2 below, the Company will carry or cause to
be carried at all times, at no expense to Mortgagee or any Holder, with Approved
Insurers "all-risk" ground and flight aircraft hull insurance covering each
Aircraft (including the Engines when they are installed on an Airframe or any
other airframe) which is of the type as from time to time applicable to aircraft
operated by the Company of the same type as such Aircraft for an amount
denominated in United States Dollars not less than the applicable Agreed Value
(as the same may be annually adjusted in accordance with the terms hereof).
<PAGE>

     Any policies of insurance carried in accordance with this (S) B1 covering
such Aircraft and any policies taken out in substitution or replacement for any
such policies (a) shall name Mortgagee as loss payee for the account of all
interests for any proceeds to be paid under such policies up to an amount equal
to the Agreed Value, and (b) shall provide that (aa) 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 Agreed Value shall be payable to
Mortgagee, except in the case of a loss with respect to an Engine installed on
an airframe other than an Airframe, in which case the Company (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 Mortgagee whether such
payment is made to the Company (or any Permitted Lessee) or any third party and,
if Mortgagee receives such a payment otherwise than in respect of an Event of
Loss, then, upon receipt of evidence satisfactory to Mortgagee that the damage
giving rise to such payment has been repaired or that such payment is then
required to pay for repairs then being made, Mortgagee shall, unless a Default
or Event or Default exists, pay the amount of such payment to the Company or its
order, and (bb) 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 Agreed Value shall be paid to the Company or its order unless a Default or
Event or Default exists and the insurers have been notified thereof by
Mortgagee.  In the case of a loss with respect to an engine (other than an
Engine) installed on an Airframe, Mortgagee shall hold any payment to it of any
insurance proceeds in respect of such loss for the account of the Company or any
other third party who is entitled to receive such proceeds.

     2.   During any period that any Aircraft is on the ground and not in
operation, the Company may carry or cause to be carried, in lieu of the
insurance required by (S) B1 above, insurance otherwise conforming with the
provisions of (S) B1, except that the scope of the risks and the type of
insurance shall be the same as from time to time applicable to aircraft operated
by the Company of the same type similarly on the ground and not in operation,
provided, that the Company shall maintain insurance against risk of loss or
damage to such Aircraft in an amount equal to the Agreed Value during such
period that such Aircraft is on the ground and not in operation.

C.   War-Risk, Hijacking, and Allied Perils Insurance

     If the Company (or any Permitted Lessee) operates or proposes to operate an
Aircraft, an Airframe, or any Engine (1) in any area of recognized hostilities
or (2) on international routes and the Company (or such Permitted Lessee)
maintains war-risk, hijacking, or allied perils insurance for other aircraft
that it operates on such routes, the Company shall maintain or cause to be
maintained war-risk, hijacking, and related perils insurance of substantially
the same type carried by major 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 (x) the amount set forth in (S) A with
respect to liability coverage and (y) the values stated in (S) B1 and B2 with
respect to hull coverage.  In any event, the Company shall maintain or cause a
Permitted Lessee to maintain the "Common North American Airline Buyback" to the
War Exclusion Clause (or London or other equivalent) war risk perils buyback.

                                                                         PAGE 48
<PAGE>

D.   Spares Coverage

     The Company will carry or cause to be carried at all times, at no expense
to Mortgagee or any Holder, with Approved Insurers spares all risks insurance
covering Engines and Parts, including Spare Engines and Spare Parts, while
removed from an Aircraft, in an aggregate amount not less than the full
replacement value of such Engine or Part (the "Spares Insured Value").

     Any policies of insurance carried in accordance with this (S) D covering
such Engines and Parts and any policies taken out in substitution or replacement
for any such policies (a) shall name Mortgagee as exclusive loss payee for any
proceeds to be paid under such policies up to an amount equal to the Spares
Insured Value for the applicable Engine or Part, and (b) shall provide that in
the event of a loss, the proceeds in respect of such loss for such Engine or
Part shall be payable to the Company, unless a Default or Event or Default
exists and the insurers have been notified thereof by Mortgagee.

E.   General Provisions

     Any policies of insurance carried in accordance with (S)(S) A, B, C and D,
including any policies taken out in substitution or replacement for such
policies:

               (1)  shall name Mortgagee and each Holder, (identified by
     description, not by name) as an additional insured (collectively, the
     "Additional Insureds"), as their interests may appear;

               (2)  shall apply worldwide and have no territorial restrictions
     or limitations (except only in the case of war, hijacking, and related
     perils insurance required under (S) C, which shall apply to the extent
     available on commercially reasonable terms in the major international
     aviation insurance markets);

               (3)  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 the Company (or any Permitted Lessee) or any other
     Person (including use for illegal purposes of any Aircraft or any Engine),
     and shall insure the Additional Insureds regardless of any breach or
     violation of any representation, warranty, declaration, term, or condition
     in such policies by the Company (or any Permitted Lessee);

               (4)  shall provide that, if the insurers cancel such insurance
     for any reason whatsoever, or if it 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 Insureds for
     30 days (seven days in the case of war risk, hijacking, and allied perils
     insurance) 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

                                                                         PAGE 49
<PAGE>

     period of prior notice as shall then be reasonably obtainable;

               (5)  shall waive any rights of setoff (including for unpaid
     premiums), recoupment, counterclaim, or other deduction, whether by
     attachment or otherwise, against each Additional Insured;

               (6)  shall waive any right of recourse, subrogation, setoff,
     recoupment, counterclaim, or other deduction against any Additional
     Insured;

               (7)  shall be primary without right of contribution from any
     other insurance that may be available to any Additional Insured;

               (8)  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;

               (9)  shall provide that none of the Additional Insureds shall be
     liable for any insurance premium; and

               (10) 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.

F.   Reports and Certificates; Other Information

     On or before the Issuance Date and on or before each renewal date of the
insurance policies required hereunder, the Company will furnish or cause to be
furnished to Mortgagee insurance certificates describing in reasonable detail
the insurance maintained by the Company hereunder and a report, signed by the
Company's regular independent insurance broker (the "Insurance Broker"), stating
the opinion in customary form of such Insurance Broker that (a) all premiums in
connection with the insurance then due have been paid, and (b) such insurance
complies with this Annex B.  To the extent such agreement is reasonably
obtainable, the Company will also cause the Insurance Broker to agree to advise
Mortgagee in writing of any default in the payment of any premium, and to notify
Mortgagee in writing at least 30 days (seven days in the case of war-risk and
allied perils coverage, or such shorter period as may be available in the major
international aviation insurance markets, as applicable) before the
cancellation, lapse, or materially adverse change of any insurance maintained
pursuant to this Annex B.

G.   Right to Pay Premiums

     The Additional Insureds shall have the rights but not the obligations of an
additional named insured.  None of Mortgagee and the other 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 insurance due to

                                                                         PAGE 50

<PAGE>

the nonpayment of premiums, Mortgagee shall have the option, in its sole
discretion,, to pay any such premium in respect of one or more of the Aircraft
that is due in respect of the coverage pursuant to this Mortgage and to maintain
such coverage, as Mortgagee may require, until the scheduled expiry date of such
insurance and, in such event, the Company shall, upon demand, reimburse
Mortgagee for amounts that it so pays.

H.   Deductibles; Self-Insurance

     The Company may self-insure by way of deductible, premium adjustment,
franchise provisions, or otherwise (including, with respect to insurance
maintained pursuant to (S) B, insuring for a maximum amount which is less than
the Agreed Value) in the insurance covering the risks required to be insured
against pursuant to (S) 4.06 of the Mortgage and this Annex B under a program
applicable to all aircraft in the Company's fleet, but in no case shall the
aggregate amount of self-insurance in regard to (S) 11 of the Mortgage and this
Annex B exceed $1 million per occurrence, or, if greater, the lesser per policy
year with respect to all of the aircraft in the Company's fleet (including each
Aircraft of (x) 4% of the consolidated tangible net worth of Holdings at the
time (based on the latest publicly-available financial statements at the time
that the insurance is placed) and (y) the value of the single most valuable
aircraft in the Company's fleet), unless an insurance broker of national
standing shall certify that the standard among the majority of major U.S.
airlines is a higher level of self-insurance, in which case the Company may
self-insure to such higher level.  In addition, the Company (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.

                                                                         PAGE 51
<PAGE>

                                  SCHEDULE 1

                     DESCRIPTION OF AIRFRAMES AND ENGINES

                   McDONNELL DOUGLAS MODEL DC-9-32 AIRFRAMES

        FAA           Manufacturer's            FAA            Manufacturer's
  Registration No.      Serial No.        Registration No.       Serial No.

      N803AT             47261               N834AT               47488
      N816AT             47445               N835AT               47534
      N817AT             47323               N836AT               47397
      N818AT             47320               N837AT               45774
      N819AT             47260               N839AT               47089
      N821AT             47284               N840AT               47523
      N823AT             47529               N845AT               47238
      N824AT             47278               N846AT               47226
      N825AT             47319               N847AT               47555
      N828AT             47274               N848AT               47559
      N830AT             47723               N849AT               47484
      N831AT             47674               N866AT               47168
      N832AT             47451               N867AT               47170
      N833AT             47489

                        BOEING MODEL 737-2L9 AIRFRAMES

                            FAA         Manufacturer's
                      Registration No.    Serial No.

                          N464AT           21278
                          N737Q            21279
                          N465AT           21528
<PAGE>

                          PRATT & WHITNEY JT8D ENGINES

    Manufacturer's     Manufacturer's      Manufacturer's      Manufacturer's
      Serial No.         Serial No.          Serial No.          Serial No.

       649189             653673              654701              688646
       653649             656845              656857              655010
       656065             657299              657308              656981
       657214             657612              665202              657590
       657608             665238              665251              665252
       665225             665332              665387              665433
       665283             665500              665542              665636
       665470             665737              665816              665820
       665721             665861              665874              665972
       665828             666004              666022              666075
       666133             666148              666183              666186
       666227             666338              666290              666729
       666334             666811              666672              666912
       666759             666948              666868              667165
       666915             667137              666955              674577
       667136             674394              667154              707401
       687596             688418              674425

EACH OF THE ABOVE AIRCRAFT ENGINES IS AT LEAST 750 RATED TAKEOFF HORSEPOWER.

                                                                         PAGE 53
<PAGE>

                                  SCHEDULE 2

                              PERMITTED COUNTRIES

                    Argentina                      Malta
                    Australia                      Mexico
                    Austria                        Morocco
                    Bahamas                        Netherlands
                    Belgium                        New Zealand
                    Brazil                         Norway
                    Canada                         Paraguay
                    Chile                          People's Republic of China
                    Denmark                        Philippines
                    Ecuador                        Portugal
                    Egypt                          Republic of China (Taiwan)
                    Finland                        Singapore
                    France                         South Africa
                    Germany                        South Korea
                    Greece                         Spain
                    Hungary                        Sweden
                    Iceland                        Switzerland
                    India                          Thailand
                    Indonesia                      Tobago
                    Ireland                        Trinidad
                    Italy                          United Kingdom
                    Japan                          Uruguay
                    Luxembourg                     Venezuela
                    Malaysia

<PAGE>

                                  SCHEDULE 3

                           LOCATIONS OF SPARE PARTS

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Address 1                               Address 2                               City                State         Zip
-------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                                     <C>                 <C>           <C>
Atlanta Hartsfield Int'l Airport        10700 Spine Rd.                         Atlanta             GA            30320
-------------------------------------------------------------------------------------------------------------------------
AirTran Reservation Center              1800 Phoenix Blvd.                      Atlanta             GA            30349
-------------------------------------------------------------------------------------------------------------------------
AirTran Training Center                 1688 Phoenix Pkwy                       College Park        GA            30349
-------------------------------------------------------------------------------------------------------------------------
Miami Int'l Airport                     P.O. Box 52-2602                        Miami               FL            33152
-------------------------------------------------------------------------------------------------------------------------
Bloomington Airport                     2901 E. Empire, Suite 110               Bloomington         IL            61704
-------------------------------------------------------------------------------------------------------------------------
Boston Int'l Airport                    400 Terminal D                          East Boston         MA            02128
-------------------------------------------------------------------------------------------------------------------------
Buffalo Int'l Airport                   4200 Genesee St.                        Cheektowaga         NY            14225
-------------------------------------------------------------------------------------------------------------------------
Akron Canton Regional Airport           5430 Lauby Rd.                          North Canton        OH            44720
-------------------------------------------------------------------------------------------------------------------------
Dayton Int'l Airport                    3600 Terminal Dr.                       Vandalia            OH            45377
-------------------------------------------------------------------------------------------------------------------------
DFW Airport                             Ticket Couter, Terminal E, Section A    Dallas              TX            75261
-------------------------------------------------------------------------------------------------------------------------
Newark International Airport            Terminal A, PO Box 4100                 Newark              NJ            07114
-------------------------------------------------------------------------------------------------------------------------
Ft. Lauderdale Int'l Airport            300 S. Terminal Dr.                     Ft. Lauderdale      FL            33315
-------------------------------------------------------------------------------------------------------------------------
Bishop Int'l Airport, Room 110C         G-3425W Bristol Rd.                     Flint               MI            48507
-------------------------------------------------------------------------------------------------------------------------
Gulfport/Biloxi Regional Airport        AirTran Airways Ticket Counter 14035-L  Gulfport            MS            39503
                                        Airport Rd.
-------------------------------------------------------------------------------------------------------------------------
Greensboro Airport                      6415 Bryan Blvd, Suite 88               Greensboro          NC            27409
-------------------------------------------------------------------------------------------------------------------------
AirTran Corporate Offices               9955 AirTran Blvd.                      Orlando             FL            32827
-------------------------------------------------------------------------------------------------------------------------
William P. Hobby Airport                7800 Airport Blvd.                      Houston             TX            77061
-------------------------------------------------------------------------------------------------------------------------
Washington Dulles Int'l Airport         151 Cargo Rd.                           Dulles              VA            20166
-------------------------------------------------------------------------------------------------------------------------
Jacksonville Airport                    2400 Yankee Clipper Dr., Suite 105      Jacksonville        FL            32218
-------------------------------------------------------------------------------------------------------------------------
LaGuardia Airport                       Central Terminal PO Box 110             Flushing            NY            11371
-------------------------------------------------------------------------------------------------------------------------
Orlando Int'l Airport                   9246 Airport Blvd                       Orlando             FL            32822
-------------------------------------------------------------------------------------------------------------------------
AirTran TOC                             4170 Wiley Dr.                          Orlando             FL            32827
-------------------------------------------------------------------------------------------------------------------------
Chicago-Midway Airport                  5700 S. Cicero Ave.                     Chicago             IL            60638
-------------------------------------------------------------------------------------------------------------------------
Memphis Airport                         2491 Winchester, Suite 303              Memphis             TN            38116
-------------------------------------------------------------------------------------------------------------------------
Miami Int'l Airport                     PO Box 8887                             Miami               FL            33299
-------------------------------------------------------------------------------------------------------------------------
Quad Cities/Moline Airport              2200 69th Ave.                          Moline              IL            61265
-------------------------------------------------------------------------------------------------------------------------
Lindberg Terminal                       4300 Glumack Dr.                        St. Paul            MN            55111
-------------------------------------------------------------------------------------------------------------------------
New Orleans Int'l Airport               800 Airline Hwy                         Kenner              LA            70062
-------------------------------------------------------------------------------------------------------------------------
Myrtle Beach Jetport                    1100 Jetport Rd.                        Myrtle Beach        SC            29577
-------------------------------------------------------------------------------------------------------------------------
Newport News Airport                    900 Bland Blvd.                         Newport News        VA            23602
-------------------------------------------------------------------------------------------------------------------------
Philadelphia Int'l Airport              Tkt Ctr Terminal D                      Philadelphia        PA            19153
-------------------------------------------------------------------------------------------------------------------------
AirTran Airways                         PO Box 12404 Landside Terminal          Pittsburgh          PA            15213
-------------------------------------------------------------------------------------------------------------------------
Raleigh-Durham Airport                  1600 Terminal Blvd., Terminal-A         Raleigh             NC            27623
                                        Extension
-------------------------------------------------------------------------------------------------------------------------
Southwest Florida Int'l Airport         16000 Chamberlin Pkwy., Suite 8678      Ft. Myers           FL            33913
-------------------------------------------------------------------------------------------------------------------------
Savannah Airport                        418 Airways Ave.                        Savannah            GA            31408
-------------------------------------------------------------------------------------------------------------------------
AirTran Reservation Center              1224 Bob Harman Rd., Suite 213          Savannah            GA            31408
-------------------------------------------------------------------------------------------------------------------------
Lake City Airport                       P.O. Box 1909                           Lake City           FL            32056
-------------------------------------------------------------------------------------------------------------------------
                                        11013 Airport Hwy                       Swanton             OH            43558
-------------------------------------------------------------------------------------------------------------------------
Tampa International Airport             AirTran Airways PO Box 22771            Tampa               FL            33607
-------------------------------------------------------------------------------------------------------------------------
Okaloosa County Airport                 PO Box 16 State Rd 85N                  Eglin AFB           FL            33542
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

                                  SCHEDULE 4

                              ENCUMBERED ENGINES

        Manufacturer's          Manufacturer's          Designated Value
         Model Number             Serial No.

           JT8D-7B                 665225                  $600,000
           JT8D-9A                 649189                  $600,000
           JT8D-9A                 653649                  $600,000
           JT8D-9A                 665874                  $600,000
<PAGE>

                                   EXHIBIT H

                               FORM OF MORTGAGE

                                [see Exhibit G]
<PAGE>

                                   EXHIBIT I

                          FORM OF SECURITY AGREEMENT

                                [see Exhibit G]<PAGE>

                                                                    EXHIBIT 10.3

                                                                  EXECUTIVE COPY
                                                                  --------------

                             AIRTRAN AIRWAYS, INC.
                            AIRTRAN HOLDINGS, INC.

 166,400 Units consisting of $166,400,000 11.27% Senior Secured Notes due 2008
                           of AirTran Airways, Inc.
          with Warrants to purchase 3,000,000 shares of common stock
                           of AirTran Holdings, Inc.

                              PURCHASE AGREEMENT
                              ------------------

                                                                  April 12, 2001

BOEING CAPITAL LOAN CORPORATION
c/o Entity Services
2325-B Renaissance Drive, Suite 8
Las Vegas, Nevada 89119

Ladies and Gentlemen:

          AirTran Airways, Inc., a Delaware corporation ("Airways") and AirTran
Holdings, Inc., a Nevada corporation ("Holdings" and, together with Airways, the
"Issuers"), hereby agree with you as follows:

          1.   Issuance of Securities.

               (a)  Airways proposes to issue and sell to Boeing Capital Loan
     Corporation (the "Initial Purchaser") $166,400,000 aggregate principal
     amount of 11.27% Senior Secured Notes due 2008, Series A of Airways (the
     "Series A Notes"). The Series A Notes will be issued pursuant to an
     indenture (the "Indenture"), to be dated as of April 12, 2001, by and among
     Airways and any future subsidiary guarantors (the "Guarantors"), and
     Wilmington Trust Company, as indenture trustee (the "Trustee"). The
     Guarantors will unconditionally guarantee the obligations under the Notes
     (defined below) and the Indenture (collectively, the "Guaranty"). The
     obligations under the Notes will be secured by mortgages on, security
     interests in or pledges of (the "Security Interests") certain assets (the
     "Collateral") of Airways and certain of its current and future subsidiaries
     (collectively, the "Grantors") pursuant to (a) the Issuer's Pledge and
     Security Agreement substantially in the form attached hereto as Exhibit A
                                                                     ---------
     (the "Security Agreement"), (b) the Aircraft Mortgage substantially in the
     form attached hereto as Exhibit B (the "Aircraft Mortgage"), (c) the
                             ---------
     Mortgage and Fixture Filing substantially in the form attached hereto as
     Exhibit C (the "Mortgage"), and (d) such other documents executed from time
     ---------
     to time and included in the definition of "Collateral Documents" under the
     Indenture (each of the documents identified in the foregoing clauses (a)
     through (d), the "Collateral Documents"). The Security Interests will
     secure the payment and performance when due of all of the obligations of
     Airways, the Guarantors, if any, and the Grantors under the Indenture, the
     Notes and the Collateral Documents, and shall be subject to the Collateral
     Trust Agreement (defined below). Wilmington Trust Company
<PAGE>

     shall serve as the collateral trustee (the "Collateral Trustee") pursuant
     to that certain Collateral Trust Agreement dated as of April 12, 2001 in
     the form attached as Exhibit D hereto (the "Collateral Trust Agreement").
                          ---------

               (b)  Holdings proposes to issue and sell to the Initial Purchaser
     166,400 warrants ("the Warrants") to purchase an aggregate of 3,000,000
     shares of its common stock, par value $.001 per share (the "Holdings'
     Common Stock"). The Warrants are to be issued pursuant to the provisions of
     that certain warrant agreement (the "Warrant Agreement"), dated as of April
     12, 2001 between Holdings and the Initial Purchaser, substantially in the
     form attached hereto as Exhibit E.
                             ---------

               (c)  The Series A Notes and the Warrants will be sold in units
     (the "Units"), each unit consisting of $1,000 principal amount of Series A
     Notes and one Warrant to purchase 18.02885 shares of Holdings' Common
     Stock. The Series A Notes and the Warrants will be separately transferable
     immediately upon issuance. The issuance of Series A Notes and Warrants on
     the terms set forth herein shall be defined as the "Offering".

               (d)  The Units will be offered and sold to the Initial Purchaser
     pursuant to an exemption from the registration requirements under the
     Securities Act of 1933, as amended (the "Act").

               (e)  Upon original issuance thereof, and until such time as the
     same is no longer required under the applicable requirements of the Act,
     the Series A Notes and the Warrants shall bear the legends set forth on
     Exhibit F hereto.
     -------

               (f)  For the purposes of this Purchase Agreement dated April 12,
     2001 (this "Agreement"), capitalized terms are used as defined in Annex X
                                                                       -------
     attached hereto.

          2.   Agreements to Sell and Purchase. On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions hereof, (a) Airways shall issue and sell to the Initial
Purchaser (and, in order to induce the Initial Purchaser to purchase the Series
A Notes, the Grantors shall grant the Security Interests), and the Initial
Purchaser agrees to purchase from Airways, $166,400,000 aggregate principal
amount of the Series A Notes and (b) Holdings shall issue and sell to the
Initial Purchaser, and the Initial Purchaser agrees to purchase from Holdings
166,400 Warrants. The purchase price for each Unit shall be $1,000.

          3.   Terms of Offering.

               (a)  Holders of the Series A Notes and the 11.27% Series C Senior
     Secured Notes (the "Series C Notes") (including subsequent transferees)
     will have the registration rights set forth in the registration rights
     agreement applicable to the Notes in the form attached as Exhibit G hereto
                                                               ---------
     (the "Note Registration Rights Agreement"), to be executed on and dated as
     of the Closing Date (as defined below). Pursuant to the Note

                                       2
<PAGE>

     Registration Rights Agreement, Airways will agree, among other things, to
     file with the Securities and Exchange Commission (the "Commission") (a) a
     registration statement under the Act (the "Exchange Offer Registration
     Statement") relating to, among other things, the (i) 11.27% Series B Senior
     Secured Notes due 2008 of Airways (the "Series B Notes"), identical in all
     respects to the Series A Notes (except that the Series B Notes shall have
     been registered pursuant to such registration statement) to be offered in
     exchange for the Series A Notes and (ii) 11.27% Series D Senior Secured
     Notes due 2008 of Airways (the "Series D Notes" and, together with the
     Series A Notes, the Series B Notes and the Series C Notes, each with the
     Guaranty endorsed thereon, if any, the "Notes"), identical in all respects
     to the Series C Notes (except that the Series D Notes shall have been
     registered pursuant to such registration statement) to be offered in
     exchange for the Series C Notes (such offers to exchange being referred to
     as the "Registered Exchange Offer"), and/or (b) under certain
     circumstances, a shelf registration statement pursuant to Rule 415 under
     the Act (the "Note Shelf Registration Statement") relating to the resale by
     certain holders of the Notes. Airways will, under certain circumstances, be
     required to pay additional interest ("Special Interest") if it fails to
     meet its obligations under the Note Registration Rights Agreement.

               (b)  Holders of the Warrants will have the registration rights
     set forth in the registration rights agreement applicable to the Warrants
     in the form attached as Exhibit H hereof (the "Warrant Registration Rights
                             ---------
     Agreement"), to be executed on and dated as of the Closing Date. Pursuant
     to the Warrant Registration Rights Agreement, Holdings will agree, among
     other things, to file with the Commission a shelf registration statement
     pursuant to Rule 415 under the Act (the "Warrant Shelf Registration
     Statement") for the Warrants and the common shares underlying the Warrants
     within 120 days of the date the Units are issued and to use its best
     efforts to cause that registration statement to be declared effective
     within 180 days of the date the Units are issued. Holdings will, under
     certain circumstances, be required to pay liquidated damages if it fails to
     meet its obligations under the Warrant Registration Rights Agreement.

               (c)  In connection with the Offering, Boeing Capital Loan
     Corporation ("BCLC") and Holdings have entered into a Note Agreement dated
     as of April 12, 2001 (the "Holdings Note Agreement"), providing for, among
     other things, (1) the issuance to BCLC by Holdings of $17.5 million
     principal amount of certain Series B senior secured convertible notes (the
     "Holdings' Convertible Notes Issuance"), and (2) the issuance to BCLC by
     Holdings of $17.5 million principal amount of certain Series A senior
     secured notes (the "Holdings' Series A Notes Issuance" and, together with
     the Holdings' Convertible Notes Issuance, the "Holdings Note Issuance").
     Holdings will use the proceeds of the Holdings' Note Issuance to make a
     $35.0 million equity contribution to Airways (the "Equity Contribution").

               (d)  This Agreement, the Indenture, the Note Registration Rights
     Agreement, the Holdings Note Agreement, the Warrant Registration Rights
     Agreement,

                                       3
<PAGE>

     the Collateral Documents, the Collateral Trust Agreement, the Notes, the
     Warrant Agreement, any and all other documents or instruments executed by
     either, or both, of the Issuers in connection the Holdings' Note Issuance,
     any and all documents or instruments executed by either, or both, of the
     Issuers in connection with the Equity Contribution and all other documents
     or instruments executed by either, or both, of the Issuers in connection
     with the transactions contemplated hereby and thereby are referred to
     herein as the "Documents." The transactions contemplated by the Documents,
     including without limitation the Offering, the Holdings' Note Issuance, and
     the Equity Contribution, and the use of the proceeds therefrom are
     collectively referred to herein as the "Transactions." The Units, the Notes
     and the Warrants are referred to herein as the "Securities". Unless the
     context requires otherwise, all agreements, representations and warranties
     of the Issuers set forth in this Agreement are made after giving pro forma
     effect to the Transactions.

          4.   Delivery and Payment. Delivery to the Initial Purchaser of and
payment for the Notes shall be made at a Closing (the "Closing") to be held at
11:00 a.m., New York time, on April 12, 2001 (the "Closing Date") at the offices
of Sidley & Austin, 875 Third Avenue, New York, New York 10022. The Closing Date
and the location of delivery of and the form of payment for the Units may be
varied by agreement between the Initial Purchaser and the Issuers.

          The Issuers shall deliver to the Initial Purchaser one or more
certificates representing the Units, comprised of the Series A Notes and the
Warrants, each in definitive form, registered in such names and denominations as
the Initial Purchaser may request, against payment by the Initial Purchaser of
the purchase price therefor by immediately available federal funds bank wire
transfer to such bank account as the Issuers shall designate to the Initial
Purchaser at least two business days prior to the Closing.

          The certificates representing the Units in definitive form shall be
made available to the Initial Purchaser for inspection at the offices of Sidley
& Austin, 875 Third Avenue, New York, New York 10022 (or such other place as
shall be reasonably acceptable to the Initial Purchaser) not later than 10:00
a.m. one business day immediately preceding the Closing Date.

          5.   Agreements of the Issuers. The Issuers, jointly and severally,
hereby agree:

               (a)  To (i) advise the Initial Purchaser promptly after obtaining
     actual knowledge (and, if requested by the Initial Purchaser, confirm such
     advice in writing) of (A) the issuance by any state securities commission
     of any stop order suspending the qualification or exemption from
     qualification of any of the Securities for offer or sale in any
     jurisdiction, or the initiation of any proceeding for such purpose by any
     state securities commission or other regulatory authority, or (B) the
     happening of any event not otherwise disclosed pursuant to one or more
     disclosure schedules to the Transaction Documents that makes any statement
     of a material fact made in the Holdings SEC

                                       4
<PAGE>

     Documents untrue or that requires the making of any additions to or changes
     thereto in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading, (ii) use their
     commercially reasonable efforts to prevent the issuance of any stop order
     or order suspending the qualification or exemption from qualification of
     any of the Securities under any state securities or blue sky laws, and
     (iii) if at any time any state securities commission or other regulatory
     authority shall issue an order suspending the qualification or exemption
     from qualification of any of the Securities under any such laws, use their
     commercially reasonable efforts to obtain the withdrawal or lifting of such
     order at the earliest possible time.

               (b)  To cooperate with the Initial Purchaser and the Initial
     Purchaser's counsel in connection with the qualification of the Securities
     under the securities or blue sky laws of such jurisdictions as the Initial
     Purchaser may request and continue such qualification in effect so long as
     reasonably required for Exempt Resales; provided, that the Issuers shall
                                             --------
     not be required in connection therewith to file any general consent to
     service of process or to qualify as a foreign corporation in any
     jurisdiction where it is not now so qualified or to subject itself to
     taxation in respect of doing business in any jurisdiction in which it is
     not otherwise so subject.

               (c)  Whether or not any of the Transactions are consummated or
     this Agreement is terminated, to pay (i) all costs, expenses, fees and
     taxes incident to and in connection with: (A) the preparation, printing and
     distribution of all agreements, memoranda, correspondence and other
     documents prepared and delivered in connection herewith, (B) the printing,
     processing and distribution (including, without limitation, word processing
     and duplication costs) and delivery of, each of the Documents, (C) the
     issuance and delivery of the Securities, including the fees of the Trustee,
     (D) the qualification of the Securities for offer and sale under the
     securities or blue sky laws of the several states (including, without
     limitation, the fees and disbursements of the Initial Purchaser's counsel
     relating to such registration or qualification, and (E) the preparation of
     the Securities, (ii) all fees and expenses of the counsel and accountants
     of the Issuers, (iii) all expenses and listing fees in connection with the
     application for quotation of the Notes in the NASD Automated Quotation
     System -- PORTAL ("PORTAL"), (iv) all fees and expenses (including fees and
     expenses of counsel) of the Issuers in connection with approval of the
     Notes by DTC for "book-entry" transfer, (v) all fees charged by rating
     agencies in connection with the rating of the Notes, (vi) all fees and
     expenses (including reasonable fees and expenses of counsel) of the Trustee
     and (vii) all out-of-pocket fees and expenses (including reasonable fees
     and expenses of counsel) incurred by the Initial Purchaser in connection
     with the preparation, negotiation and execution of the Documents, its
     services to be rendered under this agreement and the consummation of the
     Transactions.

               (d)  To make the Equity Contribution to Airways from the proceeds
     of the Holdings' Note Issuance and to use the Equity Contribution, existing
     cash balances of Airways and the proceeds from the sale of the Series A
     Notes to satisfy in full all

                                       5
<PAGE>

     monetary obligations with respect to the 10.50% Senior Secured Notes due
     2001 of Airways and the 10.25% Senior Notes due 2001 of Holdings and to pay
     all transaction costs relating to such repayment.

               (e)  To the extent it may lawfully do so, not to insist upon,
     plead, or in any manner whatsoever claim or take the benefit or advantage
     of, any stay, extension, usury or other law, wherever enacted, now or at
     any time hereafter in force, that would prohibit or forgive the payment of
     all or any portion of the principal of or interest on the Notes, or that
     may affect the covenants or the performance of the Indenture (and, to the
     extent it may lawfully do so, each of Airways and Holdings hereby expressly
     waives all benefit or advantage of any such law, and covenants that it
     shall not, by resort to any such law, hinder, delay or impede the execution
     of any power granted to the Trustee in the Indenture or the Collateral
     Trustee in the Security Documents but shall suffer and permit the execution
     of every such power as though no such law had been enacted).

               (f)  To do and perform all things required to be done and
     performed under the Documents prior to and after the Closing Date,
     including, but not limited to:

                    (A)  to effect the inclusion of the Notes in PORTAL;

                    (B)  to list all shares of Holdings' Common Stock issued or
                    issuable upon the exercise of the Warrants on any securities
                    exchange on which Holdings' Common Stock is then listed or
                    to authorize for quotation on the National Association of
                    Securities Dealers Automated Quotation System ("NASDAQ") or,
                    if not then so listed, the National Market System of NASDAQ
                    all Holdings' Common Stock issued or issuable upon exercise
                    of the Warrants if the Holdings' Common Stock is then so
                    authorized for quotation; and

                    (C)  To prepare and file with the Commission promptly after
                    the Issue Date, but in no event later than the 120/th/ day
                    after the Issue Date, a Warrant Shelf Registration
                    Statement, (ii) use its best efforts to cause such Warrant
                    Shelf Registration Statement to be declared effective under
                    the Securities Act as promptly as practicable after the
                    filing thereof, but in no event later than the 180/th/ day
                    after the Closing Date and (iii) use its best efforts to
                    keep the Warrant Shelf Registration Statement effective
                    until April 12, 2009 or such shorter period that will
                    terminate when all of the shares of Holdings' Common Stock
                    issuable upon exercise of the Warrants have been sold
                    pursuant to a registration statement filed under the
                    Securities Act covering such shares of Holdings' Common
                    Stock.

                                       6
<PAGE>

                    (D)  To prepare and file with the Commission promptly after
                    the Issue Date, but in no event later than the 120/th/ day
                    after the Issue Date, a Note Shelf Registration Statement,
                    (ii) use its best efforts to cause such Note Shelf
                    Registration Statement to be declared effective under the
                    Securities Act as promptly as practicable after the filing
                    thereof, but in no event later than the 180/th/ day after
                    the Closing Date and (iii) use its best efforts to keep the
                    Note Shelf Registration Statement effective until April 12,
                    2009 or such shorter period that will terminate when all of
                    the Notes have been sold pursuant to a registration
                    statement filed under the Securities Act covering such
                    Notes.

               (g)  Not to, and to ensure that no affiliate (as defined in Rule
     501(b) of the Act) of either of the Issuers will, sell, offer for sale or
     solicit offers to buy or otherwise negotiate in respect of any "security"
     (as defined in the Act) that would be integrated with the sale of the
     Units, the Series A Notes or the Warrants in a manner that would require
     the registration under the Act of the sale to the Initial Purchaser of the
     Units, the Series A Notes or the Warrants.

               (h)  For so long as any of the Notes remain outstanding, during
     any period in which either of the Issuers is not subject to Section 13 or
     15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
     Act"), to make available, upon request, to any owner of the Notes in
     connection with any sale thereof, and any prospective purchaser of such
     Notes from such owner, the information required by Rule 144A(d)(4) under
     the Act.

               (i)  To comply with the representation letter of the Issuers to
     DTC relating to the approval of the Notes by DTC for "book entry" transfer.

               (j)  For so long as the Notes are outstanding, and whether or not
     required to do so by the rules and regulations of the Commission, (i) to
     furnish to the Trustee and deliver or cause to be delivered to the holders
     of the Notes and the Initial Purchaser (A) all quarterly and annual
     financial information that would be required to be contained in a filing
     with the Commission on Forms 10-Q and 10-K if the Issuers were required to
     file such Forms, including for each, a "Management's Discussion and
     Analysis of Financial Condition and Results of Operations" and, with
     respect to the annual information only, a report thereon by the Issuers'
     independent certified public accountants, and (B) all reports that would be
     required to be filed with the Commission on Form 8-K if the Issuers were
     required to file such reports, and (ii) from and after the time the
     Exchange Offer Registration Statement or the Note Shelf Registration
     Statement (or such other registration statement with respect to the Notes)
     is filed with the Commission, to file such information with the Commission
     so long as the Commission will accept such filings.

                                       7
<PAGE>

               (k)  Except in connection with the Registered Exchange Offer or
     the filing of the Note Shelf Registration Statement, not to, and not to
     authorize or permit any person acting on their behalf to, (i) distribute
     any offering material in connection with the offer and sale of the
     Securities, or (ii) solicit any offer to buy or offer to sell the
     Securities by means of any form of general solicitation or general
     advertising (including, without limitation, as such terms are used in
     Regulation D under the Act) or in any manner involving a public offering
     within the meaning of Section 4(2) of the Act.

               (l)  Not to directly or indirectly, without the prior consent of
     the Initial Purchaser, offer, sell, grant any option to purchase, or
     otherwise dispose (or announce any offer, sale, grant of any option to
     purchase or other disposition) of any securities of either of the Issuers
     for a period of six months after the Closing Date, except as contemplated
     by the Note Registration Rights Agreement, the Holdings SEC Documents
     (including each of the stock option plans described therein), the Warrant
     Registration Rights Agreement , the Warrant Agreement, and the Holdings
     Note Agreement.

               (m)  To take all actions necessary to ensure that a sufficient
     number of shares of Holdings' Common Stock will be authorized and available
     for issuance upon the exercise of the Warrants.

               (n)  At any time prior to the completion of the resale by the
     Initial Purchaser of the Units, the Notes or the Warrants, to notify the
     Initial Purchaser promptly in writing upon becoming aware if either of the
     Issuers or any of their Affiliates becomes a party in interest or a
     disqualified person with respect to any employee benefit plan. The terms
     "ERISA," "Affiliates," "party in interest," "disqualified person" and
     "employee benefit plan" shall have the meanings as set forth in Section
     6(bb) hereof.

               (o)  During the two year period after the Closing Date (or such
     shorter period as may be provided for in Rule 144(k) under the Act, as the
     same may be in effect from time to time), to not, and to not permit any
     current or future subsidiaries of either the Issuers or any other
     affiliates (as defined in Rule 144A under the Act) controlled by either of
     the Issuers to, resell any of the Securities which constitute "restricted
     securities" under Rule 144 that have been reacquired by either of the
     Issuers, any current or future subsidiaries of either of the Issuers or any
     other affiliates (as defined in Rule 144A under the Act) controlled by
     either of the Issuers, except pursuant to an effective registration
     statement under the Act.

               (p)  For so long as the Initial Purchaser and any Affiliate of
     the Initial Purchaser hold Notes, Holdings' Convertible Notes, or Holdings'
     Series A Notes (each a "Permitted Transferee", and, together with the
     Initial Purchaser, each a "Purchaser Party"), the applicable Issuer shall
     purchase Notes, Holdings' Convertible Notes and Holdings' Series A Notes
     under the following circumstances (such obligation, the "Mandatory
     Redemption Obligation"):

                                       8
<PAGE>

                    (i)   Airways shall purchase $3,100,000 aggregate principal
          amount of the Notes held by the Purchaser Parties at a price equal to
          one hundred percent (100%) of the principal amount of such Notes plus
          accrued and unpaid interest and Special Interest, if any, thereon on
          each Delivery Date of a Transaction Aircraft delivered after the
          Closing Date.

                    (ii)  On April 15, 2002, Airways shall purchase Notes in an
          aggregate principal amount equal to the difference of (A) $34,100,000
          minus (B) the product of (x) $3,100,000 multiplied by (y) the number
          of Transaction Aircraft delivered after the Closing Date and on or
          prior to April 15, 2002, at a price equal to one hundred percent
          (100%) of their principal amount plus accrued and unpaid interest and
          Special Interest, if any, thereon; provided, however, if any
          Transaction Aircraft have not been delivered on or before such date
          due to the delivery delays caused by any Boeing Affiliate, the
          aggregate amount of Notes Airways is required to purchase pursuant to
          this Section 5(p)(ii) shall be reduced by $3,100,000 for each such
          Transaction Aircraft the delivery of which has been so delayed until
          the date Boeing notifies Airways in writing that such Transaction
          Aircraft is available for delivery.

                    (iii) For so long as the Purchaser Parties hold a majority
          in the aggregate principal amount then outstanding of the Notes,
          Airways shall, upon written notice by Boeing, purchase all Notes, and
          Holdings shall purchase all Holdings' Convertible Notes and Holdings'
          Series A Notes, in each case, then outstanding and owned by the
          Purchaser Parties, at a price equal to one hundred percent (100%) of
          their principal amount plus accrued and unpaid interest and Special
          Interest, if any, thereon upon any "event of default" under the terms
          of the Notes, Holdings' Convertible Notes and Holdings' Series A Notes
          or other obligations owing from Airways, Holdings or any of their
          affiliates to any Boeing Affiliate, where such "event of default" is
          with respect to an outstanding payment obligation of greater than
          $10,000,000.

               (q)  To (i) treat for Tax purposes the Series A Notes and
     Warrants to purchase 18.02885 shares of Holdings' Common Stock as financial
     instruments acquired at fair market value, (ii) treat as original issue
     discount within the meaning of Code Section 1273(a)(1) that portion of the
     $1,000 issue price of the Series A Notes equal to the fair market value of
     the Warrants to purchase 18.02885 shares of Holdings' Common Stock, (iii)
     treat the Series A Notes as applicable high yield debt obligations under
     Code Section 163(i) and (iv) treat the appropriate amounts under the Code
     as the disqualified portion and the dividend equivalent portion.

          6.   Representations and Warranties of the Issuers. Each of the
Issuers, jointly and severally, represents and warrants to the Initial Purchaser
that as of the Closing Date:

                                       9
<PAGE>

               (a)  No injunction or order has been issued that either (i)
     asserts that any of the Transactions is subject to the registration
     requirements of the Act, or (ii) would prevent or suspend the issuance or
     sale of any of the Securities, in any jurisdiction. As of the Closing Date
     and except as otherwise disclosed on one or more disclosure schedules to
     the Transaction Documents, the Holdings SEC Documents (x) will not contain
     any untrue statement of a material fact or omit to state any material fact
     necessary in order to make the statements therein, in light of the
     circumstances under which they were made, not misleading and (y) will
     contain all the information specified in, and meet the requirements of,
     Rule 144A(d)(4) under the Act. Except as disclosed in the Holdings SEC
     Documents or on Schedule 6(a), there are no related party transactions that
                     -------------
     would be required to be disclosed in a registration statement on Form S-1
     filed under the Act.

               (b)  Each of the Issuers (i) has been duly organized, is validly
     existing and is in good standing under the laws of its jurisdiction of
     organization, (ii) has all requisite power and authority to carry on its
     business and to own, lease and operate its properties and assets described
     in the Holdings SEC Documents, and (iii) is duly qualified or licensed to
     do business and is in good standing as a foreign corporation, as the case
     may be, authorized to do business in each jurisdiction in which the nature
     of such businesses or the ownership or leasing of such properties requires
     such qualification, except where the failure to be so qualified could not,
     singly or in the aggregate, reasonably be expected to have a material
     adverse effect on (A) the properties, business, prospects, operations,
     earnings, assets, liabilities or condition (financial or otherwise) of
     either of the Issuers, taken as a whole, (B) the ability of either of the
     Issuers to perform their obligations in all material respects under any of
     the Documents, (C) the enforceability of any of the Security Documents or
     the attachment, perfection or priority of any of the Security Interests
     intended to be created thereby in any portion of the Collateral or (D) the
     validity of any of the Documents or the consummation of any of the
     Transactions (each, a "Material Adverse Effect").

               (c)  As of the Closing, (i) Holdings will have no direct or
     indirect subsidiaries other than Airways and AirTran Investments
     Corporation, each of which is a wholly-owned subsidiary of Holdings and
     (ii) Airways will have no direct or indirect subsidiaries other than
     AirTran Airways 717 Leasing Corporation, which is a wholly-owned subsidiary
     of Airways. All of the shares of outstanding common stock of Airways and
     AirTran Investments Corporation are owned, directly or indirectly, by
     Holdings, free and clear of all liens, security interests, mortgages,
     pledges, charges, claims or restrictions on transferability or encumbrance
     of any kind. All of the shares of outstanding common stock of AirTran
     Airways 717 Leasing Corporation, are owned, directly or indirectly, by
     Airways, free and clear of all liens, security interests, mortgages,
     pledges, charges, claims or restrictions on transferability or encumbrance
     of any kind other than those created by the Transaction Documents. Except
     as disclosed in the Holdings 10-K, there are no outstanding (A) securities
     convertible into or exchangeable for any capital stock of either of the
     Issuers, (B) options, warrants or other rights to purchase or subscribe for
     capital stock of either of the Issuers, or (C) contracts,

                                       10
<PAGE>

     commitments, agreements, understandings, arrangements, calls or claims of
     any kind relating to the issuance of any capital stock of either of the
     Issuers, any such convertible or exchangeable securities or any such
     options, warrants or rights. Except as disclosed in the Holdings SEC
     Documents, immediately following the Closing, neither of the Issuers will
     directly or indirectly own any capital stock or other equity interest in
     any person.

               (d)  All of the outstanding shares of capital stock of each of
     the Issuers have been duly authorized and validly issued, are fully paid
     and nonassessable, and were not issued in violation of, and are not subject
     to, any preemptive or similar rights. Schedule 6(d) sets forth (a) the
                                           -------------
     Capitalization of each of Airways and Holdings as of the Closing Date and
     (b) the pro forma Capitalization of each of Airways and Holdings after
     giving effect to the Transactions. "Capitalization" shall mean (a) the
     number of authorized and outstanding shares of Common Stock, (b) the number
     of authorized and outstanding shares of each series of preferred stock, (c)
     a description of outstanding securities convertible into or exchangeable
     for Common Stock and the maximum number of shares of Common Stock issuable
     upon exercise of all such outstanding rights, (d) a description of any
     option plans and the number of authorized options and the number of
     outstanding options, and (e) the number of any other outstanding shares or
     securities. Except as set forth in such Schedule 6(d), immediately
                                             -------------
     following the Closing, neither of the Issuers will have any liabilities,
     absolute, accrued, contingent or otherwise other than (A) liabilities that
     are reflected in the Financial Statements (defined below), or (B)
     liabilities incurred subsequent to the date thereof in the ordinary course
     of business, consistent with past practice, that could not, singly or in
     the aggregate, reasonably be expected to have a Material Adverse Effect.

               (e)  Except for this Agreement and the Note Registration Rights
     Agreement, the Warrant Registration Rights Agreement, and the Holdings Note
     Agreement, one or more other agreements between Issuers and Purchaser
     Parties or their Affiliates granting to such parties certain registration
     rights or as disclosed in the Holdings SEC Documents, neither of the
     Issuers has entered into any agreement (i) to register any of its
     securities under the Act, or (ii) to purchase or offer to purchase any
     securities of either of the Issuers or any of their respective Affiliates.

               (f)  Each of the Issuers has all requisite power and authority to
     enter into, deliver and perform its obligations under the Documents to
     which it is a party and to consummate the Transactions contemplated
     thereby. Each of the Documents has been duly authorized by each of the
     Issuers that is or will be a party thereto, and this Agreement is, and,
     when executed and delivered, each other Document to which either of the
     Issuers is a party will be, a legal, valid and binding obligation of each
     of the Issuers that is or will be a party thereto, enforceable in
     accordance with its terms, except that the enforcement thereof may be
     subject to (i) bankruptcy, insolvency, reorganization, receivership,
     moratorium, fraudulent conveyance or other similar laws now or hereafter in
     effect relating to creditors' rights generally and (ii) general principles
     of equity (whether applied by a court of law or equity) and the discretion
     of the court before which

                                       11
<PAGE>

     any proceeding therefor may be brought. On the Closing Date, the Indenture
     will conform in all material respects to the requirements of the Trust
     Indenture Act of 1939, as amended (the "TIA"), applicable to an indenture
     that is required to be qualified under the TIA.

               (g)  The Series A Notes have been duly authorized by Airways for
     issuance and sale to the Initial Purchaser pursuant to this Agreement and,
     when executed and authenticated in accordance with the terms of the
     Indenture and delivered to and paid for by the Initial Purchaser in
     accordance with the terms hereof, will be legal, valid and binding
     obligations of Airways, enforceable against Airways in accordance with
     their terms, except that the enforcement thereof may be subject to (i)
     bankruptcy, insolvency, reorganization, receivership, moratorium,
     fraudulent conveyance or other similar laws now or hereafter in effect
     relating to creditors' rights generally and (ii) general principles of
     equity (whether applied by a court of law or equity) and the discretion of
     the court before which any proceeding therefor may be brought. The Series B
     Notes have been duly authorized by Airways and, when executed,
     authenticated and delivered in accordance with the terms of the Indenture
     and the Note Registration Rights Agreement, will be legal, valid and
     binding obligations of Airways, enforceable against Airways in accordance
     with their terms, except that the enforcement thereof may be subject to (i)
     bankruptcy, insolvency, reorganization, receivership, moratorium,
     fraudulent conveyance or other similar laws now or hereafter in effect
     relating to creditors' rights generally and (ii) general principles of
     equity (whether applied by a court of law or equity) and the discretion of
     the court before which any proceeding therefor may be brought. The Notes
     rank and will rank on a parity with all senior indebtedness of Airways that
     is outstanding on the date hereof or that may be incurred hereafter, and
     senior to all other indebtedness of Airways that is outstanding on the date
     hereof or that may be incurred hereafter.

               (h)  The Warrants have been duly authorized by Holdings for
     issuance and sale to the Initial Purchaser pursuant to this Agreement and,
     when issued and delivered in accordance with the terms hereof, the Warrants
     will be validly issued, fully paid and nonassessable, and will not be
     issued in violation of, and will not be subject to any preemptive or
     similar rights. Each Warrant is exercisable for the purchase of 18.02885
     shares of Holdings' Common Stock. The shares of Holdings' Common Stock
     issuable upon exercise of the Warrants have been duly authorized and, when
     issued upon such exercise, will be validly issued, fully paid and
     nonassessable, will not be issued in violation of, and will not be subject
     to any preemptive or similar rights.

               (i)  Neither of the Issuers is in violation of its respective
     certificate of incorporation or bylaws (the "Charter Documents"). Neither
     of the Issuers is (i) in violation of any Federal, state, local or foreign
     statute, law (including, without limitation, common law) or ordinance, or
     any judgment, decree, rule, regulation or order (collectively, "Applicable
     Law") of any government, governmental or regulatory agency or body, court,
     arbitrator or self-regulatory organization, domestic or foreign (each, a
     "Governmental Authority"), or (ii) in breach of or default under any bond,
     debenture,

                                       12
<PAGE>

     note or other evidence of indebtedness, indenture, mortgage, deed of trust,
     lease or any other agreement or instrument to which any of them is a party
     or by which any of them or their respective property is bound
     (collectively, "Applicable Agreements"), other than in the case of clauses
     (i) or (ii) as disclosed in the Holdings SEC Documents or violations,
     breaches or defaults that could not, singly or in the aggregate, reasonably
     be expected to have a Material Adverse Effect. There exists no condition
     that, with the passage of time or otherwise, would (i) constitute a
     violation of such Charter Documents or Applicable Laws, (ii) constitute a
     breach of or default under any Applicable Agreement, or (iii) result in the
     imposition of any penalty or the acceleration of any indebtedness other
     than, with respect to this clause (iii) only, breaches, penalties or
     defaults that could not, singly or in the aggregate, reasonably be expected
     to have a Material Adverse Effect. All Applicable Agreements are in full
     force and effect and are legal, valid and binding obligations, and no
     default has occurred or is continuing thereunder, other than such defaults
     that could not, singly or in the aggregate, reasonably be expected to have
     a Material Adverse Effect.

               (j)  Neither the execution, delivery or performance of the
     Documents nor the consummation of the Transactions shall conflict with,
     violate, constitute a breach of or a default (with the passage of time or
     otherwise) under, require the consent of any person (other than consents
     already obtained) under, result in the imposition of a Lien on any assets
     of either of the Issuers (except pursuant to the Documents), or result in
     an acceleration of indebtedness under or pursuant to (i) the Charter
     Documents, (ii) any Applicable Agreement, other than, with respect to this
     clause (ii) only, such breaches, violations or defaults as disclosed in the
     Holdings SEC Documents or that could not, singly or in the aggregate,
     reasonably be expected to have a Material Adverse Effect, or (iii) any
     Applicable Law. After giving effect to the Transactions, no Default or
     Event of Default (each, as defined in the Indenture) will exist.

               (k)  No permit, certificate, authorization, approval, consent,
     license or order of, or filing, registration, declaration or qualification
     with, any Governmental Authority (collectively, "Permits") and no approval
     or consent of any other person, is required in connection with, or as a
     condition to, the execution, delivery or performance of any of the
     Documents or the consummation of any of the Transactions, other than such
     Permits (i) as have been made or obtained on or prior to the Closing Date,
     (ii) as are not required to be made or obtained on or prior to the Closing
     Date that will be made or obtained when required, or (iii) the failure of
     which to make or obtain could not, singly or in the aggregate, reasonably
     be expected to have a Material Adverse Effect.

               (l)  Except as disclosed in the Holdings SEC Documents, there is
     no action, claim, suit, demand, hearing, notice of violation or deficiency,
     or proceeding (including, without limitation, an investigation or partial
     proceeding, such as a deposition), domestic or foreign (collectively,
     "Proceedings"), pending or to the actual knowledge of the Issuers after
     reasonable inquiry, overtly threatened, that either (i) seeks to restrain,
     enjoin, prevent the consummation of, or otherwise challenge any of the
     Documents or any of the Transactions, or (ii) could, singly or in the
     aggregate,

                                       13
<PAGE>

     reasonably be expected to have a Material Adverse Effect. Neither of the
     Issuers is subject to any judgment, order, decree, rule or regulation of
     any Governmental Authority that could, singly or in the aggregate,
     reasonably be expected to have a Material Adverse Effect.

               (m)  Immediately following the Closing, each of the Issuers and
     each of their respective directors, members, managers, officers, employees
     and agents (collectively, the "Regulated Persons") shall have, and will be
     in compliance with the terms and conditions of, all Permits (including,
     without limitation, Permits with respect to engaging in aviation activities
     or operations) necessary or advisable to own, lease and operate the
     properties and to conduct the businesses described in the Holdings SEC
     Documents other than those the failure of which to have could not, singly
     or in the aggregate, reasonably be expected to have a Material Adverse
     Effect. Immediately following the Closing, all such Permits will be valid
     and in full force and effect. To the actual knowledge of the Issuers, after
     reasonable inquiry, no event has occurred which allows, or after notice or
     lapse of time would allow, the imposition of any material penalty,
     revocation or termination by the issuer thereof or which results, or after
     notice or lapse of time would result, in any material impairment of the
     rights of the holder of any such Permits. Neither of the Issuers has actual
     knowledge, after reasonable inquiry, that either of the Issuers is
     considering limiting, conditioning, suspending, modifying, revoking or not
     renewing any such Permit.

               (n)  To the actual knowledge of the Issuers, after reasonable
     inquiry, (i) no Governmental Authority is investigating any Regulated
     Person (other than ordinary course reviews by one or more Governmental
     Authorities having jurisdiction over matters relating to Issuers or their
     respective business affairs) incident to the aviation activities or
     operations of the Issuers), and (ii) there is no basis for the Federal
     Aviation Administration (the "FAA") or any other Governmental Authority to
     deny the renewal of the current Permits held by either of the Issuers.

               (o)  Airways is an "air carrier" within the meaning of the
     Transportation Code that is a "citizen of the United States" within the
     meaning of the Transportation Code and holds both a certificate under
     Section 41102(a)(1) of the Transportation Code and an air carrier operating
     certificate issued pursuant to Chapter 447 under the Transportation Code
     for aircraft capable of carrying ten or more individuals or 6,000 pounds or
     more of cargo. Neither Issuer has received notice from the United States
     Department of Transportation or the Federal Aviation Administration of any
     loss of such certification or that any investigation by such Governmental
     Authority has been commenced in relation to the potential revocation
     thereof.

               (p)  Immediately following the Closing, each of the Issuers (i)
     will have good and marketable title, free and clear of all Liens (other
     than Permitted Liens and the Liens identified on Schedule 6(p) (the
                                                      -------------
     "Identified Liens")), to the Collateral, and to all property and assets
     described in the Holdings SEC Documents as being owned by it,

                                       14
<PAGE>

     and (ii) will enjoy peaceful and undisturbed possession under all leases to
     which it is a party as lessee.

               (q)  Immediately following the Closing, the assets of each of the
     Issuers will include all of the assets and properties that will be used in,
     or are otherwise material to, the conduct of the respective businesses of
     each of the Issuers as proposed to be conducted, and such assets are in
     working condition, except where the failure of such assets to be in working
     condition could not, singly or in the aggregate, reasonably be expected to
     have a Material Adverse Effect.

               (r)  Immediately following the Closing, each of the Issuers shall
     maintain appropriate insurance covering its properties, operations,
     personnel and businesses against such losses and risks substantially in
     accordance with customary industry practice.

               (s)  The provisions of the Security Documents, when executed and
     delivered by the parties thereto, will create in favor of the Collateral
     Trustee, a legal, valid and enforceable Lien on, and security interest in
     all of the right, title and interest of the Issuers in the Collateral
     described therein. When financing statements have been filed in the
     appropriate offices in accordance with the terms thereof, the Security
     Documents shall constitute a fully perfected first priority Lien on, and
     security interest in, all right, title and interest of the Issuers in such
     of the Collateral described therein as may be perfected by the filing of
     financing statements, subject to no Liens other than Permitted Liens and
     the Identified Liens.

               (t)  All material Tax returns required to be filed by each of the
     Issuers has been filed and all such returns are true, complete, and correct
     in all material respects. All Taxes that are due or claimed from each of
     the Issuers have been paid other than those (i) currently payable without
     penalty or interest or (ii) being contested in good faith and by
     appropriate proceedings and for which adequate reserves have been
     established in accordance with GAAP. To the actual knowledge of the
     Issuers, after reasonable inquiry, there are no proposed Tax assessments
     against either of the Issuers that could singly or in the aggregate have a
     Material Adverse Effect. The accruals and reserves on the books and records
     of each of the Issuers in respect of any material Tax liability for any
     Taxable period not finally determined are adequate to meet any assessments
     of Tax for any such period. For purposes of this Agreement, the term "Tax"
     and "Taxes" shall mean all federal, state, local and foreign taxes, and
     other assessments of a similar nature (whether imposed directly or through
     withholding), including any interest, additions to tax, or penalties
     applicable thereto.

               (u)  Each of the Issuers owns, or is licensed under, and has the
     right to use, all patents, patent rights, licenses, inventions, copyrights,
     know-how (including trade secrets and other unpatented and/or unpatentable
     proprietary or confidential information, systems or procedures),
     trademarks, service marks and trade names (collectively,

                                       15
<PAGE>

"Intellectual Property") necessary for the conduct of, its businesses, free and
clear of all Liens, other than Permitted Liens and other than where the failure
to own or license such property could not, singly or, together with such
Permitted Liens, in the aggregate, reasonably be expected to have a Material
Adverse Effect. To the actual knowledge of the Issuers, after reasonable
inquiry, (i) no claims have been asserted by any person challenging the use of
any such Intellectual Property by either of the Issuers or questioning the
validity or effectiveness of any license or agreement related thereto, (ii)
there is no valid basis for any such claim (other than any claims that could
not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect), and (iii) the use of such Intellectual Property by either of
the Issuers will not infringe on the Intellectual Property rights of any other
person.

          (v)  Each of the Issuers maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) material
transactions are executed in accordance with management's general or specific
authorization, (ii) material transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles of the United States, consistently applied ("GAAP"), and
to maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
material differences.

          (w)  The audited consolidated combined financial statements and
related notes of each of the Issuers contained in the Holdings 10-K (the
"Financial Statements") present fairly the combined financial position, results
of operations and cash flows of the Issuers, as of the respective dates and for
the respective periods to which they apply, and have been prepared in accordance
with GAAP and the requirements of Regulation S-X.

          (x)  Subsequent to the respective dates as of which information is
given in the Holdings 10-K, except as adequately disclosed in the Holdings 10-K
or in Schedule 6(x) hereto, (i) neither of the Issuers has incurred any
      -------------
liabilities, direct or contingent, that are material, singly or in the
aggregate, to either of the Issuers, or has entered into any material
transactions not in the ordinary course of business, (ii) there has not been any
decrease in the capital stock or membership interests, as the case may be, or
any increase in long-term indebtedness or any material increase in short-term
indebtedness of either of the Issuers, or any payment of or declaration to pay
any dividends or any other distribution with respect to either of the Issuers,
and (iii) there has not been any material adverse change in the properties,
business, prospects, operations, earnings, assets, liabilities or condition
(financial or otherwise) of either of the Issuers (each of clauses (i), (ii) and
(iii), a "Material Adverse Change"). To the actual knowledge of the Issuers
after reasonable inquiry, there is no event that is reasonably likely to occur,
which if it were to occur, could, singly or in the aggregate, reasonably be
expected to have a

                                       16
<PAGE>

Material Adverse Effect, except such events that have been adequately disclosed
in the Holdings 10-K or in one or more disclosure schedules to the Transaction
Documents.

          (y)  No "nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the Act (i) has
imposed (or has informed either of the Issuers that it is considering imposing)
any condition (financial or otherwise) on either of the Issuers' retaining any
rating assigned to such Issuer or to any securities of such Issuer, or (ii) has
indicated to either of the Issuers that it is considering (A) the downgrading,
suspension, or withdrawal of, or any review for a possible change that does not
indicate the direction of the possible change in, any rating so assigned, or (B)
any change in the outlook for any rating of either of the Issuers or any
securities of either of the Issuers.

          (z)  All indebtedness represented by the Series A Notes is being
incurred for proper purposes and in good faith. On the Closing Date (after
giving effect to the Transactions), each of the Issuers will be solvent, and
will have on the Closing Date (after giving effect to the Transactions)
sufficient capital for carrying on its business and will be on the Closing Date
(after giving effect to the Transactions) able to pay its debts as they mature.

          (aa) None of the Issuers and, to their actual knowledge after
reasonable inquiry, no one acting on their behalf has (i) taken, directly or
indirectly, any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of either of the
Issuers to facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid anyone any compensation for soliciting purchases of,
any of the Securities, or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of either
of the Issuers.

          (bb) Without limiting clause (1) above, no registration under the Act,
and no qualification of the Indenture under the TIA is required for the sale of
the Units, the Series A Notes or the Warrants to the Initial Purchaser as
contemplated hereby or for the Exempt Resales, assuming the accuracy of the
Initial Purchaser's representations contained herein regarding the absence of
general solicitation in connection with the sale of the Units to the Initial
Purchaser. No form of general solicitation or general advertising was used by
either of the Issuers or any of their respective Affiliates or, to the actual
knowledge of the Issuers after, reasonable inquiry, any of their respective
representatives in connection with the offer and sale of any of the Units or in
connection with Exempt Resales. Except as disclosed in the Holdings 10-K, no
securities of the same class as any of the Securities have been offered, issued
or sold by either of the Issuers or any of their respective Affiliates within
the six-month period immediately prior to the date hereof.

                                       17
<PAGE>

          (cc) Neither of the Issuers nor any of their respective "Affiliates"
is a "party in interest" or a "disqualified person" with respect to any employee
benefit plans. To the actual knowledge of the Issuers, after reasonable inquiry,
no condition exists or event or transaction has occurred in connection with any
employee benefit plan that could result in either of the Issuers or any of their
respective "Affiliates" incurring any liability, fine or penalty that could,
singly or in the aggregate, have a Material Adverse Effect. Neither of the
Issuers nor any trade or business under common control with either of the
Issuers (for purposes of Section 414(c) of the Code) maintain any employee
pension benefit plan that is subject to Title IV of the Employee Retirement
Income Act of 1974, as amended, or the rules and regulations promulgated
thereunder ("ERISA").

          The terms "employee benefit plan," "employee pension benefit plan,"
and "party in interest" shall have the meanings assigned to such terms in
Section 3 of ERISA. The term "Affiliate" shall have the meaning assigned to such
term in Section 407(d)(7) of ERISA, and the term "disqualified person" shall
have the meaning assigned to such term in Section 4975 of the Internal Revenue
Code of 1986, as amended, or the rules, regulations and published
interpretations promulgated thereunder (the "Code").

          (dd) None of the Transactions will violate or result in a violation of
Section 7 of the Exchange Act (including, without limitation, Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R.
Part 224) of the Board of Governors of the Federal Reserve System). Neither of
the Issuers is subject to regulation, nor shall either of the Issuers become
subject to regulation upon the consummation of the Transactions, under the
Investment Company Act of 1940, as amended, and the rules and regulations and
interpretations promulgated thereunder, or the Public Utility Holding Company
Act of 1935, as amended.

          (ee) Except as set forth on Schedule 6(ee), neither of the Issuers has
                                      --------------
dealt with any broker, finder, commission agent or other person (other than the
Initial Purchaser) in connection with the Transactions, and neither of the
Issuers is under any obligation to pay any broker's fee or commission in
connection with such transactions.

          (ff) Neither of the Issuers is engaged in any unfair labor practice.
Except as disclosed in the Holdings SEC Documents, there is (i) no unfair labor
practice complaint or other proceeding pending or, to the actual knowledge of
the Issuers, after reasonable inquiry, threatened against either of the Issuers
before the National Labor Relations Board or any state, local or foreign labor
relations board or any industrial tribunal, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending or threatened, (ii) no strike, labor dispute, slowdown or stoppage is
pending or, to the actual knowledge of the Issuers after reasonable inquiry,
threatened against either of the Issuers, and (iii) no union representation
question existing with respect to the employees of either of the Issuers, and,
to the actual knowledge of the Issuers after reasonable inquiry, no union
organizing activities are taking place that,

                                       18
<PAGE>

could, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

          (gg) Except as would not have a Material Adverse Effect or as
disclosed in the Holdings SEC Documents, (i) neither of the Issuers in violation
of any federal, state or local laws and regulations (collectively,
"Environmental Laws") relating to pollution or protection of human health or the
environment or the use, treatment, storage, disposal, transport or handling,
emission, discharge, release or threatened release of toxic or hazardous
substances, materials or wastes, or petroleum and petroleum products ("Materials
of Environmental Concern"), including, without limitation, noncompliance with or
lack of any permits or other environmental authorizations; (ii) there are no
past, present or reasonably foreseeable circumstances that would be reasonably
expected to lead to any such violation in the future; (iii) neither of the
Issuers has received any communication from any person or entity alleging any
such violation; (iv) there is no pending or, to the actual knowledge of the
Issuers after reasonable inquiry, threatened claim, action, investigation or
notice by any person or entity against either of the Issuers or against any
person or entity for whose acts or omissions either of the Issuers is or may
reasonably be expected to be liable, either contractually or by operation of
law, alleging liability for investigatory, cleanup, or other response costs,
natural resources or property damages, personal injuries, attorney's fees or
penalties relating to any Materials of Environmental Concern or any violation or
potential violation of any Environmental Law (collectively, "Environmental
Claims"), and (v) to the actual knowledge of the Issuers after reasonable
inquiry, there are no actions, activities, circumstances, conditions, events or
incidents that could form the basis of any such Environmental Claim.

          (hh) In the ordinary course of business, each of the Issuers (i)
conducts a periodic review of the effect of Environmental Laws on its business,
operations and properties, and each of the Issuers has identified and evaluated
associated costs and liabilities, and any capital or operating expenditures,
required for cleanup, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities, and any potential liabilities to third parties; and (ii) has
conducted environmental investigations of, and has reviewed information
regarding, its business, properties and operations, and those of other
properties within the vicinity of its businesses, properties and operations; on
the basis of such reviews, investigations and inquiries, the Company has
reasonably concluded that, except as disclosed in the Holdings SEC Documents,
any costs and liabilities associated with such matters would not have a Material
Adverse Effect on either of the Issuers.

          (ii) No statement, representation or warranty made by either of the
Issuers or, to the actual knowledge of the Issuers after reasonable inquiry, any
other person (other than the Initial Purchaser) in any of the Documents or in
any certificate or document required to be delivered was or will be, when made,
inaccurate, untrue or incorrect in any material respect. Each certificate signed
by any officer of either of the

                                       19
<PAGE>

Issuers and delivered to the Initial Purchaser or counsel for the Initial
Purchaser in connection with the Transactions shall be deemed to be a
representation and warranty by each of the Issuers to the Initial Purchaser as
to the matters covered thereby.

          (jj) Holdings is subject to the reporting requirements of Section 13
or Section 15(d) of the Exchange Act.

          (kk) No other securities of the Issuers are of the same class (within
the meaning of Rule 144A under the Act) as the Notes are listed on a national
securities exchange registered under Section 6 of the Exchange Act, or quoted in
a U.S. automated inter-dealer quotation system. The Notes are eligible for
resale under Rule 144A.

          (ll) Each of the Issuers and each of the subsidiaries of both of the
Issuers operates all real and personal property leased by it under valid and
enforceable leases and has performed in all material respects the obligations
required to be performed by it with respect to each such lease except for such
leases and obligations which, in the aggregate, would not have a Material
Adverse Effect. As to leases with respect to which either of the Issuers or any
subsidiary of either of the Issuers is the lessor, the lessees and other parties
under such leases are in compliance with all material terms and conditions
thereunder and such leases are in full force and effect except for such leases
which, if not in full force and effect, would not, in the aggregate, have a
Material Adverse Affect.

          (mm) There are no legal or governmental proceedings involving or, to
the Issuers' knowledge, affecting either of the Issuers or any subsidiary of
either of the Issuers or any of their respective properties or assets which
would be required to be described in a filing with the Securities and Exchange
Commission that are not described in the Holdings SEC Documents, nor are there
any material contracts or other documents which would be required to be
described in a filing with the Securities and Exchange Commission that are not
described in the Holdings SEC Documents.

          (nn) Except as described in the Holdings SEC Documents, there are no
consensual encumbrances or restrictions on the ability of any subsidiary of
either of the Issuers (x) to pay dividends on such subsidiary's capital stock or
to pay any indebtedness to either of the Issuers or any other subsidiary of
either of the Issuers, (y) to make loans or advances to, or investments in,
either of the Issuers or any subsidiary of either of the Issuers or (z) to
transfer any of its property or assets to either of the Issuers or any
subsidiary of either of the Issuers.

          (oo) Neither of the Issuers nor any person acting on behalf of either
of the Issuers has offered or sold the Units be means of any general
solicitation or general advertising within the meaning of Rule 502(c) under the
Act or, with respect to Securities sold outside the United States to non-U.S.
persons (as defined in Rule 902 under the Act), by means of any directed selling
efforts within the meaning of Rule 902 under the Act, and the Issuers, any
Affiliate of either of the Issuers and any person acting on behalf of either of
the Issuers have complied with and will implement the "offering restrictions"

                                       20
<PAGE>

     within the meaning of such Rule 902; provided, that no representation is
                                          --------
     made in this subsection with respect to the actions of the Initial
     Purchaser.

               (pp) Except as disclosed in the Holdings SEC Documents, neither
     of the Issuers nor any person acting on behalf of either of the Issuers
     (other than the Initial Purchaser as to whom the Issuers make no
     representation) has solicited offers to buy or offered or sold or otherwise
     negotiated in respect of any security (as defined in the Act) that is or
     could be integrated with the sale of the Units in a manner that would
     require the registration under the Act of any of the Securities; and the
     Issuers will take reasonable precautions designed to ensure that any offer
     or sale, direct or indirect, in the United States or to any U.S. person (as
     defined in Rule 902 under the Act) of any Security or any substantially
     similar security issued by either of the Issuers, within six months
     subsequent to the date on which the distribution of the Units has been
     completed, is made under restrictions and other circumstances reasonably
     designed not to affect the status of the offer and sale of the Units in the
     United States and to U.S. persons contemplated by this Agreement as
     transactions exempt from the registration requirements of the Act.

          7.   Representations and Warranties of the Initial Purchaser. The
Initial Purchaser individually represents and warrants that:

               (a)  It is a QIB as defined in Rule 144A under the Act.

               (b)  It is not acquiring the Units with a view to any
     distribution thereof that would violate the Act or the securities laws of
     any state of the United States or any other applicable jurisdiction.

               (c)  In connection with any resale of the Units (other than
     pursuant to an effective registration statement under the Act) it will
     solicit offers to buy the Units only from, and will offer and sell the
     Units only to, QIBs who, in purchasing such Units, will be deemed to have
     represented and agreed:

               (i)  it is purchasing the Units for its own accounts or accounts,

               (ii) that the Units, the Series A Notes and the Warrants will not
               have been registered under the Act and may be resold, pledged or
               otherwise transferred, prior to the date that is two years (or
               such other period that may hereafter be provided under Rule
               144(k) as permitting resales of restricted securities by
               nonaffiliates without restriction) after the later of the
               original issue date of the Units and the last date on which
               either of the Issuers or any of their respective Affiliates was
               the owner of the Units, Series A Notes and the Warrants only (A)
               to either of the Issuers, (B) pursuant to a registration
               statement which has been declared effective under the Act, (C)
               for so long as the Units, the Series A Notes and the Warrants are
               eligible for resale pursuant to an exemption under the Act, to a
               person who the seller reasonably believes is a QIB that purchases
               for its

                                       21
<PAGE>

               own account or the account of a QIB to whom notice is given that
               the transfer is being made in reliance on an exemption under the
               Act, or (D) pursuant to another available exemption from the
               registration requirements of the Act, and

               (iii)  that the holder will, and each subsequent holder is
               required to, notify any purchaser from it of the security
               evidenced thereby of the resale restrictions set forth in (ii)
               above.

               (d)  It has all requisite power and authority to enter into,
     deliver and perform its obligations under this Agreement, the Note
     Registration Rights Agreement and the Warrant Registration Rights Agreement
     and each of this Agreement, the Note Registration Rights Agreement and the
     Warrant Registration Rights Agreement has been duly authorized by it.

          3.   Indemnification.

               (a)  Each of the Issuers shall, jointly and severally, without
     limitation as to time, indemnify and hold harmless the Initial Purchaser
     and each person, if any, who controls (within the meaning of Section 15 of
     the Act or Section 20(a) of the Exchange Act) the Initial Purchaser (any of
     such persons being hereinafter referred to as a "controlling person"), and
     the respective officers, directors, partners, employees, representatives
     and agents of the Initial Purchaser and any such controlling person
     (collectively, the "Indemnified Parties"), to the fullest extent lawful,
     from and against any and all losses, claims, damages, liabilities, costs
     (including, without limitation, costs of preparation and reasonable
     attorneys' fees) and expenses whatsoever (including, without limitation,
     costs and expenses incurred in connection with investigating, preparing,
     pursuing or defending against any of the foregoing) (collectively,
     "Losses"), as incurred, arising out of or based upon (i) any representation
     or warranty made by or on behalf of either Issuer under or in connection
     with the Documents, any written report or any other written information or
     report delivered by either Issuer pursuant to the Documents, which shall
     have been false or incorrect in any material respect when made or deemed
     made, or (ii) any act, omission, transaction or event contemplated by the
     Documents; provided that the Issuers shall not be liable to any Indemnified
                --------
     Party for any Losses that arise from the gross negligence or willful
     misconduct of such Indemnified Party. The Issuers shall not be liable under
     this Section 8 for any settlement of any claim or action effected without
     their prior written consent, which consent shall not be unreasonably
     withheld. The Issuers shall notify the Initial Purchaser promptly of the
     institution, threat or assertion of any Proceeding of which either of the
     Issuers is aware in connection with the matters addressed by this Agreement
     which involves either of the Issuers and any of the Indemnified Parties.

               (b)  If any Proceeding shall be brought or asserted against any
     person entitled to indemnification hereunder, such Indemnified Party shall
     give prompt written

                                       22
<PAGE>

     notice to the Issuers; provided, that the failure to so notify the Issuers
                            --------
     shall not relieve either of the Issuers from any obligation or liability
     except to the extent (but only to the extent) that it shall be finally
     determined by a court of competent jurisdiction (which determination is not
     subject to appeal) that such Issuer has been prejudiced by such failure.

               Neither of the Issuers shall consent to entry of any judgment in
     or enter into any settlement of any pending or threatened Proceeding in
     respect of which indemnification or contribution may be sought hereunder
     (whether or not any Indemnified Party is a party thereto) unless such
     judgment or settlement includes, as an unconditional term thereof, the
     giving by the claimant or plaintiff to each Indemnified Party of a release,
     in form and substance reasonably satisfactory to the Initial Purchaser,
     from all Losses that may arise from such Proceeding or the subject matter
     thereof (whether or not any Indemnified Party is a party thereto).

               (c)  If the indemnification provided for in this Section 8 is
     unavailable to an Indemnified Party or is insufficient to hold such
     Indemnified Party harmless for any Losses in respect of which this Section
     8 would otherwise apply by its terms (other than by reason of exceptions
     provided in this Section 8), then the Issuers, in lieu of indemnifying such
     Indemnified Party, shall contribute to the amount paid or payable by such
     Indemnified Party as a result of such Losses (i) in such proportion as is
     appropriate to reflect the relative benefits received by the Issuers, on
     the one hand, and the Initial Purchaser, on the other hand, from the
     Offering, or (ii) if the allocation provided by clause (i) above is not
     permitted by applicable law, in such proportion as is appropriate to
     reflect not only the relative benefits referred to in clause (i) above but
     also the relative fault of the Issuers, on the one hand, and the Initial
     Purchaser, on the other hand, in connection with the actions, statements or
     omissions that resulted in such Losses, as well as any other relevant
     equitable considerations. The relative benefits received by the Issuers, on
     the one hand, and the Initial Purchaser, on the other hand, shall be deemed
     to be in the same proportion as the total net proceeds from the Offering
     (before deducting expenses) received by the Issuers and the fees received
     by the Initial Purchaser, bear to the total price of the Units on or prior
     to the Closing Date. The relative fault of the Issuers, on the one hand,
     and the Initial Purchaser, on the other hand, shall be determined by
     reference to, among other things, whether any untrue or alleged untrue
     statement of a material fact or omission or alleged omission to state a
     material fact relates to information supplied by the Issuers, on the one
     hand, or the Initial Purchaser, on the other hand, and the parties'
     relative intent, knowledge, access to information and opportunity to
     correct or prevent such statement or omission. The amount paid or payable
     by an Indemnified Party as a result of any Losses shall be deemed to
     include any legal or other fees or expenses incurred by such party in
     connection with any Proceeding, to the extent such party would have been
     indemnified for such fees or expenses if the indemnification provided for
     in this Section 8 was available to such party.

                                       23
<PAGE>

                    Each party hereto agrees that it would not be just and
         equitable if contribution pursuant to this Section 8(c) 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 the
         immediately preceding paragraph. Notwithstanding the provisions of this
         Section 8(c), the Initial Purchaser shall not be required to
         contribute, in the aggregate, any amount in excess of the amount by
         which fees received by the Initial Purchaser on or prior to the Closing
         Date with respect to the Notes exceeds the amount of any damages that
         the Initial Purchaser 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 Act) shall be entitled to contribution
         from any person who was not guilty of such fraudulent
         misrepresentation.

                    (d)    The indemnity and contribution agreements contained
         in this Section 8 are in addition to any liability that the Issuers may
         otherwise have to the Indemnified Parties.

               9.   Conditions.

                    (a)    The obligations of the Initial Purchaser to purchase
         the Units under this Agreement are subject to the satisfaction or
         waiver of each of the following conditions:

                    (i)    All the representations and warranties of each of the
                    Issuers in each of the Documents to which it is a party
                    shall be true and correct in all material respects at and as
                    of the Closing Date after giving effect to the Transactions
                    with the same force and effect as if made on and as of such
                    date. On or prior to the Closing Date, each of the Issuers
                    and, to the actual knowledge of the Issuers, after
                    reasonable inquiry, each other party to the Documents (other
                    than the Initial Purchaser) shall have performed or complied
                    in all material respects with all of the agreements and
                    satisfied in all material respects all conditions on their
                    respective parts to be performed, complied with or satisfied
                    pursuant to the Documents (other than conditions to be
                    satisfied by such other parties, which the failure to so
                    satisfy could not reasonably be expected to have a Material
                    Adverse Effect). There shall exist on the Closing Date no
                    Event of Default or Default (each as defined in the
                    Indenture).

                    (ii)   No "default" or "event of default" relating to a
                    payment obligation of any Issuer shall have occurred and be
                    continuing under any agreement between any of (A) the
                    Issuers and (B) any Boeing Affiliate which default or event
                    of default relates to a payment in excess of $500,000.

                    (iii)  No injunction, restraining order or order of any
                    nature by a Governmental Authority shall have been issued as
                    of the Closing Date that

                                      24
<PAGE>

                    would prevent or materially interfere with the consummation
                    of any of the Transactions; and no stop order suspending the
                    qualification or exemption from qualification of any of the
                    Securities in any jurisdiction shall have been issued and no
                    Proceeding for that purpose shall have been commenced or, to
                    the actual knowledge of the Issuers after reasonable
                    inquiry, be pending or threatened as of the Closing Date.

                    (iv)   No action shall have been taken and no Applicable Law
                    shall have been enacted, adopted or issued that would, as of
                    the Closing Date, prevent the consummation of any of the
                    Transactions. Except as disclosed in the Holdings SEC
                    Documents, no Proceeding shall be pending or, to the actual
                    knowledge of the Issuers after reasonable inquiry,
                    threatened other than Proceedings that (A) if adversely
                    determined could not, singly or in the aggregate, adversely
                    affect the issuance or marketability of the Securities, and
                    (B) could not, singly or in the aggregate, reasonably be
                    expected to have a Material Adverse Effect.

                    (v)    Since the date as of which information is given in
                    Holdings 10-K, there shall not have been any Material
                    Adverse Change.

                    (vi)   The Initial Purchaser shall have received on the
                    Closing Date:

                           (A)   certificates dated the Closing Date, signed by
                           (1) the chief executive officer, president or
                           treasurer of each Issuer, and (2) the principal
                           financial or accounting officer of each of the
                           Issuers, on behalf of such Issuer, (x) confirming the
                           matters set forth in paragraphs (i) through (v) of
                           this Section 9(a), and (y) certifying as to such
                           other matters as the Initial Purchaser may reasonably
                           request,

                           (B)   a certificate, dated the Closing Date, signed
                           by the Secretary or Assistant Secretary of each of
                           the Issuers, certifying such matters as the Initial
                           Purchaser may reasonably request,

                           (C)   a certificate of solvency, dated the Closing
                           Date, signed by the principal financial or accounting
                           officer or such other officer acceptable to the
                           Initial Purchaser of each of the Issuers
                           substantially in the form previously approved by the
                           Initial Purchaser;

                           (D)   A certificate of the Secretary or the Assistant
                           Secretary of each Issuer and each Restricted
                           Subsidiary attaching (a) resolutions of the Board of
                           Directors of such Issuer and such Restricted
                           Subsidiary, as applicable, evidencing approval of the
                           transactions contemplated by each of the Transaction
                           Documents and the

                                      25
<PAGE>

                           execution, delivery and performance thereof, and
                           authorizing certain officers to execute and deliver
                           the same, and certifying that such resolutions were
                           duly and validly adopted and have not since been
                           amended, revoked or rescinded, (b) the Certificate of
                           Incorporation (or equivalent document) of such Issuer
                           and each Restricted Subsidiary, each certified as of
                           a recent date by the Secretary of State (or
                           equivalent entity) of their respective states (or
                           jurisdictions) of incorporation, (c) the Bylaws of
                           such Issuer and each Restricted Subsidiary, (d) an
                           incumbency certificate signed by the Secretary or an
                           Assistant Secretary and one other officer of such
                           Issuer and each Restricted Subsidiary certifying as
                           to the names, titles and true signatures of the
                           officers of such Issuer or Restricted Subsidiary
                           authorized to sign the Transaction Documents to which
                           it is a party and the other documents to be delivered
                           hereunder, (e) corporate and tax good standing
                           certificates as to such Issuer and each Restricted
                           Subsidiary from their respective states of
                           incorporation and other jurisdictions of
                           incorporation and from each jurisdiction where each
                           Issuer and such Restricted Subsidiary is qualified to
                           do business, and (f) certifying that no dissolution
                           or liquidation proceedings as to such Issuer or any
                           Restricted Subsidiary have been commenced or are
                           contemplated;

                           (E)   the opinions (in form and substance reasonably
                           satisfactory to the Initial Purchaser and counsel to
                           the Initial Purchaser) of Smith, Gambrell & Russell,
                           LLP, special counsel to the Issuers, dated the
                           Closing Date, in the form of Exhibit I hereto;
                                                        ---------

                           (F)   the opinions (in form and substance reasonably
                           satisfactory to the Initial Purchaser and counsel to
                           the Initial Purchaser) of Crowe & Dunlevy, special
                           FAA counsel to the Issuers, dated the Closing Date,
                           substantially in the form of Exhibit J hereto;
                                                        ---------

                           (G)   copies of all opinions, certificates, letters
                           and other documents delivered under or in connection
                           with the Transactions;

                           (H)   except with respect to Permitted Liens and
                           Identified Liens, copies of duly executed payoff
                           letters, UCC-3 termination statements (subject to the
                           reasonable payoff and delivery requirements of each
                           creditor), mortgage releases and other collateral
                           releases and terminations, each in form and substance
                           reasonably satisfactory to the Initial Purchaser
                           evidencing (x) the termination of each agreement and
                           instrument relating to any indebtedness secured by
                           the Collateral and (y) the release of each

                                      26
<PAGE>

                           item of Collateral securing such indebtedness and the
                           termination of all Liens created thereunder, and each
                           such payoff letter, release and termination shall be
                           in full force and effect;

                           (I)   the Security Documents duly executed by the
                           Issuers:

                           (J)   duly executed financing statements, appropriate
                           for filing in all jurisdictions that may be deemed
                           necessary or desirable in order to perfect the Liens
                           created by the Security Documents, covering the
                           Collateral;

                           (K)   contemplated requests for information, listing
                           all effective financing statements filed as of the
                           date thereof in the jurisdictions referred to in the
                           prior subparagraph that name either of the Issuers as
                           debtor, together with copies of such financing
                           statements (none of which shall cover the Collateral
                           described in the Security Documents (unless such
                           financing statements evidence Permitted Liens or are
                           to be terminated pursuant to the terms thereof)); and

                           (L)   reasonable evidence that all other actions
                           necessary or desirable to perfect and protect the
                           Liens created by the Security Documents and
                           contemplated thereby have been taken.

                    (vii)  The Documents shall have been executed and delivered
                    by all parties thereto, and the Initial Purchaser shall have
                    received a fully executed original of each Documen t.

                    (viii) Each of the Transactions shall have been consummated.

                    (ix)   Intentionally Omitted.

                    (x)    None of the parties (other than the Purchaser
                    Parties) to any of the Documents, including without
                    limitation this Agreement, the Indenture, the Note
                    Registration Rights Agreement, the Warrant Registration
                    Rights Agreement the Security Documents, the Notes, the
                    Warrant Agreement, any and all documents or instruments
                    executed in connection with the Holdings Note Issuance and
                    any and all documents or instruments executed in connection
                    with the Equity Contribution, are in breach or default under
                    their respective obligations thereunder.

                    (b)    The obligation of each of the Issuers to sell the
         Units under this Agreement is subject to the satisfaction or waiver of
         each of the following conditions:

                    (i)    The Initial Purchaser shall have delivered payment to
                    the Issuers for the Units pursuant to Sections 2 and 4 of
                    this Agreement.

                                      27
<PAGE>

                    (ii)   All of the representations and warranties of the
                    Initial Purchaser in this Agreement shall be true and
                    correct in all material respects at and as of the Closing
                    Date, with the same force and effect as if made on and as of
                    such date.

                    (iii)  No injunction, restraining order or order of any
                    nature by a Governmental Authority shall have been issued as
                    of the Closing Date that would prevent or interfere with the
                    issuance and sale of the Units; and no stop order suspending
                    the qualification or exemption from qualification of any of
                    the Units in any jurisdiction shall have been issued and no
                    Proceeding for that purpose shall have been commenced or be
                    pending or threatened as of the Closing Date.

              10.   Termination. The Initial Purchaser may terminate this
Agreement at any time prior to the Closing Date by written notice to the Issuers
if any of the following has occurred:

                    (a)    since the date as of which information is given in
         the Holdings 10-K, any Material Adverse Effect or development involving
         or reasonably expected to result in a prospective Material Adverse
         Effect on the properties, business, prospects, operations, earnings,
         assets, liabilities or condition (financial or otherwise), taken as a
         whole, of either of the Issuers, whether or not arising in the ordinary
         course of business, that could reasonably be expected to (i) make it
         impracticable or inadvisable to proceed with the offering or delivery
         of the Units on the terms and in the manner contemplated herein, or
         (ii) materially impair the investment quality of any of the Notes;

                    (b)    the failure of either of the Issuers to satisfy the
         conditions contained in Section 9(a) hereof on or prior to the fifth
         business day following the date of this Agreement;

                    (c)    any outbreak or escalation of hostilities or other
         national or international calamity or crisis or material adverse change
         or disruption in economic conditions in, or in the financial markets
         of, the United States or elsewhere (it being understood that any such
         change or disruption shall be relative to such conditions and markets
         as in effect on the date hereof), if the effect of such outbreak,
         escalation, calamity, crisis or material adverse change in the economic
         conditions in, or in the financial markets of, the United States or
         elsewhere could be reasonably expected to make it, in the Initial
         Purchaser's judgment, impracticable or inadvisable to market or proceed
         with the offering or delivery of the Units on the terms and in the
         manner contemplated herein or to enforce contracts for the sale of any
         of the Units;

                    (d)    the suspension or limitation of trading generally in
         securities on the New York Stock Exchange, the American Stock Exchange
         or the NASDAQ National Market or any setting of limitations on prices
         for securities on any such exchange or NASDAQ National Market;

                                      28
<PAGE>

                    (e)    the enactment, publication, decree or other
         promulgation after the date hereof of any Applicable Law that in the
         Initial Purchaser's counsel's opinion materially and adversely affects,
         or could be reasonably expected to materially and adversely affect, the
         properties, business, prospects, operations, earnings, assets,
         liabilities or condition (financial or otherwise) of either of the
         Issuers, taken as a whole;

                    (f)    any securities of either of the Issuers shall have
         been downgraded or placed on any "watch list" for possible downgrading
         by any "nationally recognized statistical rating organization", as such
         term is defined for purposes of Rule 431(g)(2) under the Act; or

                    (g)    the declaration of a banking moratorium by any
         Governmental Authority; or the taking of any action by any Governmental
         Authority after the date hereof in respect of its monetary or fiscal
         affairs that in the Initial Purchaser's opinion could reasonably be
         expected to have a material adverse effect on the financial markets in
         the United States or elsewhere.

               The indemnities and contribution and expense reimbursement
provisions and other agreements, representations and warranties of each of the
Issuers set forth in or made pursuant to this Agreement shall remain operative
and in full force and effect, and will survive, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
the Initial Purchaser, (ii) acceptance of the Units, and payment for them
hereunder, and (iii) any termination of this Agreement. Without limiting the
foregoing, except as set forth in Section 11 hereof, notwithstanding any
termination of this Agreement, the Issuers shall be jointly and severally liable
(i) for all expenses that they have agreed to pay pursuant to Section 5(c)
hereof and (ii) pursuant to Section 8 hereof.

               11.  Default by the Initial Purchaser. If the Initial Purchaser
shall breach its obligations to purchase the Units that it has agreed to
purchase hereunder on the Closing Date and arrangements satisfactory to the
Issuers for the purchase of such Units are not made within 36 hours after such
default, this Agreement shall terminate with respect to the Initial Purchaser
without liability on the part of either of the Issuers. Nothing herein shall
relieve the Initial Purchaser from liability for its default.

               12.  Miscellaneous.

                    (a)    Notices given pursuant to any provision of this
         Agreement shall be addressed as follows:

                    (i)    if to either of the Issuers, to AirTran Airways,
                    Inc., 9955 AirTran Boulevard, Orlando, FL 32827, Attention:
                    Treasurer, Facsimile (407) 251-5567, with a copy to Smith,
                    Gambrell & Russell, LLP, 1230 Peachtree Street, Suite 3100,
                    Promenade II, Atlanta, GA 30309-3592, Attention: Howard E.
                    Turner, Esq., Facsimile (404) 685-6894 or John R. Schneider,
                    Esq., Facsimile (404) 685-6961, and

                                      29
<PAGE>

                    (ii)   if to the Initial Purchaser, to Boeing Capital Loan
                    Corporation, c/o Entity Services, 2325-B Renaissance Drive,
                    Suite 8, Las Vegas, Nevada 89119, Attention: Ms. Kristine
                    Epps, Telephone (702) 740-4244, Facsimile (702) 966-4247,
                    with a copy to Boeing Capital Corporation, 500 Naches
                    Avenue, S.W., 3rd Floor, M/C 6Y-11, Renton, Washington
                    98055, Attention: Legal Department, Facsimile (425) 393-
                    2903, with a copy to Sidley & Austin, 555 West Fifth Street,
                    Los Angeles, CA 90013, Attention: Robert W. Kadlec, Esq.,
                    Facsimile (213) 896-6600.

         (provided, that any notice pursuant to Section 8 hereof will be mailed,
          --------
         delivered, telegraphed or telecopied and confirmed to the party to be
         notified and its counsel), or in any case to such other address as the
         person to be notified may have requested in writing.

                    (b)    This Agreement has been and is made solely for the
         benefit of and shall be binding upon each of the Issuers, the Initial
         Purchaser and, to the extent provided in Section 8 hereof, the
         controlling persons, officers, directors, partners, employees,
         representatives and agents referred to in Section 8, and their
         respective heirs, executors, administrators, successors and assigns,
         all as and to the extent provided in this Agreement, and no other
         person shall acquire or have any right under or by virtue of this
         Agreement. The term "successors and assigns" shall not include a
         purchaser of any of the Units from the Initial Purchaser merely because
         of such purchase. Notwithstanding the foregoing, it is expressly
         understood and agreed that each purchaser who purchases Units from the
         Initial Purchaser is intended to be a beneficiary of the Issuers'
         covenants contained in the Note Registration Rights Agreement and the
         Warrant Registration Rights Agreement to the same extent as if the
         Notes or Warrants were sold and those covenants were made directly to
         such purchaser by each of the Issuers, and each such purchaser shall
         have the right to take action against each of the Issuers to enforce,
         and obtain damages for any breach of, those covenants.

                    (c)    This Agreement shall be construed and interpreted,
         and the rights of the parties shall be determined in accordance with
         the laws of the State of New York, including without limitation,
         Sections 5-1401 and 5-1402 of the New York General Obligations Laws and
         New York Civil Practice Laws and Rules 327(b). Each of the Issuers
         hereby irrevocably submits to the jurisdiction of any New York state
         court sitting in the Borough of Manhattan in the City of New York or
         any Federal court sitting in the Borough of Manhattan in the City of
         New York in respect of any suit, action or proceeding arising out of or
         relating to this Agreement, and irrevocably accepts for itself and in
         respect of its property, generally and unconditionally, jurisdiction of
         the aforesaid courts. Each of the Issuers irrevocably waives, to the
         fullest extent it may effectively do so under applicable law, trial by
         jury and any objection that it may now or hereafter have to the laying
         of the venue of any such suit, action or proceeding brought in any such
         court and any claim that any such suit, action or proceedings brought
         in such court has been brought in an inconvenient forum. Each of the
         Issuers irrevocably consents, to the fullest extent it

                                      30
<PAGE>

may effectively do so under applicable law, to the service of process of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the Issuers
at the address set forth herein, such service to become effective 30 days after
such mailing. Nothing herein shall affect the right of the Initial Purchaser to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against either of the Issuers in any other
jurisdiction.

     (d)  This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.

     (e)  The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.

     (f)  If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in fall force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

     (g)  This Agreement may be amended, modified or supplemented, and waivers
or consents to departures from the provisions hereof may be given, provided that
the same are in writing and signed by each of the signatories hereto.

     (h)  Any capitalized term not defined herein shall have the meaning set
forth for such term in the Indenture.

                                       31
<PAGE>

          Please confirm that the foregoing correctly sets forth the agreement
between the Issuers and the Initial Purchaser.

                                          Very truly yours,

                                          AIRTRAN AIRWAYS, INC.

                                          By:   /s/ Steven A. Rossum
                                            ----------------------------------
                                              Name: Steven A. Rossum
                                              Title: Vice President-Treasurer

                                          AIRTRAN HOLDINGS, INC.

                                          By:   /s/ Steven A. Rossum
                                            ----------------------------------
                                              Name: Steven A. Rossum
                                              Title: Vice President-Treasuer

Accepted and Agreed to:
BOEING CAPITAL LOAN CORPORATION

By: /s/ J. S. Weltman
   -------------------------------
   Name: J. S. Weltman
   Title: Authorized Signatory
<PAGE>

            ANNEX X TO THE PURCHASE AGREEMENT DATED APRIL 12, 2001

     The following terms shall have the definitions set forth in the section
listed:

          "Act"                                         Section 1(d)
      ---------------------------------------------------------------------
          "Agreement"                                   Section 1(f)
      ---------------------------------------------------------------------
          "Aircraft Mortgage"                           Section 1(a)
      ---------------------------------------------------------------------
          "Airways"                                     First Paragraph
      ---------------------------------------------------------------------
          "Applicable Agreements"                       Section 6(i)
      ---------------------------------------------------------------------
          "Applicable Law"                              Section 6(i)
      ---------------------------------------------------------------------
          "BCLC"                                        Section 3(c)
      ---------------------------------------------------------------------
          "Capitalization"                              Section 6(d)
      ---------------------------------------------------------------------
          "Charter Documents"                           Section 6(i)
      ---------------------------------------------------------------------
          "Closing"                                     Section 4
      ---------------------------------------------------------------------
          "Closing Date"                                Section 4
      ---------------------------------------------------------------------
          "Code"                                        Section 6(cc)
      ---------------------------------------------------------------------
          "Collateral"                                  Section 1(a)
      ---------------------------------------------------------------------
          "Collateral Trust Agreement"                  Section 1(a)
      ---------------------------------------------------------------------
          "Collateral Trustee"                          Section 1(a)
      ---------------------------------------------------------------------
          "Collateral Documents"                        Section 1(a)
      ---------------------------------------------------------------------
          "Commission"                                  Section 3(a)
      ---------------------------------------------------------------------
          "controlling person"                          Section 8(a)
      ---------------------------------------------------------------------
          "Documents"                                   Section 3(d)
      ---------------------------------------------------------------------
          "Eligible Initial Purchasers"                 Section 3
      ---------------------------------------------------------------------
          "Environmental Laws"                          Section 6(gg)
      ---------------------------------------------------------------------
          "Equity Contribution"                         Section 3(c)
      ---------------------------------------------------------------------
          "ERISA"                                       Section 6(cc)
      ---------------------------------------------------------------------

                                      A-1
<PAGE>

      ---------------------------------------------------------------------
          "Exchange Act"                                Section 5(h)
      ---------------------------------------------------------------------
          "Exchange Offer Registration                  Section 3(a)
          Statement"
      ---------------------------------------------------------------------
          "Exempt Resales"                              Section 3
      ---------------------------------------------------------------------
          "Financial Statements"                        Section 6(w)
      ---------------------------------------------------------------------
          "GAAP"                                        Section 6(v)
      ---------------------------------------------------------------------
          "Governmental Authority"                      Section 6(i)
      ---------------------------------------------------------------------
          "Grantors"                                    Section 1(a)
      ---------------------------------------------------------------------
          "Guarantors"                                  Section 1(a)
      ---------------------------------------------------------------------
          "Guaranty"                                    Section 1(a)
      ---------------------------------------------------------------------
          "Holdings"                                    First Paragraph
      ---------------------------------------------------------------------
          "Holdings' Common Stock"                      Section 1(b)
      ---------------------------------------------------------------------
          "Holdings' Convertible Notes                  Section 3(c)
          Issuance"
      ---------------------------------------------------------------------
          "Holdings Note Agreement"                     Section 3(c)
      ---------------------------------------------------------------------
          "Holdings' Note Issuance"                     Section 3(c)
      ---------------------------------------------------------------------
          "Holdings' Series A Notes                     Section 3(c)
          Issuance"
      ---------------------------------------------------------------------
          "Indemnified Parties"                         Section 8(a)
      ---------------------------------------------------------------------
          "Indenture"                                   Section 1(a)
      ---------------------------------------------------------------------
          "Initial Purchaser"                           Section 1(a)
      ---------------------------------------------------------------------
          "Intellectual Property"                       Section 6(u)
      ---------------------------------------------------------------------
          "Issuers"                                     First Paragraph
      ---------------------------------------------------------------------
          "Losses"                                      Section 8(a)
      ---------------------------------------------------------------------
          "Mandatory Redemption                         Section 5(p)
          Obligation"
      ---------------------------------------------------------------------
          "Material Adverse Change"                     Section 6(y)
      ---------------------------------------------------------------------
          "Material Adverse Effect"                     Section 6(b)
      ---------------------------------------------------------------------

                                      A-2
<PAGE>

      ---------------------------------------------------------------------
          "Mortgage"                                    Section 1(a)
      ---------------------------------------------------------------------
          "Note Registration Rights                     Section 3(a)
          Agreement"
     ---------------------------------------------------------------------
          "Notes"                                       Section 3(a)
      ---------------------------------------------------------------------
          "Note Shelf Registration Rights               Section 3(a)
          Agreement"
      ---------------------------------------------------------------------
          "Offering"                                    Section 1(c)
      ---------------------------------------------------------------------
          "Permits"                                     Section 6(k)
      ---------------------------------------------------------------------
          "Permitted Transferee"                        Section 5(p)
      ---------------------------------------------------------------------
          "PORTAL"                                      Section 5(c)
      ---------------------------------------------------------------------
          "Proceedings"                                 Section 6(o)
      ---------------------------------------------------------------------
          "Purchaser Party"                             Section 5(p)
      ---------------------------------------------------------------------
          "QIBs"                                        Section 3
      ---------------------------------------------------------------------
          "Registered Exchange Offer"                   Section 3(a)
      ---------------------------------------------------------------------
          "Securities"                                  Section 3(d)
      ---------------------------------------------------------------------
          "Security Agreement"                          Section 1(a)
      ---------------------------------------------------------------------
          "Security Interests"                          Section 1(a)
      ---------------------------------------------------------------------
          "Series A Notes"                              First Paragraph
      ---------------------------------------------------------------------
          "Series B Notes"                              Section 3(a)
      ---------------------------------------------------------------------
          "Series C Notes"                              Section 3(a)
      ---------------------------------------------------------------------
          "Series D Notes"                              Section 3(a)
      ---------------------------------------------------------------------
          "Special Interest"                            Section 3(a)
      ---------------------------------------------------------------------
          "Tax"                                         Section 6(t)
      ---------------------------------------------------------------------
          "TIA"                                         Section 6(f)
      ---------------------------------------------------------------------
          "Transactions"                                Section 3(d)
      ---------------------------------------------------------------------
          "Trustee"                                     Section 1(a)
      ---------------------------------------------------------------------
          "Units"                                       Section 1(c)

                                      A-3
<PAGE>

      ---------------------------------------------------------------------
          "Warrant Agreement"                           Section 1(b)
      ---------------------------------------------------------------------
          "Warrant Registration Rights                  Section 3(b)
          Agreement"
      ---------------------------------------------------------------------
          "Warrants"                                    Section 1(b)
      ---------------------------------------------------------------------
          "Warrant Shelf Registration                   Section 3(b)
          Statement"

          The following terms shall have the definitions indicated:

          "Affiliate" shall have the meaning set forth in the Indenture.
           ---------

          "Boeing Affiliate" shall mean any Affiliate of The Boeing Company and
           ----------------
Rolls-Royce.

          "Delivery Date" shall mean the date on which a Transaction Aircraft is
           -------------
delivered to Airways.

          "DTC" shall mean The Depository Trust Company.
           ---

          "Exempt Resales" shall mean sales by the Initial Purchaser of some or
           --------------
all of the Units purchased by the Initial Purchaser hereunder solely to persons
whom the Initial Purchaser reasonably believes to be "qualified institutional
buyers" as defined in Rule 144A under the Act.

          "Holdings 10-K" shall mean that certain Annual Report pursuant to
           -------------
Section 13 or 15(d) of the Securities Act of 1934 on Form 10-K, for the fiscal
year ended on December 31, 2000 of Holdings, filed with the Securities and
Exchange Commission on April 2, 2001, as amended by that certain Annual Report
pursuant to Section 13 or 15(d) of the Securities Act of 1934 on Form 10-K/A for
the fiscal year ended December 31, 2000 of Holdings, filed with the Securities
and Exchange Commission on April 2, 2001.

          "Holdings SEC Documents" means (i) the Company 10-K, (ii) that certain
           ----------------------
Current Report on Form 8-K of the Company dated April 3, 2001, (iii) that
certain Current Report on Form 8-K of the Company dated March 14, 2001, (iv)
that certain Current Report on Form 8-K of Company dated January 23, 2001, and
(v) each and every other form, schedule, report, registration statement,
definitive proxy statement and other document (together with all amendments
thereof and supplements thereto) filed by Company with the Commission after
January 1, 2001, and on or before April 12, 2001.

          "Permitted Liens" shall have the meaning set forth in the Indenture.
           --------------

          "Reasonable Inquiry" shall mean reasonable inquiry by senior officers
           ------------------
of the Issuers.

                                      A-4
<PAGE>

          "Secretary" or "Assistant Secretary" means the secretary or assistant
           --------       -------------------
secretary, respectively, of either of the Issuers, as applicable.

          "Transaction Aircraft" shall mean those aircraft which are being
           --------------------
acquired by Airways from The Boeing Company.

          "Transaction Documents" shall have the meaning set forth in the
           ---------------------
Indenture.

          "Transportation Code" shall mean Subtitle VII of Title 49 of the
           -------------------
United States Code, as in effect on the date hereof and as modified or amended
thereafter, or any successor or substituted legislation in effect and
applicable.

                                      A-5
<PAGE>

                                   EXHIBIT A

                          FORM OF SECURITY AGREEMENT

           [see Exhibit G to Exhibit 10.1 filed with this Form 10-Q]
<PAGE>

                                   EXHIBIT B

                            FORM OF AIRCRAFT MORTGAGE

           [see Exhibit G to Exhibit 10.1 filed with this Form 10-Q]

<PAGE>

                                   EXHIBIT C

                                FORM OF MORTGAGE

           [see Exhibit G to Exhibit 10.1 filed with this Form 10-Q]

<PAGE>

                                   EXHIBIT D

                       FORM OF COLLATERAL TRUST AGREEMENT

           [see Exhibit C to Exhibit 10.1 filed with this Form 10-Q]

<PAGE>

                                   EXHIBIT E

                           FORM OF WARRANT AGREEMENT

                  [see Exhibit 10.2 filed with this Form 10-Q]

<PAGE>

                                   EXHIBIT F

                                    LEGENDS

<PAGE>

                                   EXHIBIT F

                                    LEGENDS

                        LEGENDS FOR THE SERIES A NOTES
                        ------------------------------

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.  NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.

THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE) ONLY (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S AND THE REGISTRAR'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN THE CASE OF THE FOREGOING CLAUSES, A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE COMPANY AND THE REGISTRAR.  THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

                                       1
<PAGE>

                           LEGENDS FOR THE WARRANTS
                           ------------------------

NEITHER THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE NOR THE SHARES OF
COMMON STOCK, PAR VALUE $.001 PER SHARE, OF AIRTRAN HOLDINGS, INC. FOR WHICH THE
WARRANT IS EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.  NEITHER THIS
WARRANT CERTIFICATE NOR ANY INTEREST OR PARTICIPATION HEREIN NOR ANY SHARE OF
COMMON STOCK ACQUIRED UPON EXERCISE HEREOF MAY BE OFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.

THE HOLDER OF THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE OR ANY
SECURITIES OF THE COMPANY FOR WHICH THE WARRANT IS EXERCISABLE, BY ITS
ACCEPTANCE HEREOF, AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THE WARRANTS
REPRESENTED BY THIS WARRANT CERTIFICATE ONLY (A) TO THE COMPANY, (B) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE ARE
ELIGIBLE FOR RESALE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT, (D) PURSUANT TO OFFERS AND SALES TO NON-
U.S.  PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501
UNDER THE SECURITIES ACT THAT IS ACQUIRING THE WARRANTS REPRESENTED BY THIS
WARRANT CERTIFICATE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE WARRANT AGENT'S, AS APPLICABLE, RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION REASONABLY
SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, AN ASSIGNMENT
IN THE FORM APPEARING ON THE OTHER SIDE OF THIS WARRANT CERTIFICATE IS COMPLETED
AND DELIVERED BY THE

                                       2
<PAGE>

TRANSFEROR TO THE WARRANT AGENT. THIS LEGEND SHALL BE REMOVED UPON THE REQUEST
OF A HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

THIS SECURITY IS SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED AS OF APRIL
12, 2001 BETWEEN THE COMPANY AND BOEING CAPITAL LOAN CORPORATION (THE "INITIAL
PURCHASER"), A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

                                       3
<PAGE>

                                   EXHIBIT G

                   FORM OF NOTE REGISTRATION RIGHTS AGREEMENT

                                     A-12
<PAGE>

                             AIRTRAN AIRWAYS, INC.

               $166,400,000 11.27% Senior Secured Notes due 2008

                         REGISTRATION RIGHTS AGREEMENT
                         -----------------------------

                                                                  April 12, 2001

BOEING CAPITAL LOAN CORPORATION
c/o Entity Services
2325-B Renaissance Drive, Suite 8
Las Vegas, NV  89119

Ladies and Gentlemen:

     AirTran Airways, Inc. (the "Issuer"), is issuing and selling to Boeing
                                 ------
Capital Loan Corporation (the "Purchaser"), upon the terms set forth in a
                               ---------
purchase agreement, dated as of April 12, 2001 (the "Purchase Agreement"),
                                                     ------------------
$166,400,000 aggregate principal amount of its 11.27% Senior Secured Amortizing
Notes due 2008, Series A, including any future guarantees to be endorsed thereon
(the "Series A Notes" and together with the 11.27% Senior Secured Notes due
      --------------
2008, Series C, including any future guarantees to be endorsed thereon, issuable
upon conversion of the Series A Notes (the "Series C Notes"), the "Notes").  As
                                            --------------         -----
an inducement to the Purchaser to enter into the Purchase Agreement, the Issuer
agrees with the Purchaser, for the benefit of the holders of the Securities
(defined below) (including, without limitation, the Purchaser), as follows:

1.   Definitions
     -----------

     Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement.  As used in this
Agreement, the following terms shall have the following meanings:

     Advice:  See Section 6.
     ------

     Agreement:  This Registration Rights Agreement.
     ---------

     Applicable Period:  See Section 2(f).
     -----------------

     Business Days:  Any day other than (i) Saturday or Sunday, or (ii) a day on
     -------------
which banking institutions in the State of New York are authorized or obligated
by law or executive order to be closed.

     Closing Date:  April 12, 2001.
     ------------

1
<PAGE>

     DTC:  See Section 6(i).
     ---

     Effectiveness Date:  The 180th day following the Issue Date.
     ------------------

     Effectiveness Period:  See Section 3(a).
     --------------------

     Event:  See Section 4(a).
     -----

     Event Date:  See Section 4(a).
     ----------

     Exchange Act:  The Securities Exchange Act of 1934, as amended, and the
     ------------
rules and regulations of the SEC promulgated thereunder.

     Exchange:  See Section 2(a).
     --------

     Exchange Offer Registration Statement:  See Section 2(a).
     -------------------------------------

     Exchange Notes:  The Series B Notes and the Series D Notes.
     --------------

     Filing Date:  The 120th day following the Issue Date.
     -----------

     Holder:  Each holder of Registrable Securities.
     ------

     Indenture:  The Indenture, dated the date hereof, by and among the Issuer,
     ---------
the guarantors referred to therein and Wilmington Trust Company, as trustee,
pursuant to which the Notes are being issued, as amended or supplemented from
time to time, in accordance with the terms thereof.

     Initial Shelf Registration:  See Section 3(a).
     --------------------------

     Issue Date: the date on which the Notes were originally issued.
     ----------

     Losses:  See Section 8(a).
     ------

     NASD:  The National Association of Securities Dealers, Inc.
     ----

     Participating Broker-Dealer:  See Section 2(f).
     ---------------------------

     Person:  An individual, trustee, corporation, limited liability company,
     ------
partnership, joint stock company, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof,
union, business association, firm or other entity.

     Prospectus:  The prospectus included in any Registration Statement
     ----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities covered by such Registration
Statement, and

2
<PAGE>

all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.

     Registrable Securities:  (i) Notes and (ii) Exchange Notes received in the
     ----------------------
Exchange Offer that may not be sold without restriction under federal or state
securities law.

     Registration Default Period:  See Section 4(a).
     ---------------------------

     Registration Statement:  Any registration statement of the Issuer that
     ----------------------
covers any of the Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.

     Rule 144:  Rule 144 under the Securities Act, as such Rule may be amended
     --------
from time to time, or any similar rule (other than Rule 144A) or regulation
hereafter adopted by the SEC.

     Rule 144A:  Rule 144A under the Securities Act, as such Rule may be amended
     ---------
from time to time, or any similar rule (other than Rule 144) or regulation
hereafter adopted by the SEC.

     Rule 415:  Rule 415 under the Securities Act, as such Rule may be amended
     --------
from time to time, or any similar rule or regulation hereafter adopted by the
SEC.

     SEC:  The Securities and Exchange Commission.
     ---

     Securities:  The Notes and the Exchange Notes, collectively.
     ----------

     Securities Act:  The Securities Act of 1933, as amended, and the rules and
     --------------
regulations of the SEC promulgated thereunder.

     Series B Notes:  11.27% Senior Secured Amortizing Notes due 2008, Series B,
     --------------
of the Issuer, including any existing or future guarantees endorsed or to be
endorsed thereon, identical in all respects to the Series A Notes, except for
references to series and restrictive legends.

     Series D Notes:  11.27% Senior Secured Notes due 2008, Series D, of the
     --------------
Issuer, including any existing or future guarantees and endorsed thereon,
identical in all respects to the Series C Notes, except for references to series
and restrictive legends.

     Shelf Notice:  See Section 2(i).
     ------------

     Shelf Registration:  The Initial Shelf Registration and any Subsequent
     ------------------
Shelf Registration.

     Special Counsel:  Counsel chosen by the holders of a majority in aggregate
     ---------------
principal amount of Securities.

     Special Interest:  See Section 4(a).
     ----------------

3
<PAGE>

     Subsequent Shelf Registration:  See Section 3(b).
     -----------------------------

     TIA:  The Trust Indenture Act of 1939, as amended.
     ---

     Transfer Restricted Securities:  Each Note until (i) the date on which such
     ------------------------------
Note has been exchanged by a person other than a broker-dealer in the Exchange
Offer for an Exchange Note, (ii) following the exchange by a broker-dealer in
the Exchange Offer of such Note for an Exchange Note, the date on which such
Exchange Note is sold to a purchaser who receives from such broker-dealer on, or
prior, to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Note has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Note is distributed to the public pursuant to Rule 144 under the Securities Act.

     Trustee:  The trustee under the Indenture and, if any, the trustee under
     -------
any indenture governing the Exchange Notes.

     Underwritten Registration or Underwritten Offering:  A registration in
     --------------------------------------------------
which securities of the Issuer are sold to an underwriter for reoffering to the
public.

2.   Exchange Offer
     --------------

     (a)  The Issuer shall:
          ----------------

          (i)   prepare and file with the SEC promptly after the date hereof,
but in no event later than the Filing Date, a registration statement (the
"Exchange Offer Registration Statement") on an appropriate form under the
 -------------------------------------
Securities Act with respect to a proposed offer (the "Exchange Offer") to the
                                                      --------------
Holders to issue and deliver to such Holders, in exchange for the Notes, a like
aggregate principal amount of Exchange Notes,

          (ii)  use its best efforts to cause the Exchange Offer Registration
Statement to become effective as promptly as practicable after the filing
thereof, but in no event later than the Effectiveness Date,

          (iii) keep the Exchange Offer Registration Statement effective until
the consummation of the Exchange Offer pursuant to its terms, and

          (iv)  unless the Exchange Offer would not be permitted by a policy of
the SEC, commence the Exchange Offer and use its commercially reasonable efforts
to issue, on or prior to 30 days after the date on which the Exchange Offer
Registration Statement is declared effective, Exchange Notes in exchange for all
Notes tendered prior thereto in 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.

     (b)  The Exchange Notes shall be issued under, and entitled to the benefits
of, the Indenture or a trust indenture that is identical to the Indenture (other
than such changes as are necessary to comply

4
<PAGE>

with any requirements of the SEC to effect or maintain the qualification thereof
under the TIA).

     (c)  In connection with the Exchange Offer, the Issuer shall:

          (i)    mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate letter
of transmittal that is an exhibit to the Exchange Offer Registration Statement,
and any related documents;

          (ii)   keep the Exchange Offer open for not less than 30 days after
the date notice thereof is mailed to the Holders (or longer if required by
applicable law);

          (iii)  utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York;

          (iv)   permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last Business Day on which the
Exchange Offer shall remain open; and

          (v)    otherwise comply in all material respects with all laws
applicable to the Exchange Offer.

     (d)  As soon as practicable after the close of the Exchange Offer, the
Issuer shall:

          (i)    accept for exchange all Notes validly tendered and not validly
withdrawn pursuant to the Exchange Offer;

          (ii)   deliver to the Trustee for cancellation all Notes so accepted
for exchange; and

          (iii)  cause the Trustee promptly to authenticate and deliver to each
Holder of Notes, Series B Notes equal in aggregate principal amount to the
Series A Notes of such Holder so accepted for exchange and Series D Notes equal
in aggregate principal amount to the Series C Notes of such Holder so accepted
for exchange.

     (e)  Interest on each Exchange Security will accrue from the last interest
payment date on which interest was paid on the Notes surrendered in exchange
therefor or, if no interest has been paid on the Notes, from the date of
original issue of the Notes.  Each Exchange Security shall bear interest at the
rate set forth thereon; provided, that interest with respect to the period prior
to the issuance thereof shall accrue at the rate or rates borne by the Notes
surrendered in exchange therefor from time to time during such period.

     (f)  The Issuer shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
                                                          --------------------
containing a summary statement of the positions taken or policies made by the
staff of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange
Offer (a "Participating Broker-Dealer").  Such "Plan of Distribution" section
          ---------------------------           --------------------
shall also allow the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including (without

5
<PAGE>

limitation) all Participating Brokers-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Notes.  The Issuer shall use its commercially reasonable efforts to
keep the Exchange Offer Registration Statement effective and to amend and
supplement the Prospectus to be lawfully delivered by all Persons subject to the
prospectus delivery requirement of the Securities Act for such period of time as
such Persons must comply with such requirements in order to resell the Exchange
Notes (the "Applicable Period").
            -----------------

     (g)  The Issuer may require each Holder participating in the Exchange Offer
to represent to the Issuer that, at the time of the consummation of the Exchange
Offer, (i) any Exchange Notes received by such Holder in the Exchange Offer will
be acquired in the ordinary course of its business, (ii) such Holder will have
no arrangement or understanding with any Person to participate in the
distribution of the Exchange Notes within the meaning of the Securities Act or
resale of the Exchange Notes in violation of the Securities Act, (iii) if such
Holder is not a broker-dealer, that it is not engaged in and does not intend to
engage in, the distribution of the Exchange Notes, (iv) if such Holder is a
broker-dealer that will receive Exchange Notes for its own account in exchange
for Notes that were acquired as a result of market-making or other trading
activities, that it will deliver a prospectus, as required by law, in connection
with any resale of such Exchange Notes, and (v) if such Holder is an affiliate
of the Issuer, that it will comply with the registration and prospectus delivery
requirements of the Securities Act applicable to it.

     (h)  If (i) the Issuer is not required to file the Exchange Offer
Registration Statement or permitted to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or SEC policy or (ii) any
Holder of Transfer Restricted Securities notifies the Issuer prior to the 20th
day following consummation of the Exchange Offer (A) that such Holder is
prohibited by law or SEC policy from participating in the Exchange Offer or (B)
that such Holder may not resell the Exchange Notes acquired by such holder in
the Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales or (C) that it is a broker-dealer and
owns Notes acquired directly from the Issuer or an affiliate of the Issuer, then
the Issuer shall promptly deliver to the Holders (or in the case of any
occurrence of the event described in clause (ii) hereof, to any such Holder) and
the Trustee notice thereof (the "Shelf Notice") and shall as promptly as
                                 ------------
possible thereafter file with the SEC a Shelf Registration Statement pursuant to
Section 3 to cover resales of the Notes by the holders thereof who satisfy
certain conditions outlined in Section 3(a) relating to the provision of
information in connection with the Shelf Registration Statement.

3.   Shelf Registration
     ------------------

     If a Shelf Notice is required to be delivered pursuant to Section 2(h)(i),
then this Section 3 shall apply to all Registrable Securities.  Otherwise, upon
consummation of the Exchange Offer in accordance with Section 2, the provisions
of this Section 3 shall apply solely with respect to (i) Notes held by any
Holder thereof not permitted to participate in the Exchange Offer as
contemplated by Section 2(h)(ii)(A) hereof, (ii) Exchange Notes that are not
freely tradeable as contemplated by Section 2(h)(ii)(B) hereof and (iii) Notes
held by a broker-dealer that were acquired directly from the Issuer or an
affiliate of the Issuer as contemplated by Section 2(h)(ii)(C)

6
<PAGE>

hereof; provided in each case that the relevant Holder has duly notified the
Issuer prior to the 20th day following consummation of the Exchange Offer as
required by Section 2(h)(ii).

     (a)  Initial Shelf Registration. The Issuer shall prepare and file with the
          --------------------------
SEC a Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Registrable Securities (the "Initial
                                                                      -------
Shelf Registration").  If the Issuer has not yet filed an Exchange Offer
------------------
Registration Statement, the Issuer shall file with the SEC the Initial Shelf
Registration on or prior to the Filing Date and shall use its best efforts to
cause the Initial Shelf Registration to become effective as promptly as
practicable after the filing thereof, but in no event later than the
Effectiveness Date.  Otherwise, the Issuer shall use its best efforts to file
the Initial Shelf Registration on or prior to 90 days after such filing
obligation arises and to cause the Initial Shelf Registration to be declared
effective on or prior to 180 days after such obligation occurs.  The Initial
Shelf Registration shall be on Form S-1 or another appropriate form permitting
registration of such Registrable Securities for resale by such Holders in the
manner or manners designated by them (including, without limitation, one or more
underwritten offerings).  The Issuer shall (i) not permit any securities other
than the Registrable Securities to be included in any Shelf Registration, and
(ii) use its best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act as promptly as practicable after the filing
thereof, and to keep the Initial Shelf Registration continuously effective under
the Securities Act until the date that is 24 months after the date it is
declared effective (subject to extension pursuant to the last paragraph of
Section 6 hereof) (the "Effectiveness Period"), or such shorter period ending
                        --------------------
when (i) all Registrable Securities covered by the Initial Shelf Registration
have been sold in the manner set forth and as contemplated in the Initial Shelf
Registration or (ii) a Subsequent Shelf Registration covering all of the
Registrable Securities has been declared effective under the Securities Act.  No
Holder shall be entitled to include any of its Registrable Securities in any
Shelf Registration pursuant to this Agreement unless such Holder furnishes to
the Issuer and the Trustee in writing, within 30 days after receipt of a request
therefor, such information as the Issuer and the Trustee, after conferring with
counsel with regard to information relating to Holders that would be required by
the SEC to be included in such Shelf Registration or Prospectus included
therein, may reasonably request for inclusion in any Shelf Registration or
Prospectus included therein.

     (b)  Subsequent Shelf Registrations.  If any Shelf Registration ceases to
          ------------------------------
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the Registrable Securities registered
thereunder), the Issuer shall use its commercially reasonable efforts to obtain
the prompt withdrawal of any order suspending the effectiveness thereof, and in
any event shall within 30 days of such cessation of effectiveness amend the
Shelf Registration in a manner reasonably expected to obtain the withdrawal of
the order suspending the effectiveness thereof, or the Issuer shall use its best
efforts to file an additional "shelf" Registration Statement pursuant to Rule
415 covering all of the Registrable Securities (a "Subsequent Shelf
                                                   ----------------
Registration") on or prior to 90 days after such cessation of effectiveness and
------------
to cause the Subsequent Shelf Registration to be declared effective on or prior
to 180 days after such cessation of effectiveness.  Upon a Subsequent Shelf
Registration being declared effective, the Issuer shall use its best efforts to
keep such Subsequent Shelf Registration continuously effective for a period
equal to the number of days in the Effectiveness Period less the aggregate
number of days during which the Initial Shelf

7
<PAGE>

Registration, and any Subsequent Shelf Registration, was previously effective.

4.   Liquidated Damages.
     -------------------

     (a)  The Issuer acknowledges and agrees that the Holders will suffer
damages, and that it would not be feasible to ascertain the extent of such
damages with precision, if the Issuer fails to fulfill its obligations
hereunder.  Accordingly, in the event of such failure, the Issuer agrees to pay
liquidated damages to each Holder under the circumstances and to the extent set
forth below:

          (i)    if the Issuer fails to file any of the Registration Statements
required to be filed by this Registration Rights Agreement on or before the date
specified herein for such filing; or

          (ii)   any of the Registration Statements required to be filed by this
Registration Rights Agreement is not declared effective by the SEC on or before
the date specified herein for such effectiveness; or

          (iii)  if the Issuer has not exchanged Exchange Notes for all Notes
validly tendered in accordance with the terms of the Exchange Offer within 30
days after the date on which an Exchange Offer Registration Statement is
declared effective by the SEC; or

          (iv)   if a Shelf Registration or the Exchange Offer Registration
Statement is filed and declared effective by the SEC but thereafter ceases to be
effective or usable in connection with the resale of Transfer Restricted
Securities without being succeeded within 30 days by a Subsequent Shelf
Registration filed and declared effective;

(each of the foregoing an "Event," the date on which the Event occurs being
                           -----
referred to herein as an "Event Date," and each period during which an Event has
                          ----------
occurred and is continuing being referred to herein as an "Registration Default
                                                           --------------------
Period").
------

     Upon the occurrence of any Event, the Issuer shall pay, or cause to be
paid, in addition to amounts otherwise due under the Indenture and the
Registrable Securities, as liquidated damages, and not as a penalty, to each
Holder special interest ("Special Interest") on the Notes accruing at a per
                          ----------------
annum rate of 0.50% for the first 90 days of the Registration Default Period, at
a per annum rate of 0.50% for the second 90 days of the Registration Default
Period and at a per annum rate of 0.25% thereafter for the remaining portion of
the Registration Default Period.  From and including the date on which all of
Events have been cured, the accrual of Special Interest will cease.  Special
Interest is payable in addition to any other interest payable from time to time
pursuant to the terms of the Notes.

     An Event under clause (i) above shall be cured on the date that the
required Registration Statement is filed with the SEC; an Event under clause
(ii) above shall be cured on the date that the required Registration Statement
is declared effective by the SEC; an Event under clause (iii) above shall be
cured on the earlier of the date (A) the Exchange Offer is consummated with
respect to all Notes validly tendered or (B) the Issuer deliver a Shelf Notice
to the Holders; and an Event under clause (iv) above shall be cured on the
earlier of (A) the date on which the applicable Shelf

8
<PAGE>

Registration is no longer subject to an order suspending the effectiveness
thereof or proceedings relating thereto or (B) a new Subsequent Shelf
Registration is declared effective.

     (b)  The Issuer shall notify the Trustee within five Business Days after
each Event Date.  The Issuer shall pay the Special Interest due on the
Registrable Securities by depositing with the Trustee, in trust, for the benefit
of the Holders thereof, by 12:00 noon, New York City time, on or before the
applicable semi-annual interest payment date for the Registrable Securities,
immediately available funds in sums sufficient to pay the Special Interest then
due.  The Special Interest due shall be payable on each interest payment date to
the record Holder entitled to receive the interest payment to be made on such
date as set forth in the Indenture.

5.   Consents.
     ---------

     Prior to consummating the Exchange Offer or filing the Initial Shelf
Registration, as the case may be, the Issuer shall use its commercially
reasonable efforts to make or obtain all permits necessary or desirable for the
consummation of the transactions contemplated hereby.

6.   Registration Procedures
     -----------------------

     In connection with the registration of any Securities pursuant to Sections
2 or 3 hereof, the Issuer shall effect such registrations to permit the sale of
such Securities in accordance with the intended method or methods of disposition
thereof, and pursuant thereto the Issuer shall:

     (a)  Prepare and file with the SEC, as soon as practicable after the date
hereof but in any event on or prior to the Filing Date, a Registration Statement
or Registration Statements as prescribed by Section 2 or 3 that 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 its best efforts to cause each such Registration Statement to become
effective and remain effective as provided herein; provided that, if (i) such
                                                   --------
filing is pursuant to Section 3 or (ii) a Prospectus contained in an Exchange
Offer Registration Statement filed pursuant to Section 2 is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Notes during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Issuer shall, if requested, furnish to and afford the Holders of the
Registrable Securities covered by such Registration Statement, their Special
Counsel, each Participating Broker-Dealer, the managing underwriters, if any,
and their counsel a reasonable opportunity to review and make available for
inspection by such Persons copies of all such documents (including copies of any
documents to be incorporated by reference therein and all exhibits thereto)
proposed to be filed, such financial and other information and books and records
of the Issuer, and cause the members, managers, officers, directors and
employees of the Issuer, counsel to the Issuer and independent certified public
accountants of the Issuer, to respond to such inquiries, as shall be reasonably
necessary, in the opinion of the respective counsel to such Holders,
Participating Broker-Dealer and underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act.  The Issuer may require
each Holder to agree to keep confidential any non-public information relating to
the Issuer received by such Holder and not disclose such information (other than
to an Affiliate or prospective purchaser

9
<PAGE>

who agrees to respect the confidentiality provisions of this Section 6(a)) until
such information has been made generally available to the public unless the
release of such information is required by law or necessary to respond to
inquiries of regulatory authorities (including the National Association of
Insurance Commissioners, or similar organizations or their successors). The
Issuer shall not file any Registration Statement or Prospectus or any amendments
or supplements thereto in respect of which the Holders must be afforded an
opportunity to review prior to the filing of such document, if the Holders of a
majority in aggregate principal amount of the Registrable Securities covered by
such Registration Statement, their Special Counsel, any Participating Broker-
Dealer or the managing underwriters, if any, or their counsel shall reasonably
object.

     (b)  Provide an indenture trustee for the Registrable Securities or the
Exchange Notes, as the case may be, and cause the Indenture (or other indenture
relating to the Registrable Securities) to be qualified under the TIA not later
than the effective date of the first Registration Statement; and in connection
therewith, to effect such changes to such indenture as may be required for such
indenture to be so qualified in accordance with the terms of the TIA; and
execute, and use its commercially reasonable efforts to cause such trustee 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 such indenture
to be so qualified in a timely manner.

     (c)  Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods required
hereby; cause the related Prospectus to be supplemented by any Prospectus
supplement required by Applicable Law, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply in all material respects with the provisions of the
Securities Act and the Exchange Act applicable thereto with respect to the
disposition of all securities covered by such Registration Statement, as so
amended, or in such Prospectus, as so supplemented, in accordance with the
intended methods of distribution set forth in such Registration Statement or
Prospectus as so amended.

     (d)  Furnish to such selling Holders and Participating Broker-Dealers who
so request (i) upon the Issuer's receipt, a copy of the order of the SEC
declaring such Registration Statement and any post-effective amendment thereto
effective and (ii) such reasonable number of copies of such Registration
Statement and of each amendment and supplement thereto (in each case including
any documents incorporated therein by reference and all exhibits), (iii) such
reasonable number of copies of the Prospectus included in such Registration
Statement (including each preliminary Prospectus), and such reasonable number of
copies of the final Prospectus as filed by the Issuer pursuant to Rule 424(b)
under the Securities Act, in conformity with the requirements of the Securities
Act, and (iv) such other documents (including any amendments required to be
filed pursuant to clause (c) of this Section), as any such Person may reasonably
request. The Issuer hereby consents to the use of the Prospectus by each of the
selling Holders of Registrable Securities or each such Participating Broker-
Dealer, as the case may be, and the underwriters or agents, if any, and dealers
(if any), in connection with the offering and sale of the Registrable Securities
covered by, or the sale by Participating Broker-Dealers of the Exchange Notes
pursuant to, such Prospectus and any amendment thereto.

10
<PAGE>

     (e)  If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, notify the selling Holders of Registrable Securities, their
Special Counsel, each Participating Broker-Dealer and the managing underwriters,
if any, promptly (but in any event within two Business Days), and confirm such
notice in writing, (A) when a Prospectus has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective under the Securities Act, (B) of the issuance by the SEC of any stop
order suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any Prospectus or the initiation of any
proceedings for that purpose, (C) if, at any time when a Prospectus is required
by the Securities Act to be delivered in connection with sales of the
Registrable Securities, the representations and warranties of the Issuer
contained in any agreement (including any underwriting agreement) contemplated
by Section 6(m) below cease to be true and correct in any material respect, (D)
of the receipt by the Issuer of any notification with respect to the suspension
of the qualification or exemption from qualification of a Registration Statement
or any of the Registrable Securities or the Exchange Notes to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
contemplation, initiation or threatening of any proceeding for such purpose, (E)
of the happening of any event that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, Prospectus or
documents so that it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (F) of the Issuer's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.

     (f)  Use its commercially reasonable efforts to register or qualify, and,
if applicable, to cooperate with the selling Holders of Registrable Securities,
the underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, Securities to be included in a Registration Statement for
offer and sale under the securities or Blue Sky laws of such jurisdictions
within the United States as any selling Holder, Participating Broker-Dealer or
the managing underwriters reasonably request in writing; and, if Securities are
offered other than through an Underwritten Offering, the Issuer shall cause its
counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 6(f) at the expense
of the Issuer; keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be kept effective and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Securities
covered by the applicable Registration Statement, provided, however that the
                                                  --------  -------
Issuer shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified, (ii) take action that would
subject it to general service of process in any jurisdiction where it is not so
subject or (iii) take action that would subject it to taxation in respect of
doing business in any such jurisdiction where it is not then so subject.

     (g)  Use its commercially reasonable efforts to prevent the issuance of any
order suspending the

11
<PAGE>

effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or exemption
from qualification) of any of the Securities for sale in any jurisdiction, and,
if any such order is issued, to use its commercially reasonable efforts to
obtain the withdrawal of any such order at the earliest possible time.

     (h)  If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, and if requested by the managing underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Securities, (i) promptly incorporate in a Prospectus or post-effective amendment
such information as the managing underwriters, if any, or such Holders
reasonably request to be included therein as required to comply with any
Applicable Law and (ii) make all required filings of such Prospectus or such
post-effective amendment as soon as practicable after the Issuer has received
notification of such matters required by Applicable Law to be incorporated in
such Prospectus or post-effective amendment.

     (i)  If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, cooperate with the selling Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which certificates
shall not bear any restrictive legends and shall be in a form eligible for
deposit with The Depository Trust Company ("DTC"); and enable such Registrable
                                            ---
Securities to be in such denominations and registered in such names as the
managing underwriters, if any, or Holders may reasonably request.

     (j)  If (i) a Shelf Registration is filed pursuant to Section 3 or (ii) a
Prospectus contained in an Exchange Offer Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, upon the occurrence of any event contemplated by paragraph
6(e)(E) or 6(e)(F) above, as promptly as practicable prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities being sold thereunder
or to the purchasers of the Exchange Notes to whom such Prospectus will be
delivered by a Participating Broker-Dealer, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

     (k)  Prior to the effective date of the first Registration Statement
relating to the Securities, (i) provide the applicable trustee with printed
certificates for the Securities in a form eligible for deposit with DTC and (ii)
provide a CUSIP number for each of the Securities.

     (l)  Use its commercially reasonable efforts to cause all Securities
covered by such Registration

12
<PAGE>

Statement to be listed on each securities exchange, if any, on which similar
debt securities issued by the Issuer are then listed.

     (m)  If a Shelf Registration is filed pursuant to Section 3, enter into
such agreements (including an underwriting agreement in form, scope and
substance as is customary in Underwritten Offerings) and take all such other
actions in connection therewith (including those reasonably requested by the
managing underwriters, if any, or the Holders of a majority in aggregate
principal amount of Registrable Securities being sold) in order to expedite or
facilitate the registration or the disposition of such Registrable Securities,
and in such connection, whether or not an underwriting agreement is entered into
and whether or not the registration is an Underwritten Registration, (i) make
such representations and warranties to the Holders and the underwriters, if any,
with respect to the business of the Issuer and its subsidiaries, if any, and the
Registration Statement, Prospectus and documents, if any, incorporated or deemed
to be incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in Underwritten
Offerings, and confirm the same if and when reasonably requested; (ii) obtain
opinions of counsel to the Issuer and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and the Holders of a majority in aggregate
principal amount of the Registrable Securities being sold), addressed to each
selling Holder and each of the underwriters, if any, covering the matters
customarily covered in opinions requested in Underwritten Offerings; (iii)
obtain "cold comfort" letters and updates thereof (which letters and updates (in
form, scope and substance) shall be reasonably satisfactory to the managing
underwriters) from the independent certified public accountants of the Issuer
(and, if necessary, any other independent certified public accountants of any
subsidiary of the Issuer or of any business acquired by the Issuer for which
financial statements and financial data are, or are required to be, included in
the Registration Statement), addressed to each of the underwriters and each
selling Holder, such letters to be in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
Underwritten Offerings and such other matters as reasonably requested by
underwriters; and (iv) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority in principal amount of the
Registrable Securities being sold and the managing underwriters, if any, to
evidence the continued validity of the representations and warranties of the
Issuer and its subsidiaries made pursuant to clause (i) above and to evidence
compliance with any conditions contained in the underwriting agreement or other
similar agreement entered into by the Issuer.

     (n)  Comply with all applicable rules and regulations of the SEC and make
generally available to its security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or
any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing on the first day of the
fiscal quarter following each fiscal quarter in which Registrable Securities are
sold to underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Issuer after the effective date of
a Registration Statement, which statements shall cover said 12-month periods.

13
<PAGE>

     (o)  Upon consummation of an Exchange Offer, obtain an opinion of counsel
to the Issuer (in form, scope and substance reasonably satisfactory to the
Purchaser), addressed to all Holders participating in the Exchange Offer, to the
effect that (i) the Issuer has duly authorized, executed and delivered the
Exchange Notes and the Indenture, (ii) the Exchange Notes and the Indenture
constitute legal, valid and binding obligations of the Issuer, enforceable
against the Issuer in accordance with their respective terms, except as such
enforcement may be subject to (A) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and (B) general principles of equity (regardless of whether
such enforcement is sought in a proceeding in equity or at law), and (iii) all
obligations of the Issuer under the Exchange Notes and the Indenture are secured
by Liens on the assets securing the obligations of the Issuer under the Notes.

     (p)  If an Exchange Offer is to be consummated, upon delivery of the
Registrable Securities by such Holders to the Issuer (or to such other Person as
directed by the Issuer) in exchange for the Exchange Notes the Issuer shall
mark, or caused to be marked, on such Registrable Securities that such
Registrable Securities are being cancelled in exchange for the Exchange Notes
and in no event shall such Registrable Securities be marked as paid or otherwise
satisfied.

     (q)  Cooperate with each seller of Registrable Securities covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and its counsel in connection with
any filings required to be made with the NASD.

     (r)  Use its commercially reasonable efforts to take all other steps
necessary to effect the registration of the Registrable Securities covered by a
Registration Statement contemplated hereby.

     The Issuer may require each seller of Registrable Securities or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuer such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Securities or Exchange
Notes as the Issuer may, from time to time, reasonably request in writing.  The
Issuer may exclude from such registration the Registrable Securities of any
seller or Exchange Notes of any Participating Broker-Dealer who fails to furnish
such information within a reasonable time (which time in no event shall exceed
15 days) after receiving such request.

     Each Holder and each Participating Broker-Dealer agrees by acquisition of
such Registrable Securities or Exchange Notes of any Participating Broker-Dealer
that, upon receipt of written notice from the Issuer of the happening of any
event of the kind described in Section 6(e)(B), 6(e)(D), 6(e)(E) or 6(e)(F),
such Holder will forthwith discontinue disposition (in the jurisdictions
specified in a notice of a 6(e)(D) event, and elsewhere in a notice of a
6(e)(B), 6(e)(E) or 6(e)(F) event) of such Securities covered by such
Registration Statement or Prospectus until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 6(j), or until
it is advised in writing (the "Advice") by the Issuer that offers or sales in a
                               ------
particular jurisdiction may be resumed or that the use of the applicable
Prospectus may be resumed, as the case may be, and has received copies of any
amendments or supplements thereto.  If the Issuer shall give such notice, each
of the Effectiveness Period and the Applicable Period shall be extended by the
number of days

14
<PAGE>

during such periods from and including the date of the giving of such notice to
and including the date when each seller of such Securities covered by such
Registration Statement shall have received (i) the copies of the supplemented or
amended Prospectus contemplated by Section 6(j) or (ii) the Advice.

7.   Registration Expenses
     ---------------------

     (a)  All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuer shall be borne by the Issuer whether or not
the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation:

          (i)    all registration and filing fees including, without limitation,
(A) fees with respect to filings required to be made with the NASD and (B)
reasonable fees and expenses of compliance with state securities or Blue Sky
laws (including, without limitation, reasonable fees and disbursements of
counsel in connection with Blue Sky qualifications of the Registrable Securities
or Exchange Notes and determination of the eligibility of the Registrable
Securities or Exchange Notes for investment under the laws of such jurisdictions
(x) where the Holders are located, in the case of the Exchange Notes, or (y) as
provided in Section 6(f), in the case of Registrable Securities or Exchange
Notes to be sold by a Participating Broker-Dealer during the Applicable Period);

          (ii)   reasonable printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities or Exchange Notes
in a form eligible for deposit with DTC and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriters, if any, or,
in respect of Registrable Securities or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period, by the Holders of a
majority in aggregate principal amount of the Registrable Securities included in
any Registration Statement or of such Exchange Notes, as the case may be);

          (iii)  messenger, telephone, duplication, word processing and delivery
expenses incurred by the Issuer in the performance of its obligations hereunder;

          (iv)   reasonable fees and disbursements of counsel for the Issuer;

          (v)    reasonable fees and disbursements of all independent certified
public accountants referred to in Section 6(m)(iii) (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance);

          (vi)   reasonable fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in an offering
pursuant to Section 3 of Schedule E to the By-laws of the NASD, but only where
the need for such a "qualified independent underwriter" arises due to a
relationship with the Issuer;

          (vii)  Securities Act liability insurance, if the Issuer so desire
such insurance;

          (viii) reasonable fees and expenses of all other Persons retained by
the Issuer; internal

15
<PAGE>

expenses of the Issuer (including, without limitation, all salaries and expenses
of officers and employees of the Issuer performing legal or accounting duties);
and the expense of any annual audit; and

          (ix)   reasonable rating agency fees and the fees and expenses
incurred in connection with the listing of the Securities to be registered on
any securities exchange.

     (b)  The Issuer shall reimburse the Holders for the reasonable fees and
disbursements of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Registrable Securities to be included in any Registration Statement and
other reasonable and necessary out-of-pocket expenses of the Holders incurred in
connection with the registration of the Registrable Securities.

8.   Indemnification
     ---------------

     (a)  Indemnification by the Issuer.  The Issuer shall, without limitation
          -----------------------------
as to time, indemnify and hold harmless each Holder and each Participating
Broker-Dealer, each Person who controls each such Holder (within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act) and the
officers, directors, partners, employees, representatives and agents of each
such Holder, Participating Broker-Dealer and controlling person, to the fullest
extent lawful, from and against any and all losse s, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
reasonable attorneys' fees) and expenses (including, without limitation, costs
and expenses incurred in connection with investigating, preparing, pursuing or
defending against any of the foregoing) (collectively, "Losses"), as incurred,
                                                        ------
based upon or arising out of any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or in any
amendment or supplement thereto, or in any preliminary prospectus, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except insofar as such
Losses (i) are based upon information relating to such Holder or Participating
Broker-Dealer and furnished in writing to the Issuer by such Holder or
Participating Broker-Dealer expressly for use therein; or (ii) arise out of such
Holder's noncompliance with the last paragraph of Section 6 hereof if the
supplemented or amended Prospectus or the Prospectus and additional or
supplemental filings contemplated by such paragraph cured such untrue statement
or alleged untrue statement of a material fact contained in the Prospectus
delivered in violation of such paragraph or such omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading. The Issuer shall also indemnify
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, its officers, directors, agents
and employees and each Person who controls such Persons (within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act) to the
same extent as provided above with respect to the indemnification of the Holders
or the Participating Broker-Dealer.

     (b)  Indemnification by Holders of Registrable Securities.  In connection
          ----------------------------------------------------
with any Registration Statement, Prospectus or any amendment or supplement
thereto, or any preliminary prospectus in

16
<PAGE>

which a Holder is participating, such Holder shall furnish to the Issuer in
writing such information as the Issuer reasonably request for use in connection
with any Registration Statement, Prospectus or any amendment or supplement
thereto, or any preliminary prospectus and shall, without limitation as to time,
indemnify and hold harmless the Issuer, its respective members, managers,
directors, officers, agents and employees, each Person, if any, who controls the
Issuer (within the meaning of Section 15 of the Securities Act and Section 20(a)
of the Exchange Act), and the members, managers, directors, officers, agents or
employees of such controlling persons, to the fullest extent lawful, from and
against all Losses arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in any Registration Statement, Prospectus
or in any amendment or supplement thereto or in any preliminary prospectus, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading to the extent, but only
to the extent, that such untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact is contained in
or omitted from any information so furnished in writing by such Holder to the
Issuer expressly for use therein. In no event shall the liability of any selling
Holder be greater in amount than the dollar amount of the proceeds (net of
payment of all expenses) received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.

     (c)  Conduct of Indemnification Proceedings.  If any Proceeding shall be
          --------------------------------------
brought or asserted against any Person entitled to indemnity hereunder (an
"indemnified party"), such indemnified party shall promptly notify the party or
 -----------------
parties from which such indemnity is sought (the "indemnifying parties") in
                                                  --------------------
writing; provided, that the failure to so notify the indemnifying parties shall
         --------
not relieve the indemnifying parties from any obligation or liability except to
the extent (but only to the extent) that it shall be finally determined by a
court of competent jurisdiction (which determination is not subject to appeal)
that the indemnifying parties have been prejudiced materially by such failure.

     The indemnifying party shall have the right, exercisable by giving written
notice to an indemnified party, within 20 business days after receipt of written
notice from such indemnified party of such Proceeding, to assume, at its
expense, the defense of any such Proceeding, provided, that an indemnified party
                                             --------
shall have the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless:  (i) the
indemnifying party has agreed to pay such fees and expenses; or (ii) the
indemnifying party shall have failed promptly to assume the defense of such
Proceeding or shall have failed to employ counsel reasonably satisfactory to
such indemnified party; or (iii) the named parties to any such Proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party or any of its affiliates or controlling persons, and such
indemnified party shall have been advised by counsel that there may be one or
more defenses available to such indemnified party that are in addition to, or in
conflict with, those defenses available to the indemnifying party or such
affiliate or controlling person (in which case, if such indemnified party
notifies the indemnifying parties in writing that it elects to employ separate
counsel at the expense of the indemnifying parties, the indemnifying parties
shall not have the right to assume the defense thereof and the reasonable fees
and expenses of such counsel shall be at the expense of the indemnifying party;
it being understood, however, that, the

17
<PAGE>

indemnifying party shall not, in connection with any one such Proceeding or
separate but substantially similar or related Proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified
party).

     No indemnifying party shall be liable for any settlement of any such
Proceeding effected without its written consent, but if settled with its written
consent, or if there be a final judgment for the plaintiff in any such
Proceeding, each indemnifying party jointly and severally agrees, subject to the
exceptions and limitations set forth above, to indemnify and hold harmless each
indemnified party from and against any and all Losses by reason of such
settlement or judgment. The indemnifying party shall not consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to each
indemnified party of a release, in form and substance reasonably satisfactory to
the indemnified party, from all liability in respect of such Proceeding for
which such indemnified party would be entitled to indemnification hereunder
(whether or not any indemnified party is a party thereto).

     (d)  Contribution.  If the indemnification provided for in this Section 8
          ------------
is unavailable to an indemnified party or is insufficient to hold such
indemnified party harmless for any Losses in respect of which this Section 8
would otherwise apply by its terms (other than by reason of exceptions provided
in this Section 8), then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall have a joint and several obligation
to contribute to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party, on the one hand, and such
indemnified party, on the other hand, from the offering of the Notes, or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the indemnifying
party, on the one hand, and such indemnified party, on the other hand, in
connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative
fault of such indemnifying party, on the one hand, and indemnified party, on the
other hand, shall be determined by reference to, among other things, whether any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by such
indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any such
statement or omission. The amount paid or payable by an indemnified party as a
result of any Losses shall be deemed to include any legal or other fees or
expenses incurred by such party in connection with any Proceeding, to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in Section 8(a) or 8(b) was available to such
party.

     The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) 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 the immediately preceding paragraph.
Notwithstanding the provisions of this Section 8(d), an indemnifying party that
is a selling Holder shall not be required to contribute, in the aggregate, any
amount in excess of such

18
<PAGE>

Holder's Maximum Contribution Amount. A selling Holder's "Maximum Contribution
                                                          --------------------
Amount" shall equal the excess of (i) the aggregate net proceeds received by
------
such Holder pursuant to the sale of such Registrable Securities over (ii) the
aggregate amount of 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 Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.

     The indemnity and contribution agreements contained in this Section 8 are
in addition to any liability that the indemnifying parties may have to the
indemnified parties.

9.   Rule 144 and Rule 144A
     ----------------------

     The Issuer covenants that it shall (a) file the reports required to be
filed by it (if so required) under the Securities Act and the Exchange Act in a
timely manner and, if at any time any such Person is not required to file such
reports, it will, upon the request of any Holder, make publicly available other
information necessary to permit sales pursuant to Rule 144 and Rule 144A and (b)
take such further action as any Holder may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act pursuant to the exemptions
provided by Rule 144 and Rule 144A.  Upon the request of any Holder, the Issuer
shall deliver to such Holder a written statement as to whether it has complied
with such information requirements.

10.  Underwritten Registrations
     --------------------------

     If any of the Registrable Securities covered by any Shelf Registration are
to be sold in an Underwritten Offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
Securities included in such offering.

     No Holder may participate in any Underwritten Registration hereunder unless
such Holder (a) agrees to sell such Holder's Registrable Securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.

11.  Miscellaneous
     -------------

     (a)  Remedies.  In the event of a breach by the Issuer of any of its
          --------
obligations under this Agreement, each Holder, in addition to being entitled to
exercise all rights provided herein, in the Indenture or, in the case of the
Purchaser, in the Purchase Agreement, or granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement.  The Issuer agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agree that, in the event of any
action for specific performance in respect of such breach, they shall waive the

19
<PAGE>

defense that a remedy at law would be adequate.

     (b)  No Inconsistent Agreements. The Issuer has not entered into, as of the
          --------------------------
date hereof, and shall not enter into, after the date of this Agreement, any
agreement with respect to any of its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof.

     (c)  Amendments and Waivers.  The provisions of this Agreement, including
          ----------------------
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Issuer has obtained the written consent of Holders of at least
a majority of the then outstanding aggregate principal amount of Registrable
Securities; provided, that Sections 6(a) and 8 shall not be amended, modified or
            --------
supplemented, and waivers or consents to departures from this proviso may not be
given, unless the Issuer has obtained the written consent of each Holder.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders whose securities are being sold pursuant to a Registration Statement and
that does not directly or indirectly affect the rights of other Holders may be
given by Holders of at least a majority in aggregate principal amount of the
Registrable Securities being sold by such Holders pursuant to such Registration
Statement, provided that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence.

     (d)  Notices.  All notices and other communications (including, without
          -------
limitation, any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, certified first-
class mail, return receipt requested, next-day air courier or facsimile:

          (i)    if to a Holder, at the most current address given by such
Holder to the Issuer in accordance with the provisions of this Section 11(d),
which address initially is, with respect to each Holder, the address of such
Holder maintained by the Registrar under the Indenture, with a copy to Sidley &
Austin, 555 West Fifth Street, Los Angeles, California 90013, Attention: Robert
W. Kadlec, Esq.; and

          (ii)   if to the Issuer, initially at 9955 AirTran Boulevard, Orlando,
Florida 32827, Attention: Treasurer, with a copy to Smith, Gambrell & Russell,
LLP, 1230 Peachtree Street, Suite 3100, Promenade II, Atlanta, Georgia 30309-
3592, Attention: Howard E. Turner, Esq. or John R. Schneider, Esq., and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 11(d).

     All such notices and communications shall be deemed to have been duly
given:  when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.

     Copies of all such notices, demands or other communications shall be
concurrently

20
<PAGE>

delivered by the Person giving the same to the Trustee under the Indenture at
the address specified in such Indenture.

     (e)  Successors and Assigns.  This Agreement shall inure to the benefit of
          ----------------------
and be binding upon the successors and assigns of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders.

     (f)  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.

     (g)  Headings.  The headings in this Agreement are for convenience of
          --------
reference only and shall not limit or otherwise affect the meaning hereof.

     (h)  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
          -------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW
AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(b).  THE ISSUER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN
THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE ISSUER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,
TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  THE ISSUER IRREVOCABLY CONSENTS, TO
THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE ISSUER AT THE ADDRESS SET FORTH HEREIN, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF
ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE ISSUER IN ANY OTHER
JURISDICTION.

     (i)  Severability.  If any term, provision, covenant or restriction of this
          ------------
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best

21
<PAGE>

efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

     (j)  Entire Agreement.  This Agreement is intended by the parties as a
          ----------------
final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the Issuer in respect
of securities sold pursuant to the Purchase Agreement. This Agreement supersedes
all prior agreements and understandings between the parties with respect to such
subject matter.

     (k)  Attorneys' Fees.  In any Proceeding brought to enforce any provision
          ---------------
of this Agreement, or where any provision hereof is validly asserted as a
defense, the prevailing party, as determined by the courts, shall be entitled to
recover reasonable attorneys' fees in addition to its costs and expenses and any
other available remedy.

Securities Held by the Issuer or its Affiliates.  Whenever the consent or
-----------------------------------------------
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Issuer or its affiliates
(as such term is defined in Rule 405 under the Securities Act) (other than
Holders deemed to be such affiliates solely by reason of their holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage. The parties
hereby acknowledge and agree that none of the Purchaser or any of its affiliates
is an affiliate of the Issuer.

22
<PAGE>

                         REGISTRATION RIGHTS AGREEMENT

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

                                   AIRTRAN AIRWAYS, INC.

                                   By:
                                   Name:
                                   Title:

ACCEPTED AND AGREED TO:

BOEING CAPITAL LOAN CORPORATION

By:
Name:
Title:

23
<PAGE>

                                   EXHIBIT J

            FORM OF OPINION OF CROWE & DUNLEVY, SPECIAL FAA COUNSEL

                                      B-1
<PAGE>

                                   EXHIBIT H

                 FORM OF WARRANT REGISTRATION RIGHTS AGREEMENT

           [see Exhibit D to Exhibit 10.1 filed with this Form 10-Q]

                                     A-13
<PAGE>

                                   EXHIBIT I

               FORM OF OPINION OF SMITH, GAMBRELL & RUSSELL, LLP

           [see Exhibit F to Exhibit 10.1 filed with this Form 10-Q]

                                     A-14
<PAGE>

                                   EXHIBIT J

            FORM OF OPINION OF CROWE & DUNLEVY, SPECIAL FAA COUNSEL

          [see Exhibit F-1 to Exhibit 10.1 filed with this Form 10-Q]

                                      B-1

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