Document:

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                                                                    Exhibit 10.3

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                           AMERICA WEST AIRLINES, INC.

                            (a Delaware corporation)

                                  $218,271,000
                       Senior Exchangeable Notes due 2023

                               PURCHASE AGREEMENT

                              Dated: July 24, 2003

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                                TABLE OF CONTENTS

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SECTION 1.        Representations and Warranties......................................     3

         (a)  Representations and Warranties by the Issuers...........................     3

         (b)  Officer's Certificates..................................................    12

SECTION 2.        Sale and Delivery to Initial Purchasers; Closing....................    12

         (a)  Initial Securities......................................................    12

         (b)  Option Securities.......................................................    12

         (c)  Payment.................................................................    13

         (d)  Denominations; Registration.............................................    13

SECTION 3.        Covenants of the Issuers............................................    13

         (a)  Offering Memorandum.....................................................    13

         (b)  Notice and Effect of Material Events....................................    13

         (c)  Amendments to Offering Memorandum and Supplements.......................    14

         (d)  Qualifications of Securities for Offer and Sale.........................    14

         (e)  Use of Proceeds.........................................................    14

         (f)  Listing on Securities Exchange..........................................    14

         (g)  Restriction on Sale of Securities.......................................    15

         (h)  PORTAL Designation......................................................    15

         (i)  DTC.....................................................................    15

         (j)  Reporting Requirements..................................................    15
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         (k)  Reservation of Common Stock..............................................   15

SECTION 4.        Payment of Expenses..................................................   15

         (a)  Expenses to be paid by the Company.......................................   16

         (b)  Expenses to be paid by the Guarantor.....................................   16

         (c)  Termination of Agreement.................................................   17

 SECTION 5.       Conditions of Initial Purchasers' Obligations........................   17

         (a)  Opinion of Counsel of the Issuers........................................   17

         (b)  Opinion of Counsel for the Issuers.......................................   17

         (c)  Opinion of Regulatory Counsel for the Issuers............................   17

         (d)  Opinion of Counsel for Initial Purchasers................................   17

         (e)  Officers' Certificate of Company.........................................   17

         (f)  Officers' Certificate of Guarantor.......................................   18

         (g)  Accountant's Comfort Letter..............................................   18

         (h)  Bring-down Comfort Letter................................................   18

         (i)  Lock-up Agreements.......................................................   19

         (j)  Indenture, Registration Rights Agreement and Guarantee and Exchange
              Agreement................................................................   19

         (k)  Conditions to Purchase of Option Securities..............................   19

         (1)  ATSB Waiver..............................................................   20

         (m)  Cash Collateral Agreement................................................   20

         (n)  Term Loan Waiver.........................................................   20
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         (o)  Additional Documents.....................................................   21

         (p)  PORTAL Market............................................................   21

         (q)  Termination of Agreement.................................................   21

SECTION 6.        Subsequent Offers and Resales of the Securities......................   21

         (a)  Offer and Sale Procedures................................................   21

         (b)  Covenants of the Issuers.................................................   22

         (c)  Qualified Institutional Buyer............................................   23

 SECTION 7.       Indemnification......................................................   23

         (a)  Indemnification of Initial Purchasers by the Company.....................   23

         (b)  Indemnification of Initial Purchasers by the Guarantor  .................   24

         (c)  Indemnification of Issuers...............................................   25

         (d)  Actions against Parties; Notification....................................   25

         (e)  Settlement without Consent if Failure to Reimburse.......................   26

 SECTION 8.       Contribution.........................................................   26

 SECTION 9.       Representations, Warranties and Agreements to Survive Delivery.......   27

 SECTION 10.      Termination of Agreement.............................................   27

         (a)  Termination; General.....................................................   27

         (b)  Liabilities..............................................................   28
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SECTION 11.       Default by One or More of the Initial Purchasers.....................   28

SECTION 12.       Notices..............................................................   28

SECTION 13.       Parties..............................................................   29

SECTION 14.       Governing Law and Time...............................................   29

SECTION 15.       Effect of Headings...................................................   29

SECTION 16.       Counterparts.........................................................   29
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SCHEDULES

Schedule A     Names of Initial Purchasers

Schedule B     Terms of Senior Exchangeable Notes Due 2023

Schedule C     List of Persons Subject to a Lock-Up Letter Agreement

EXHIBITS

Exhibit A     Form of Registration Rights Agreement

Exhibit B     Form of Opinion of Linda Mitchell, Counsel of the Issuers, to be
              delivered pursuant to Section 5(a)

Exhibit C     Form of Opinion of Cooley Godward LLP, United States Counsel for
              the Issuers, to be delivered pursuant to Section 5(b)

Exhibit D     Form of Opinion of Baker & Hostetler LLP, Regulatory Counsel for
              the Issuer, to be delivered pursuant to Section 5(c)

Exhibit E     Form of Director/Officer Lock-Up Letter Agreement

Exhibit F     Form of Warrant Holder Lock-Up Letter Agreement

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                           AMERICA WEST AIRLINES, INC.

                                  $218,271,000

                       SENIOR EXCHANGEABLE NOTES DUE 2023

                               PURCHASE AGREEMENT

                                                                   July 24, 2003

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
As Representative of the several Initial Purchasers
c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
    4 World Financial Center
    New York, New York 10080

Ladies and Gentlemen:

         America West Airlines, Inc., a Delaware corporation (the "COMPANY"),
and America West Holdings Corporation, a Delaware corporation, as guarantor (the
"GUARANTOR" and, together with the Company, the "ISSUERS") confirm their
separate and several agreements with Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MERRILL LYNCH"), and each of the other Initial
Purchasers named in Schedule A hereto (collectively, the "INITIAL PURCHASERS,"
which term shall also include any initial purchaser substituted as hereinafter
provided in Section 11 hereof), for whom Merrill Lynch is acting as
representative (in such capacity, the "REPRESENTATIVE"), with respect to (a) in
the case of the Company, the issue and sale by the Company and the purchase by
the Initial Purchasers, acting severally and not jointly, of the respective
principal amounts at maturity set forth in said Schedule A of $218,271,000
aggregate principal amount at maturity of the Company's Senior Exchangeable
Notes due 2023 (the "NOTES"), and with respect to the grant by the Company to
the Initial Purchasers, acting severally and not jointly, of the option
described in Section 2(b) hereof to purchase all or any part of an additional
$43,654,000 aggregate principal amount at maturity of Notes to cover
over-allotments, if any and (b) in the case of the Guarantor, the issue and sale
by the Guarantor of an unconditional guarantee of the Notes (the "GUARANTEE")
and the right to exchange (the "EXCHANGE RIGHT"), subject to certain conditions,
at the option of the holder, prior to maturity (unless previously redeemed or
otherwise purchased) the Notes into class B common stock, $0.01 par value (the
"COMMON STOCK"), of the Guarantor. The aforesaid $218,271,000 aggregate
principal amount at maturity of Notes, together with the Guarantee and Exchange
Right relating thereto, shall be referred to as the "INITIAL SECURITIES" and all
or any part of the $43,654,000 aggregate principal amount at maturity of Notes,
together with the Guarantee and Exchange Right relating thereto, subject to the
option described in Section 2(b) hereof shall be referred to as the "OPTION
SECURITIES". The Initial Securities, the Option Securities, the Exchange Right,
and the Guarantee are hereinafter called, collectively, the "SECURITIES." The
Securities are to be issued pursuant to an indenture, to be dated as of the
Closing Time (as defined in Section 2(c)) (the "INDENTURE"), between the Company
and U.S. Bank National Association, as trustee (the "TRUSTEE") and a Guarantee
and Exchange Agreement between the Guarantor and the Trustee (the "GUARANTEE AND
EXCHANGE AGREEMENT").

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         Securities issued in book-entry form will be issued to Cede & Co. as
nominee of The Depository Trust Company ("DTC") pursuant to a letter agreement,
to be dated as of the Closing Time (as defined in Section 2(c)), among the
Company, the Trustee and DTC.

         Each Issuer understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth herein and
agree that the Initial Purchasers may initially resell, subject to the
conditions set forth herein, all or a portion of the Securities to purchasers
("SUBSEQUENT PURCHASERS") at any time after this Agreement has been executed and
delivered. The Securities are to be sold to the Initial Purchasers and offered
and resold by the Initial Purchasers without being registered under the
Securities Act of 1933, as amended (the "1933 ACT"), in reliance upon exemptions
therefrom. Pursuant to the terms of the Securities and the Indenture, and the
Guarantee and Exchange Agreement investors that acquire Securities may only
resell or otherwise transfer such Securities if such Securities are hereafter
registered under the 1933 Act or pursuant to an available exemption from the
registration requirements of the 1933 Act (including the exemption afforded by
Rule 144A ("RULE 144A") of the rules and regulations of the Securities and
Exchange Commission (the "COMMISSION") under the 1933 Act (the "1933 ACT
REGULATIONS"). On or prior to the Closing Time, each Issuer will enter into with
the Initial Purchasers an agreement (the "REGISTRATION RIGHTS AGREEMENT"), in
substantially the form attached hereto as Exhibit A, with such changes as shall
be agreed to by the parties hereof, pursuant to which, subject to the conditions
set forth therein, such Issuer is required to file and use its reasonable best
efforts to have declared effective a registration statement (the "REGISTRATION
STATEMENT") under the 1933 Act to register resales of the Securities and the
shares of Common Stock issuable upon exchange thereof.

         The Company prepared and will deliver to the Initial Purchasers, on the
date hereof or the third succeeding business day, copies of an offering
memorandum dated July 24, 2003 (the "OFFERING MEMORANDUM") to be used by each
Initial Purchaser in connection with its solicitation of purchases of, or
offering of, the Securities. "OFFERING MEMORANDUM" means, with respect to any
date or time referred to in this Agreement, the most recent offering memorandum
delivered by the Company to the Initial Purchasers (whether the Offering
Memorandum, or any amendment or supplement to such document), including exhibits
thereto and any documents incorporated therein by reference, which has been
prepared and delivered by the Company to the Initial Purchasers in connection
with their solicitation of purchases of, or offering of, the Securities.

         All references in this Agreement to financial statements and schedules
and other information which is "contained," "included," "stated" or "described"
in the Offering Memorandum (or other references of like import) shall be deemed
to mean and include all such financial statements and schedules and other
information which are incorporated by reference in the Offering Memorandum; and
all references in this Agreement to amendments or supplements to the Offering
Memorandum shall be deemed to mean and include the filing of any document under
the Securities Exchange Act of 1934, as amended (the "1934 ACT"), which is
incorporated by reference in the Offering Memorandum.

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         SECTION 1.        Representations and Warranties

         (a)      Representations and Warranties by the Issuers. Each of the
Issuers represents and warrants to each Initial Purchaser as of the date hereof,
as of the Closing Time referred to in Section 2(c) hereof, and as of each Date
of Delivery (if any) referred to in Section 2(b) hereof, and agrees with each
Initial Purchaser, as follows:

                  (i)      Offering Memorandum. The Offering Memorandum does
         not, and at the Closing Time referred to in Section 2 (and, if any
         Option Securities are purchased, at each Date of Delivery) will not,
         include an untrue statement of a material fact or omit to state a
         material fact necessary in order to make the statements therein, in the
         light of the circumstances under which they were made, not misleading.
         The representations and warranties in this subsection shall not apply
         to statements in or omissions from the Offering Memorandum made in
         reliance upon and in conformity with information furnished to the
         Company in writing by and with respect to any Initial Purchaser through
         Merrill Lynch expressly for use in the Offering Memorandum.

                  (ii)     Incorporated Documents. The Offering Memorandum as
         delivered from time to time shall incorporate by reference the most
         recent Annual Report of the Company and the Guarantor on Form 10-K
         filed with the Commission and each subsequent Quarterly Report of the
         Company and the Guarantor on Form 10-Q filed with the Commission filed
         (not furnished) with the Commission and such other reports as
         specifically incorporated by reference in the Offering Memorandum. The
         documents incorporated by reference in the Offering Memorandum (the
         "INCORPORATED DOCUMENTS"), at the time they were or hereafter are filed
         with the Commission, or if amended, as so amended, complied, or if
         filed hereafter, will comply in all material respects with the
         requirements of the 1934 Act and the rules and regulations of the
         Commission thereunder (the "1934 ACT REGULATIONS").

                  (iii)    Independent Accountants. The accountants who
         certified the financial statements and supporting schedules
         incorporated by reference in the Offering Memorandum are independent
         public accountants as required by the 1933 Act and the 1933 Act
         Regulations.

                  (iv)     Financial Statements. The financial statements,
         together with the related schedules and notes, incorporated by
         reference into the Offering Memorandum present fairly the financial
         position of Guarantor and its consolidated subsidiaries, at the dates
         indicated and the statement of income, stockholders' equity and cash
         flows of Guarantor and its consolidated subsidiaries for the periods
         specified; said financial statements have been prepared in conformity
         with generally accepted accounting principles in the United States
         ("GAAP") applied on a consistent basis throughout the periods involved.
         The summary consolidated financial and operating data incorporated by
         reference in the Offering Memorandum present fairly the information
         shown therein and have been compiled on a basis consistent with that of
         the audited financial statements included in the Offering Memorandum.
         The supporting schedules incorporated by reference into the Offering
         Memorandum present fairly in accordance with GAAP the information
         required to be stated therein.

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                  (v)      No Material Adverse Change in Business. Since the
         respective dates as of which information is given in the Offering
         Memorandum (exclusive of any amendment thereto), except as otherwise
         stated therein, (A) there has been no material adverse change in the
         condition, financial or otherwise, or in the earnings, business or
         business prospects of the Guarantor and its subsidiaries considered as
         one enterprise, whether or not arising in the ordinary course of
         business (a "MATERIAL ADVERSE EFFECT"), (B) there have been no
         transactions entered into by the Guarantor or any of its subsidiaries,
         other than those in the ordinary course of business, which are material
         with respect to the Guarantor and its subsidiaries considered as one
         enterprise, (C) there has been no dividend or distribution of any kind
         declared, paid or made by Guarantor on any class of its capital stock,
         and (D) there has been no prohibition or material suspension of the
         operation of the Company's aircraft.

                  (vi)     Good Standing of the Company. The Company has been
         duly organized and is validly existing as a corporation in good
         standing under the laws of the State of Delaware and has power and
         authority to own, lease and operate its properties and to conduct its
         business as described in the Offering Memorandum and to enter into and
         perform its obligations under, or as contemplated by, this Agreement.
         The Company is duly qualified as a foreign corporation to transact
         business and is in good standing in each other jurisdiction in which
         such qualification is required, whether by reason of the ownership or
         leasing of property or the conduct of business, except where the
         failure so to qualify or to be in good standing would not result in a
         Material Adverse Effect. The Company has no subsidiaries.

                  (vii)    Good Standing of Guarantor and TLC. Each of Guarantor
         and The Leisure Company ("TLC") has been duly organized and is validly
         existing as a corporation, in good standing under the laws of the
         jurisdiction of its incorporation, has the power and authority to own,
         lease and operate its properties and to conduct its business as
         described in the Offering Memorandum and is duly qualified as a foreign
         corporation to transact business and is in good standing in each
         jurisdiction in which such qualification is required, whether by reason
         of the ownership or leasing of property or the conduct of business,
         except where the failure so to qualify or to be in good standing would
         not result in a Material Adverse Effect; all of the issued and
         outstanding capital stock of Guarantor have been duly authorized and
         validly issued, are fully paid and nonassessable. Guarantor owns all
         the stock in the Company, free and clear of any security interest,
         mortgage, pledge, lien, encumbrance, claim or equity, except as
         disclosed in the Offering Memorandum; none of the outstanding equity
         interests of the Guarantor was issued in violation of the preemptive or
         similar rights of any securityholder of the Guarantor. Guarantor has no
         subsidiaries other than the Company and TLC.

                  (viii)   Capitalization. The authorized, issued and
         outstanding shares of capital stock of Guarantor and the Company are as
         set forth in the Offering Memorandum under the caption "Capitalization"
         (except for subsequent issuances, if any, pursuant to this Agreement,
         pursuant to reservations, agreements, employee benefit plans referred
         to in the Offering Memorandum or pursuant to the exercise of
         exchangeable securities or options referred to in the Offering
         Memorandum). The shares of issued and outstanding capital stock of the
         Company have been duly authorized and validly issued and are fully

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         paid and non-assessable; none of the outstanding shares of capital
         stock of the Company was issued in violation of any preemptive or other
         similar rights of any securityholder of the Company. Other than as
         disclosed in the Offering Memorandum, no options, warrants or other
         rights to purchase, agreements or other obligations to issue, or rights
         to exchange any obligations into or exchange any securities for, shares
         of capital stock of or ownership interests in the Guarantor are
         outstanding.

                  (ix)     Authorization of this Agreement. This Agreement has
         been duly authorized, executed and delivered by each of the Issuers.

                  (x)      Authorization of the Indenture. The Indenture has
         been duly authorized by each of the Issuers and, when executed and
         delivered by the Issuers and the Trustee, will constitute a valid and
         binding agreement of the Issuers, enforceable against the Issuers in
         accordance with its terms, except as the enforcement thereof may be
         limited by bankruptcy, insolvency (including, without limitation, all
         laws relating to fraudulent transfers), reorganization, moratorium or
         similar laws affecting enforcement of creditors' rights generally and
         except as enforcement thereof is subject to general principles of
         equity (regardless of whether enforceability is considered in a
         proceeding in equity or at law).

                  (xi)     Authorization of the Registration Rights Agreement.
         The Registration Rights Agreement has been duly authorized by each of
         the Issuers and, when executed and delivered by each of the Issuers and
         the Initial Purchasers, will constitute a valid and binding agreement
         of each of the Issuers, enforceable against each of the Issuers in
         accordance with its terms, except as (A) the enforcement thereof may be
         limited by bankruptcy, insolvency (including, without limitation, all
         laws relating to fraudulent transfers), reorganization, moratorium or
         similar laws affecting enforcement of creditors' rights generally, (B)
         enforcement thereof is subject to general principles of equity
         (regardless of whether enforceability is considered in a proceeding in
         equity or at law) and (C) rights to indemnification, contribution or
         exculpation thereunder may not be enforceable.

                  (xii)    Authorization of the Securities. The Securities have
         been duly authorized and, at the Closing Time, will have been duly
         executed by the Company and, when authenticated, issued and delivered
         in the manner provided for in the Indenture and delivered against
         payment of the purchase price therefor as provided in this Agreement,
         will constitute valid and binding obligations of the Company,
         enforceable against the Company in accordance with their terms, except
         as the enforcement thereof may be limited by bankruptcy, insolvency
         (including, without limitation, all laws relating to fraudulent
         transfers), reorganization, moratorium or similar laws affecting
         enforcement of creditors' rights generally and except as enforcement
         thereof is subject to general principles of equity (regardless of
         whether enforcement is considered in a proceeding in equity or at law),
         and will be in the form contemplated by, and entitled to the benefits
         of, the Indenture.

                  (xiii)   Guarantee. The Guarantee and Exchange Agreement have
         been duly and validly authorized by the Guarantor and, when the
         Securities are issued, authenticated

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         and delivered by the Company against payment by the Initial Purchasers
         in accordance with the terms of this Agreement and the Indenture, will
         be a legal, valid and binding obligation of the Guarantor, enforceable
         against it in accordance with its terms, except as the enforcement
         thereof may be limited by bankruptcy, insolvency (including, without
         limitation, all laws relating to fraudulent transfers), reorganization,
         moratorium or other similar laws affecting the enforcement of
         creditors' rights generally and except as enforcement thereof is
         subject to general principles of equity (regardless of whether
         enforcement is considered in a proceeding in equity or at law), and
         will be in the form contemplated by, and entitled to the benefits of,
         the Indenture.

                  (xiv)    Description of the Securities, the Indenture and the
         Registration Rights Agreement. As of the Closing Time, the Securities,
         the Indenture and the Registration Rights Agreement will conform in all
         material respects to the respective statements relating thereto
         contained in the Offering Memorandum.

                  (xv)     Authorization and Description of Common Stock. The
         Common Stock conforms to all descriptions relating thereto set forth in
         the Offering Memorandum, and such description conforms in all material
         respects to the rights set forth in the instruments defining the same.
         Upon issuance and delivery of the Securities in accordance with this
         Agreement and the Indenture, the Securities will be exchangeable at the
         option of the holder thereof into shares of Common Stock in accordance
         with the terms of the Securities and the Indenture; the shares of
         Common Stock issuable upon exchange of the Securities have been duly
         authorized and reserved for issuance upon such exchange by all
         necessary corporate action and such shares, when issued upon such
         exchange in accordance with the terms of the Securities, will be
         validly issued and will be fully paid and non-assessable; no holder of
         such shares will be subject to personal liability by reason of being
         such a holder; and the issuance of such shares upon such exchange will
         not be subject to the preemptive or other similar rights of any
         securityholder of Guarantor.

                  (xvi)    Absence of Defaults and Conflicts. None of the
         Issuers is (A) in violation of its charter or by-laws or (B) in default
         in the performance or observance of any obligation, agreement, covenant
         or condition contained in any contract, indenture, mortgage, deed of
         trust, loan or credit agreement, note, lease or other agreement or
         instrument to which the Guarantor or any of its subsidiaries is a party
         or by which the Guarantor or any of its subsidiaries may be bound, or
         to which any of the property or assets of the Guarantor or any of its
         subsidiaries is subject (collectively, "AGREEMENTS AND INSTRUMENTS")
         except in the case of clause (B) above for such defaults that would not
         reasonably be expected to result in a Material Adverse Effect; and the
         execution, delivery and performance of this Agreement, the Registration
         Rights Agreement, the Indenture, the Guarantee and the Securities and
         the consummation of the transactions contemplated herein and in the
         Offering Memorandum (including the issuance and sale of the Securities
         and the use of the proceeds from the sale of the Securities as
         described in the Offering Memorandum under the caption "Use of
         Proceeds" and the issuance of the shares of Common Stock issuable upon
         exchange of the Securities) and compliance by each of the Company and
         the Guarantor with its obligations hereunder and under the Indenture,
         the Registration Rights Agreement, the Guarantee and the Securities do
         not

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         and will not, whether with or without the giving of notice or passage
         of time or both, conflict with or constitute a breach of, or default or
         a Repayment Event (as defined below) under, or result in the creation
         or imposition of any lien, charge or encumbrance upon any property or
         assets of the Guarantor or any of its subsidiaries pursuant to, the
         Agreements and Instruments (except for such conflicts, breaches,
         defaults or Repayment Events or liens, charges or encumbrances that,
         singly or in the aggregate, would not reasonably be expected to result
         in a Material Adverse Effect), nor will such action result in any
         violation of (i) the provisions of the charter or by-laws or other
         constituting or organizational document of the Guarantor or any of its
         subsidiaries or (ii) any applicable law, statute, rule, regulation,
         judgment, order, writ or decree of any government, government
         instrumentality or court, domestic or foreign, presently having
         jurisdiction over the Guarantor or any of its subsidiaries or any of
         their respective assets, properties or operations (except for such
         violations that, singly or in the aggregate, would not reasonably be
         expected to have a Material Adverse Effect). As used herein, a
         "REPAYMENT EVENT" means any event or condition which gives the holder
         of any note, debenture or other evidence of indebtedness (or any person
         acting on such holder's behalf) the right to require the repurchase,
         redemption or repayment prior to the stated maturity or date of
         mandatory redemption or repayment thereof of all or a portion of such
         indebtedness by the Company or Guarantor.

                  (xvii)   Absence of Labor Dispute. Except as disclosed in the
         Offering Memorandum, (A) no labor dispute with the employees of the
         Guarantor or any of its subsidiaries exists or, to the knowledge of the
         Company or the Guarantor, is imminent and (B) neither the Company nor
         the Guarantor is aware of any existing or imminent labor disturbance by
         the employees of any of Guarantors' or any of its subsidiaries
         principal suppliers, manufacturers, customers or contractors, which, in
         the case of either (A) or (B), would reasonably be expected to result
         in a Material Adverse Effect.

                  (xviii)  Absence of Proceedings. Except as disclosed in the
         Offering Memorandum, there is no action, suit, proceeding, inquiry or
         investigation before or brought by any court or governmental agency or
         body, domestic or foreign, now pending, or, to the knowledge of the
         Company or Guarantor, threatened, against or affecting the Guarantor or
         any of its subsidiaries, which, singly or in the aggregate, if
         determined adversely, would result in a Material Adverse Effect.

                  (xix)    Possession of Intellectual Property. Except as
         disclosed in the Offering Memorandum, the Guarantor and its
         subsidiaries own or possess, or can acquire on reasonable terms,
         adequate patents, patent rights, licenses, inventions, copyrights,
         know-how (including trade secrets and other unpatented and/or
         unpatentable proprietary information), trademarks, service marks, trade
         names, domain names or other intellectual property (collectively,
         "INTELLECTUAL PROPERTY") necessary to carry on the business now
         operated by them, and to the Company's or Guarantor's knowledge,
         neither the Guarantor nor any of its subsidiaries has received any
         written notice or is otherwise aware of any infringement of or conflict
         with asserted rights of others with respect to any Intellectual
         Property or of any facts or circumstances which would render any
         Intellectual Property invalid or inadequate to protect the interest of
         the Guarantor or any of its subsidiaries therein, and which
         infringement or conflict (if the subject of any unfavorable

                                       7

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         decision, ruling or finding) or invalidity or inadequacy, singly or in
         the aggregate, would reasonably be expected to result in a Material
         Adverse Effect.

                  (xx)     Absence of Further Requirements. No filing with, or
         authorization, approval, consent, license, order, registration,
         qualification or decree of, any court or governmental authority or
         agency is necessary or required for the performance by each Issuer of
         its obligations hereunder or under the Registration Rights Agreement,
         the Indenture, or the Guarantee and Exchange Agreement in connection
         with the offering, issuance or sale of the Securities hereunder, the
         issuance of shares of Common Stock upon exchange of Securities or the
         consummation of the transactions contemplated by this Agreement, the
         Registration Rights Agreement, the Guarantee and Exchange Agreement,
         the Indenture or the Offering Memorandum, or for the due execution,
         delivery or performance by the Company and the Guarantor of this
         Agreement, the Registration Rights Agreement, the Guarantee and
         Exchange Agreement or the Indenture, or for the valid authorization,
         issuance, sale and delivery of the Securities, except such as have been
         already obtained, or as may be required under the 1933 Act or the 1933
         Act Regulations or state securities laws in connection with the
         transactions contemplated in the Registration Rights Agreement and
         except for the qualification of the Indenture under the Trust Indenture
         Act of 1939, as amended (the "1939 ACT") and the listing of the Common
         Stock issued upon exchange of the Securities on the New York Stock
         Exchange, except for such as may be required in connection with any
         redemption or purchase of the Securities upon a Change of Control (as
         defined in the Indenture).

                  (xxi)    Investment Company Act. Neither the Guarantor nor any
         of its subsidiaries is, nor upon the issuance and sale of the
         Securities as herein contemplated and the application of the net
         proceeds therefrom as described in the Offering Memorandum will be, an
         "investment company" or an entity "controlled" by an "investment
         company," as such terms are defined in the Investment Company Act of
         1940, as amended (the "1940 ACT").

                  (xxii)   Good and Marketable Title. The Guarantor and each of
         its subsidiaries have good and marketable title in fee simple to all
         real property and good and marketable title to all personal property
         owned by them, in each case free and clear of all liens, encumbrances
         and defects, except such as are described in the Offering Memorandum
         and except for such liens or other imperfections of title, if any, as
         do not materially interfere with the present use of the property
         affected thereby; and all assets held under lease by the Guarantor and
         its subsidiaries are held by them under valid, subsisting and
         enforceable leases, with such exceptions as would not, singly or in the
         aggregate, reasonably be expected to have a Material Adverse Effect.

                  (xxiii)  Environmental Laws. There has been no storage,
         disposal, generation, manufacture, refinement, transportation, handling
         or treatment of toxic wastes, medical wastes, hazardous wastes or
         hazardous substances by the Guarantor or any of its subsidiaries (or,
         to the knowledge of the Company or the Guarantor, any of their
         predecessors in interest) at, upon or from any of the property now or
         previously owned or leased by the Guarantor or its subsidiaries in
         violation of, and neither the Guarantor nor any of its subsidiaries has
         any liability under, any applicable law, ordinance, rule,

                                       8

<PAGE>

         regulation, order, judgment, code, policy or rule of common law or any
         judicial or administrative interpretation thereof, including any
         judicial or administrative order, consent, decree or judgment, relating
         to pollution or protection of human health, the environment (including,
         without limitation, ambient air, surface water, groundwater, land
         surface or subsurface strata) or wildlife, including, without
         limitation, laws and regulations relating to the release or threatened
         release of chemicals, pollutants, contaminants, wastes, toxic
         substances, hazardous substances, petroleum or petroleum products,
         asbestos-containing materials or mold (collectively, "HAZARDOUS
         MATERIALS") or to the manufacture, processing, distribution, use,
         treatment, storage, disposal, transport or handling of Hazardous
         Materials (collectively, "ENVIRONMENTAL LAWS") that would, singly or in
         the aggregate, reasonably be expected to have a Material Adverse
         Effect, the Guarantor and its subsidiaries have all permits,
         authorizations and approvals required under any applicable
         Environmental Laws and are each in material compliance with their
         requirements. There are no pending or, to the knowledge of the Company
         or the Guarantor, threatened administrative, regulatory or judicial
         actions, suits, demands, demand letters, claims, liens, notices of
         noncompliance or violation, investigation or proceedings relating to
         any Environmental Law against the Guarantor or any of its subsidiaries
         and there are no events or circumstances that would reasonably be
         expected to form the basis of an order for clean-up or remediation, or
         an action, suit or proceeding by any private party or governmental body
         or agency, against or affecting the Guarantor or any of its
         subsidiaries relating to Hazardous Materials or Environmental Laws,
         except for such actions or suits that would not result in a Material
         Adverse Effect.

                  (xxiv)   ERISA. Each of the Issuers is in compliance in all
         material respects with all presently applicable provisions of the
         Employee Retirement Income Security Act of 1974, as amended, including
         the regulations and published interpretations thereunder ("ERISA"); no
         "reportable event" (as defined in ERISA) has occurred with respect to
         any "pension plan" (as defined in ERISA) for which such Issuer would
         have any liability; no Issuer has incurred and does not expect to incur
         liability under (A) Title IV of ERISA with respect to the termination
         of, or withdrawal from, any "pension plan" or (B) Section 412 or 4971
         of the Internal Revenue Code of 1986, as amended, including the
         regulations and published interpretations thereunder (the "CODE"); and
         each "pension plan" for which such Issuer would have any liability that
         is intended to be qualified under Section 401 (a) of the Code is so
         qualified in all material respects and nothing has occurred, whether by
         action or by failure to act, which would cause the loss of such
         qualification.

                  (xxv)    Insurance. The Guarantor and each of its subsidiaries
         carry, or are entitled to the benefits of insurance, with financially
         sound and reputable insurers in such amounts and covering such risks as
         is prudent and customary for the conduct of their respective businesses
         and the value of their respective properties.

                  (xxvi)   Taxes. The Guarantor and each of its subsidiaries has
         filed all federal, state and local income and franchise tax returns
         required to be filed through the date hereof and has paid all taxes due
         thereon, except such as are being contested in good faith by
         appropriate proceedings, and no tax deficiency has been determined
         adversely to the Guarantor or any of its subsidiaries which has had,
         nor does the Company or the Guarantor have any knowledge of any tax
         deficiency which, if determined adversely to

                                       9

<PAGE>

         the Guarantor or any of its subsidiaries, would reasonably be expected
         to have, a Material Adverse Effect.

                  (xxvii)  Internal Controls. The Guarantor and each of its
         subsidiaries (A) make and keep accurate books and records and (B)
         maintain internal accounting controls which provide reasonable
         assurance that (i) transactions are executed in accordance with
         management's authorization, (ii) transactions are recorded as necessary
         to permit preparation of its financial statements and to maintain
         accountability for its assets, (iii) access to its assets is permitted
         only in accordance with management's authorization and (iv) the
         reported accountability for its assets is compared with existing assets
         at reasonable intervals and appropriate action is taken with respect to
         any differences.

                  (xxviii) No Unlawful Payments. To the best of the Company's
         and the Guarantor's knowledge after due inquiry, neither the Company
         nor Guarantor, nor any director, officer, agent, employee or other
         person associated with or acting on behalf of the Company or Guarantor,
         has used any corporate funds for any unlawful contribution, gift,
         entertainment or other unlawful expense relating to political activity;
         made any direct or indirect unlawful payment to any foreign or domestic
         government official or employee from corporate funds; violated or is in
         violation of any provision of the Foreign Corrupt Practices Act of
         1977; or made any bribe, rebate, payoff, influence payment, kickback or
         other unlawful payment.

                  (xxix)   Loans to Directors or Executive Officers. The Company
         has provided the Initial Purchasers true, correct, and complete copies
         of all documentation pertaining to any extension of credit in the form
         of a personal loan made, directly or indirectly, by the Company or the
         Guarantor to any director or executive officer of the Company or the
         Guarantor, or to any family member or affiliate of any director or
         executive officer of the Company or the Guarantor; and since July 30,
         2002, the Company or Guarantor has not, directly or indirectly,
         including through any subsidiary: (i) extended credit, arranged to
         extend credit, or renewed any extension of credit, in the form of a
         personal loan, to or for any director or executive officer of the
         Company or the Guarantor, or to or for any family member or affiliate
         of any director or executive officer of the Company or the Guarantor or
         (ii) made any material modification, including any renewal thereof, to
         any term of any personal loan to any director or executive officer of
         the Company or the Guarantor, or any family member or affiliate of any
         director or executive officer, which loan was outstanding on July 30,
         2002, provided that the parties agree that "personal loan" does not
         include advances of travel and other business expenses, cashless option
         exercises, company credit cards and similar items.

                  (xxx)    No Brokerage Commission: Finder's Fee. Except as
         disclosed in the Offering Memorandum, there are no contracts,
         agreements or understandings between the Guarantor or any of its
         subsidiaries and any person that would give rise to a valid claim
         against the Company, Guarantor or any Initial Purchaser for a brokerage
         commission, finder's fee or other like payment in connection with this
         offering.

                  (xxxi)   Similar Offering. None of the Company, the Guarantor
         or any of their respective affiliates, as such term is defined in Rule
         501(b) under the 1933 Act (each, an

                                       10

<PAGE>

         "AFFILIATE"), has, directly or indirectly, solicited any offer to buy,
         sold or offered to sell or otherwise negotiated in respect of, or will
         solicit any offer to buy, sell or offer to sell or otherwise negotiate
         in respect of, in the United States or to any United States citizen or
         resident, any security which is or would be integrated with the sale of
         the Securities in a manner that would require the Securities to be
         registered under the 1933 Act.

                  (xxxii)  Rule 144A. The Securities are eligible for resale
         pursuant to Rule 144A and will not be, at the Closing Time, of the same
         class as securities listed on a national securities exchange registered
         under Section 6 of the 1934 Act, or quoted in a U.S. automated
         interdealer quotation system.

                  (xxxiii) No General Solicitation or General Advertising. None
         of the Company, the Guarantor, their respective Affiliates or any
         person acting on its or any of their behalf (other than the Initial
         Purchasers and their respective Affiliates, as to whom the Company
         makes no representation) has engaged or will engage, in connection with
         the offering of the Securities, in any form of general solicitation or
         general advertising within the meaning of Rule 502(c) under Regulation
         D of the 1933 Act.

                  (xxxiv)  No Registration Required. Subject to compliance by
         the Initial Purchasers with the representations and warranties and the
         procedures set forth in Section 6 hereof and assuming that the persons
         to whom the Initial Purchasers sell the Securities are "qualified
         institutional buyers" under Rule 144A, it is not necessary in
         connection with the offer, sale and delivery of the Securities to the
         Initial Purchasers and the initial resale by the Initial Purchasers to
         each Subsequent Purchaser in the manner contemplated by this Agreement
         and the Offering Memorandum to register the Securities under the 1933
         Act or to qualify the Indenture under the 1939 Act.

                  (xxxv)   Reporting Company. The Company and Guarantor are
         subject to the reporting requirements of Section 13 or Section 15(d) of
         the 1934 Act.

                  (xxxvi)  Air Carrier Certification. The Company is an "air
         carrier" within the meaning of the Air Transportation Safety and System
         Stabilization Act and holds a certificate under Sections 41102(a)(l)
         and 41103 of Title 49. The Company is a "citizen of the United States"
         as defined in Section 40102(a)(15) of Title 49 (a "United States
         Citizen") and holds an air carrier operating certificate issued
         pursuant to Chapter 447 of Title 49 for aircraft capable of carrying 10
         or more individuals or 6,000 pounds or more of cargo.

                  (xxxvii) Possession of Licenses and Permits. The Guarantor and
         its subsidiaries possess such permits, licenses, approvals, consents
         and other authorizations (collectively, "LICENSES") issued by the
         appropriate federal, state, local or foreign regulatory agencies or
         bodies and third parties, governmental or otherwise, including, without
         limitation, the Federal Aviation Administration and the Department of
         Transportation, necessary to conduct the business now operated by them
         as described in the Offering Memorandum; the Guarantor and its
         subsidiaries are in compliance with the terms and conditions of all
         such Licenses, except where the failure so to comply would not, singly
         or in the aggregate, reasonably be expected to have a Material Adverse
         Effect;

                                       11

<PAGE>

         all of the Licenses are valid and in full force and effect, except when
         the invalidity of such Licenses or the failure of such Licenses to be
         in full force and effect would not reasonably be expected to have a
         Material Adverse Effect; and neither the Guarantor nor any of its
         subsidiaries has received any notice of proceedings relating to the
         revocation or modification of any such Licenses which, singly or in the
         aggregate, if the subject of an unfavorable decision, ruling or
         finding, would reasonably be expected to result in a Material Adverse
         Effect.

                  (xxxviii) Registration Rights. Except as disclosed in the
         Offering Memorandum there are no persons with registration rights or
         other similar rights to have any securities registered by the Company
         or Guarantor under the 1933 Act.

         (b)      Officer's Certificates. Any certificate signed by any officer
of the Company or Guarantor delivered to the Initial Purchasers or to counsel
for the Initial Purchasers shall be deemed a representation and warranty by the
Company or Guarantor to the Initial Purchasers as to the matters covered
thereby.

         SECTION 2. Sale and Delivery to Initial Purchasers: Closing.

         (a)      Initial Securities. On the basis of the representations,
warranties and agreements herein contained and subject to the terms and
conditions herein set forth, each of the Issuers agrees to sell to each Initial
Purchaser, severally and not jointly, and each Initial Purchaser, severally and
not jointly, agrees to purchase from the Issuers at the price set forth in
Schedule B hereto the principal amount at maturity of the Initial Securities
being issued and sold by such Issuer set forth opposite the name of such Initial
Purchaser in Schedule A plus any additional principal amount at maturity of
Initial Securities that such Initial Purchaser may become obligated to purchase
pursuant to the provisions of Section 11 hereof.

         (b)      Option Securities. In addition, on the basis of the
representations, warranties and agreements herein contained and subject to the
terms and conditions herein set forth, each of the Issuers hereby grants an
option to the Initial Purchasers, severally and not jointly, to purchase up to
an additional $43,654,000 aggregate principal amount at maturity of Option
Securities being issued and sold by such Issuer at the same price per Security
set forth in Schedule B for the Initial Securities. The option hereby granted
will expire 30 days after the date of the Final Offering Memorandum and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial Securities as may be modified by subsequent
purchases and sales by the Initial Purchasers upon notice by the Representative
to the Company setting forth the number of Option Securities as to which the
Initial Purchasers are then exercising the option and the time and date of
payment and delivery for such Option Securities. Any such time and date of
delivery (a "DATE OF DELIVERY") shall be determined by the Representative, but
shall not be later than seven full business days after the exercise of said
option, nor in any event prior to the Closing Time, as hereinafter defined,
unless otherwise agreed upon by the Initial Purchasers and the Company. If the
option is exercised as to all or any portion of the Option Securities, each of
the Initial Purchasers, acting severally and not jointly, will purchase that
proportion of the principal amount at maturity of Option Securities then being
purchased which the principal amount at

                                       12

<PAGE>

maturity of Initial Securities set forth opposite the name of such Initial
Purchaser in Schedule A bears to the total principal amount at maturity of
Initial Securities.

         (c)      Payment. Payment of the purchase price for, and delivery of
one or more global certificates for, the Initial Securities shall be made at the
offices of Cooley Godward LLP, One Maritime Plaza, San Francisco, CA 94111, or
at such other place as shall be agreed upon by the Representative and the
Company, at 10:00 A.M. (New York time) on the third business day after the date
hereof (unless postponed in accordance with the provisions of Section 11
hereof), or at such other time not later than ten business days after such date
as shall be agreed upon by the Representative and the Company (such time and
date of payment and delivery being herein called the "CLOSING TIME").

         In addition, in the event that the Initial Purchasers have exercised
their option to purchase all or any of the Option Securities, payment of the
purchase price for, and delivery of one or more global certificates for, such
Option Securities shall be made at the above-mentioned offices, or at such other
place as shall be agreed upon by the Representative and the Company, on each
Date of Delivery as specified in the notice from the Representative to the
Company.

         Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Representative for the respective accounts of the Initial Purchasers of the
Securities to be purchased by them. It is understood that each Initial Purchaser
has authorized the Representative, for its account, to accept delivery of,
receipt for, and make payment of the purchase price for, the Initial Securities
and the Option Securities, if any, which it has agreed to purchase. Merrill
Lynch, individually and not as representative of the Initial Purchasers, may
(but shall not be obligated to) make payment of the purchase price for the
Initial Securities or the Option Securities, if any, to be purchased by any
Initial Purchaser whose funds have not been received by the Closing Time or the
relevant Date of Delivery, as the case may be, but such payment shall not
relieve such Initial Purchaser from its obligations hereunder.

         (d)      Denominations: Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations
($1,000 or integral multiples thereof) and registered in such names as the
Representative may request in writing at least one full business day before the
Closing Time or the relevant Date of Delivery, as the case may be; provided that
any Securities in global form be registered in the name of Cede & Co.

         SECTION 3. Covenants of the Issuers. Each of the Issuers covenants with
each Initial Purchaser as follows:

         (a)      Offering Memorandum. Each of the Company and Guarantor, as
promptly as possible, will furnish to the Initial Purchasers, without charge,
such number of copies of the Offering Memorandum and any amendments and
supplements thereto and any Incorporated Documents as the Initial Purchasers may
reasonably request.

         (b)      Notice and Effect of Material Events. Each of the Company and
Guarantor will immediately notify each Initial Purchaser, and confirm such
notice in writing, of (x) any filing made by the Company or the Guarantor of
information relating to the offering of the Securities

                                       13

<PAGE>

with any securities exchange or any other securities regulatory body or tax
authority in the United States or any other jurisdiction, and (y) prior to the
completion of the placement of the Securities by the Initial Purchasers as
evidenced by a notice from the Initial Purchasers to the Company in writing, any
material changes in or events affecting the condition, financial or otherwise,
or the earnings, business or business prospects of the Guarantor and its
subsidiaries considered as one enterprise which (i) make any statement in the
Offering Memorandum false or misleading or (ii) are not disclosed in the
Offering Memorandum. In such event or if during such time any event shall occur
as a result of which it is necessary, in the opinion of any of the Company, its
counsel, the Initial Purchasers or counsel for the Initial Purchasers, to amend
or supplement the Offering Memorandum in order that the Offering Memorandum not
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the light of
the circumstances then existing, the Company and the Guarantor will forthwith
amend or supplement the Offering Memorandum by preparing and furnishing to each
Initial Purchaser an amendment or amendments of, or a supplement or supplements
to, the Offering Memorandum (in form and substance satisfactory in the
reasonable opinion of counsel for the Initial Purchasers) so that, as so amended
or supplemented, the Offering Memorandum will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time it is
delivered to a Subsequent Purchaser, not misleading.

         (c)      Amendments to Offering Memorandum and Supplements. Each Issuer
will advise each Initial Purchaser promptly of any proposal to amend or
supplement the Offering Memorandum and will not effect any such amendment or
supplement without the consent of the Initial Purchasers, which consent shall
not be unreasonably withheld. Neither the consent of the Initial Purchasers, nor
the Initial Purchasers' delivery of any such amendment or supplement, shall
constitute a waiver of any of the conditions set forth in Section 5 hereof.

         (d)      Qualifications of Securities for Offer and Sale. Each Issuer
shall use its best efforts, in cooperation with the Initial Purchasers, to
qualify the Securities and the shares of Common Stock issuable upon exchange of
Securities for offering and sale under the applicable securities laws of such
states and other jurisdictions as the Representative may reasonably designate
and will maintain such qualification in effect as long as required in connection
with the distribution of the Securities; provided, however, that no Issuer shall
be obligated to file any general consent to service of process or to qualify as
a foreign corporation or as a dealer in securities in any jurisdiction in which
it is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities or such shares of Common Stock issuable
upon exchange of the Securities have been so qualified, the Company will file
such statements and reports as may be required by the laws of such jurisdiction
to continue such qualification in effect for so long as may be required in
connection with the distribution of the Securities.

         (e)      Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner indicated in the
Offering Memorandum under "Use of Proceeds."

         (f)      Listing on Securities Exchange. The Guarantor will use its
reasonable best efforts to cause all shares of Common Stock issuable upon
exchange of the Securities to be listed on the

                                       14

<PAGE>

New York Stock Exchange or listed on a "national securities exchange" registered
under Section 6 of the 1934 Act.

         (g)      Restriction on Sale of Securities. During a period of 90 days
from the date of the Offering Memorandum, the Company and the Guarantor will
not, without the prior written consent of Merrill Lynch, (i) directly or
indirectly, offer, pledge, announce the intention to sell, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant for the sale of, lend or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
securities exchangeable into or exchangeable or exercisable for or repayable
with Common Stock, or file any registration statement under the 1933 Act with
respect to any of the foregoing or (ii) enter into any swap or other agreement
or any transaction that transfers, in whole or in part, directly or indirectly,
any of the economic consequence of ownership of the Common Stock, or any
securities exchangeable into or exchangeable or exercisable for or repayable
with Common Stock, whether any such swap or transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities to be sold hereunder or the Common Stock to be delivered upon
exchange thereof, (B) the resale registration statement to be filed by the
Company and Guarantor pursuant to the Registration Rights Agreement relating to
the resale of the Securities and the shares of Common Stock or any other
registration statement filed pursuant to registration rights described in the
Offering Memorandum, or (C) Common Stock or options to be issued pursuant to
employee benefit plans, qualified stock option plans or other employee
compensation benefit plans or pursuant to currently outstanding options, or
pursuant to convertible securities, warrants or rights existing on the date
hereof and referred to in the Offering Memorandum.

         (h)      PORTAL Designation. Each Issuer shall use its best efforts to
permit the Securities to be designated as PORTAL securities in accordance with
the rules and regulations adopted by the National Association of Securities
Dealers, Inc. ("NASD") relating to the PORTAL Market.

         (i)      DTC. Each Issuer shall cooperate with the Representative and
use their best efforts to permit the Securities to be eligible for clearance and
settlement through the facilities of DTC.

         (j)      Reporting Requirements. Each of the Company and Guarantor,
during the period when the Offering Memorandum is required to be delivered, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods required by the 1934 Act and the 1934 Act
Regulations.

         (k)      Reservation of Common Stock. Guarantor will reserve and keep
available at all times, free of preemptive or other similar rights, a sufficient
number of Common Stock for the purpose of enabling the Company to satisfy any
obligations to issue the Common Stock initially issuable upon exchange of the
Securities.

         SECTION 4. Payment of Expenses

                                       15

<PAGE>

         (a)      Expenses to be paid by the Company. The Company shall pay all
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing, delivery to the Initial Purchasers and
any filing of the Offering Memorandum (including financial statements and any
schedules or exhibits and any Incorporated Document) and of each amendment or
supplement thereto, (ii) the preparation, printing and delivery to the Initial
Purchasers of this Agreement, any Agreement among Initial Purchasers, the
Indenture, the Securities, the Registration Rights Agreement and such other
documents as may be required in connection with the offer, purchase, sale or
delivery of the Notes, (iii) the fees and disbursements of the Company's
counsel, accountants and other advisors, (iv) the qualification of the Notes in
accordance with the provisions of Section 3(d) hereof, including filing fees and
the reasonable fees and disbursements of a single counsel for the Initial
Purchasers in connection therewith and in connection with the preparation of the
Blue Sky Survey and any supplement thereto, (v) any fees of the NASD in
connection with the Notes, (vi) the fees and expenses of the Trustee, including
the fees and disbursements of counsel for the Trustee in connection with the
Indenture and the Notes, (vii) any fees payable in connection with the rating of
the Notes, and (viii) any fees and expenses payable in connection with the
initial and continued designation of the Securities as PORTAL securities under
the PORTAL Market Rules pursuant to NASD Rule 5322.

         (b)      Expenses to be paid by the Guarantor. The Guarantor shall pay
all expenses incident to the performance of its and, to the extent not paid by
the Company, the Company's obligations under this Agreement, including (i) the
preparation, printing, delivery to the Initial Purchasers and any filing of the
Offering Memorandum (including financial statements and any schedules or
exhibits and any Incorporated Document) and of each amendment or supplement
thereto, (ii) the preparation, printing and delivery to the Initial Purchasers
of this Agreement, any Agreement among Initial Purchasers, the Indenture, the
Securities, the Guarantee and Exchange Agreement, the Registration Rights
Agreement and such other documents as may be required in connection with the
offer, purchase, sale, issuance or delivery of the Securities or the issuance or
delivery of the Common Stock issuable upon exchange thereof, (iii) the
preparation, issuance and delivery of the certificates for the Securities to the
Initial Purchasers and the certificates for the Common Stock issuable upon
exchange thereof including any transfer taxes, any stamp or other duties payable
upon the sale, issuance and delivery of the Securities to the Initial
Purchasers, the issuance and delivery of the Common Stock issuable upon exchange
thereof and any charges of DTC in connection therewith, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v) the
qualification of the Securities and the shares of Common Stock issuable upon
exchange of the Securities under securities laws in accordance with the
provisions of Section 3(d) hereof, including filing fees and the reasonable fees
and disbursements of a single counsel for the Initial Purchasers in connection
therewith and in connection with the preparation of the Blue Sky Survey and any
supplement thereto, (vi) any fees of the NASD in connection with the Securities,
(vii) the fees and expenses of the Trustee, including the fees and disbursements
of counsel for the Trustee in connection with the Indenture and the Securities,
(viii) the fees and expenses of any transfer agent or registrar for the Common
Stock, (ix) any fees payable in connection with the rating of the Securities,
and (x) any fees and expenses payable in connection with the initial and
continued designation of the Securities as PORTAL securities under the PORTAL
Market Rules pursuant to NASD Rule 5322.

                                       16

<PAGE>

         (c)      Termination of Agreement. If this Agreement is terminated by
the Representative in accordance with the provisions of Section 5 or Section
10(a)(i) hereof, the Company shall reimburse the Initial Purchasers for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
a single counsel for the Initial Purchasers.

         SECTION 5. Conditions of Initial Purchasers' Obligations. The
obligations of the several Initial Purchasers hereunder are subject to the
accuracy of the representations and warranties of each Issuer contained in
Section 1 hereof and in the certificates of any officer of either Issuer
delivered pursuant to the provisions hereof, to the performance by both Issuers
of their covenants and other obligations hereunder, and to the following further
conditions:

         (a)      Opinion of Counsel of the Issuers. At the Closing Time, the
Initial Purchasers shall have received the opinion dated as of the Closing Time,
of Linda Mitchell, General Counsel of the Company and Chief Legal Officer of the
Guarantor in form and substance satisfactory to counsel for the Initial
Purchasers, substantially to the effect set forth in Exhibit B hereto. Such
counsel may also state that, insofar as such opinion involves factual matters,
they have relied, to the extent they deem proper, upon certificates of the
officers of the Company and certificates of public officials.

         (b)      Opinion of Counsel for the Issuers. At the Closing Time, the
Initial Purchasers shall have received the opinion dated as of the Closing Time,
of Cooley Godward LLP, counsel for the Issuers, in form and substance reasonably
satisfactory to counsel for the Initial Purchasers, substantially to the effect
set forth in Exhibit C hereto. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of the officers of the Company and certificates of
public officials.

         (c)      Opinion of Regulatory Counsel for the Issuers. At the Closing
Time, the Initial Purchasers shall have received the opinion dated as of the
Closing Time, of Baker & Hostetler LLP, regulatory counsel for the Issuers, in
form and substance satisfactory to counsel for the Initial Purchasers,
substantially to the effect set forth in Exhibit D hereto. Such counsel may also
state that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon certificates of the officers of the Company
and certificates of public officials.

         (d)      Opinion of Counsel for Initial Purchasers. At the Closing
Time, the Initial Purchasers shall have received the opinion, dated as of the
Closing Time, of Shearman & Sterling LLP, counsel for the Initial Purchasers, in
form and substance satisfactory to the Initial Purchasers. In giving such
opinion such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the State of New York, the federal law of
the United States and the General Corporation Law of the State of Delaware, upon
the opinions of counsel satisfactory to the Initial Purchasers. Such counsel may
also state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company and certificates of public officials.

         (e)      Officers' Certificate of Company. At the Closing Time, there
shall not have been, since the date hereof or since the respective dates as of
which information is given in the

                                       17

<PAGE>

Offering Memorandum (exclusive of any amendments or supplements thereto after
the date of this Agreement), any material adverse change in the condition,
financial or otherwise, or in the earnings, business or business prospects of
the Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, and the Initial Purchasers shall
have received a certificate of the President or Vice President of the Company
and the Chief Financial Officer or Chief Accounting Officer of the Company,
dated as of the Closing Time, to the effect that (i) there has been no such
material adverse change, (ii) the representations and warranties in Section 1(a)
hereof are true and correct with the same force and effect as though expressly
made at and as of the Closing Time, and (iii) the Company has complied with all
of the agreements entered into in connection with the transaction contemplated
herein and satisfied all conditions on their part to be performed or satisfied
at or prior to the Closing Time.

         (f)      Officers' Certificate of Guarantor. At the Closing Time, there
shall not have been, since the date hereof or since the respective dates as of
which information is given in the Offering Memorandum (exclusive of any
amendments or supplements thereto after the date of this Agreement), any
material adverse change in the condition, financial or otherwise, or in the
earnings, business or business prospects of the Guarantor and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course of
business, and the Initial Purchasers shall have received a certificate of the
President or Vice President of the Company and the Chief Financial Officer or
Chief Accounting Officer of the Guarantor, dated as of the Closing Time, to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct with
the same force and effect as though expressly made at and as of the Closing
Time, and (iii) the Guarantor has complied with all of the agreements entered
into in connection with the transaction contemplated herein and satisfied all
conditions on their part to be performed or satisfied at or prior to the Closing
Time.

         (g)      Accountant's Comfort Letter. At the time of the execution of
this Agreement, the Initial Purchasers shall have received comfort letters, each
dated as of that date, from (i) PricewaterhouseCoopers LLP, in the form and
substance satisfactory to the Initial Purchasers, containing statements and
information of the type ordinarily included in accountants' comfort letters to
Initial Purchasers with respect to the financial statements and certain
financial information contained, or incorporated by reference, in the Offering
Memorandum, and (ii) KPMG LLP, in the form and substance satisfactory to the
Initial Purchasers, containing statements and information of the type ordinarily
included in accountants' comfort letters to Initial Purchasers with respect to
the financial statements and certain financial information contained, or
incorporated by reference, in the Offering Memorandum.

         (h)      Bring-down Comfort Letter. At the Closing Time, the Initial
Purchasers shall have received a letter, dated as of the Closing Time, from (i)
PricewaterhouseCoopers LLP, to the effect that they reaffirm the statements made
in the letter furnished pursuant to subsection (d) of this Section, except that
the specified date referred to shall be a date not more than three business days
prior to the Closing Time, and (ii) KPMG LLP, to the effect that they reaffirm
the statements made in the letter furnished pursuant to subsection (d) of this
Section, except that the specified date referred to shall be a date not more
than three business days prior to the Closing Time.

                                       18

<PAGE>

         (i)      Lock-up Agreements. On or prior to the date of this Agreement,
the Initial Purchasers shall have received an agreement substantially in the
form of Exhibit D or Exhibit E hereto (as applicable) signed by each of the
persons listed in Schedule E hereto.

         (j)      Indenture, Registration Rights Agreement and Guarantee and
Exchange Agreement. At or prior to the Closing Time, each of the Issuers and the
Trustee shall have executed and delivered the Indenture, and the Company, and
the Initial Purchasers shall have executed and delivered the Registration Rights
Agreement and the Guarantor shall have executed and delivered the Guarantee.

         (k)      Conditions to Purchase of Option Securities. In the event that
the Initial Purchasers exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the obligations of the
Initial Purchasers to purchase such Option Securities is subject to the accuracy
as of each Date of Delivery of the representations and warranties of each Issuer
contained in Section 1 and in the certificates of any officer of either Issuer
delivered pursuant to the provisions hereof, to the performance by both Issuers
of their covenants and other obligations hereunder, and at the relevant Date of
Delivery, the Initial Purchasers shall have received:

                  (i)      Officers' Certificate of the Company. A certificate,
         dated such Date of Delivery, of the President or Vice President of the
         Company and the Chief Financial Officer or Chief Accounting Officer of
         the Company confirming that the certificate delivered at the Closing
         Time pursuant to Section 5(e) hereof remains true and correct as of
         such Date of Delivery.

                  (ii)     Officers' Certificate of the Guarantor. A
         certificate, dated such Date of Delivery, of the President or Vice
         President of the Guarantor and the Chief Financial Officer or Chief
         Accounting Officer of the Guarantor confirming that the certificate
         delivered at the Closing Time pursuant to Section 5(f) hereof remains
         true and correct as of such Date of Delivery.

                  (iii)    Opinion of Counsel of the Issuers. Dated such Date of
         Delivery, the opinion of Linda Mitchell, General Counsel of the Company
         and Chief Legal Officer of the Guarantor, in form and substance
         satisfactory to the Initial Purchasers, relating to the Option
         Securities to be purchased on such Date of Delivery and otherwise to
         the same effect as the opinion required by Section 5(a) hereof.

                  (iv)     Opinion of Counsel for the Issuers. Dated such Date
         of Delivery, the opinion of Cooley Godward LLP, counsel for the
         Issuers, in form and substance satisfactory to the Initial Purchasers,
         relating to the Option Securities to be purchased on such Date of
         Delivery and otherwise to the same effect as the opinion required by
         Section 5(b) hereof.

                  (v)      Opinion of Regulatory Counsel for the Issuers. Dated
         such Date of Delivery, the opinion of Baker & Hostetler LLP, regulatory
         counsel for the Issuers, in form and substance satisfactory to the
         Initial Purchasers, relating to the Option Securities

                                       19

<PAGE>

         to be purchased on such Date of Delivery and otherwise to the same
         effect as the opinion required by Section 5(c) hereof.

                  (vi)     Opinion of Counsel for Initial Purchasers. The
         opinion of Shearman & Sterling LLP, counsel for the Initial Purchasers,
         dated such Date of Delivery, relating to the Option Securities to be
         purchased on such Date of Delivery and otherwise to the same effect as
         the opinion required by Section 5(d) hereof.

                  (vii)    Bring-down Comfort Letter. A letter dated such Date
         of Delivery, from (A) PricewaterhouseCoopers LLP in form and substance
         satisfactory to the Initial Purchasers, substantially in the same form
         and substance as the letter furnished to the Initial Purchasers
         pursuant to Section 5(g) hereof, except that the "specified date" in
         the letter furnished pursuant to this paragraph shall be a date not
         more than three business days prior to such Date of Delivery, and (B)
         KPMG LLP, in form and substance satisfactory to the Initial Purchasers,
         substantially in the same form and substance as the letter furnished to
         the Initial Purchasers pursuant to Section 5(d) hereof, except that the
         "specified date" in the letter furnished pursuant to this paragraph
         shall be a date not more than three business days prior to such Date of
         Delivery.

         (1)      ATSB Waiver. At or prior to the Closing Time, the Initial
Purchasers shall have received from the Company, a written waiver pursuant to
the $429,000,000 Loan Agreement between the Company; Citibank, N.A., as Initial
Lender and Agent; KPMG Consulting, Inc., as Loan Administrator and Air
Transportation Stabilization Board (the "BOARD") (the "LOAN AGREEMENT"), signed
by the Board, each Lender (as that term is defined in the Loan Agreement) and
each Counter-Guarantor (as that term is defined in the Loan Agreement)
consenting to the waiver of, (A) the application of Section 2.6(a) of the Loan
Agreement to the proceeds of the issue of the Securities and, (B) the
application of Section 6.14 of the Loan Agreement to the Company's agreement
under the Cash Collateral Agreement (as defined in paragraph (j) below) not to
create any liens on the Collateral (as defined therein).

         (m)      Cash Collateral Agreement. At or prior to the Closing Time,
the Initial Purchasers shall have received from the Company a copy of the fully
executed cash collateral agreement entered into between the Company and
Citibank, N.A., as agent for the Lenders (as that term is defined in the Loan
Agreement), (the "CASH COLLATERAL AGREEMENT") the terms of which provide for the
creation of a cash collateral account and for the grant of a security interest
in such account in favor of the agent.

         (n)      Term Loan Waiver. At or prior to the Closing Time, the Initial
Purchasers shall have received from the Company, a written waiver pursuant to
the Amended and Restated Term Loan Agreement dated January 18,2002 among the
Company, the Lenders (as set out therein), Mizuho Corporate Bank, Ltd. (as
successor by merger to The Industrial Bank of Japan, Limited), as Agent (the
"TERM LOAN"), signed by the Requisite Lenders (as defined in the Term Loan)
consenting to the waiver of, (A) the application of Section 2.4(B)(ii)(3) of the
Term Loan to the proceeds of the issue of the Securities, and (B) the
application of Section 6.2(A) of the Term Loan to the extent that it prohibits
the Company from granting a security interest in the Collateral (as defined in
the Cash Collateral Agreement) in favor of Citibank, N.A., as agent under the
Cash Collateral Agreement.

                                       20

<PAGE>

         (o)      Additional Documents. At the Closing Time and at each Date of
Delivery, counsel for the Initial Purchasers shall have been furnished with such
documents, certificates and opinions as they may reasonably request for the
purpose of enabling them to pass upon the issuance and sale of the Securities as
herein contemplated, or in order to evidence the accuracy and completeness of
any of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Issuers in
connection with the issuance and sale of the Securities as herein contemplated
shall be satisfactory in form and substance to the Initial Purchasers and
counsel for the Initial Purchasers.

         (p)      PORTAL Market. At the Closing Time, the Securities and the
Common Stock issuable upon exchange of the Securities shall have been designated
for trading on PORTAL.

         (q)      Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement (or, in the case of any condition to the purchase of Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several Initial Purchasers to purchase the relevant Option
Securities on such Date of Delivery) may be terminated by the Initial Purchasers
by notice to the Company and Guarantor at any time at or prior to the Closing
Time or such Date of Delivery, as the case may be, and such termination shall be
without liability of any party to any other party except as provided in Section
4 and except that Sections 1,7,8 and 9 shall survive any such termination and
remain in full force and effect.

         SECTION 6. Subsequent Offers and Resales of the Securities.

         (a)      Offer and Sale Procedures. Each of the Initial Purchasers and
the Issuers, as the case may be, hereby establish and agree to, severally and
not jointly, observe the following procedures in connection with the offer and
sale of the Securities.

                  (i)      Offers and Sales to Qualified Institutional Buyers.
         Offers and sales of the Securities shall only be made to persons whom
         the offeror or seller reasonably believes to be qualified institutional
         buyers, as defined in Rule 144A under the 1933 Act ("QUALIFIED
         INSTITUTIONAL BUYERS").

                  (ii)     No General Solicitation. No general solicitation or
         general advertising (within the meaning of Rule 502(c) under the 1933
         Act) shall be used in the United States in connection with the offering
         or sale of the Securities.

                  (iii)    Purchases by Non-Bank Fiduciaries. In the case of a
         non-bank Subsequent Purchaser of Securities acting as a fiduciary for
         one or more third parties, each third party shall, in the reasonable
         belief of such Initial Purchaser, be a Qualified Institutional Buyer to
         whom the notice required in subsection (iv) has been given.

                  (iv)     Subsequent Purchaser Notification. Each Initial
         Purchaser will take reasonable steps to inform, and cause each of its
         United States Affiliates to take reasonable steps to inform, persons
         acquiring Securities from such Initial Purchaser or its Affiliate that
         the Securities (A) have not been and will not be registered under the
         1933 Act, (B) are being sold to them without registration under the
         1933 Act in reliance on Rule 144A or in accordance with another
         exemption from registration under the 1933

                                       21

<PAGE>

         Act, as the case may be, and (C) may not be offered, sold or otherwise
         transferred except (1) to the Company, (2) outside the United States in
         accordance with Regulation S under the 1933 Act or (3) inside the
         United States in accordance with (x) Rule 144A to a person whom the
         seller reasonably believes is a Qualified Institutional Buyer that is
         purchasing such Securities for its own account or for the account of a
         Qualified Institutional Buyer to whom notice is given that the offer,
         sale or transfer is being made in reliance on Rule 144A or (y) pursuant
         to another available exemption from registration under the 1933 Act.

                  (v)      Restriction on Transfer. The transfer restrictions
         and the other provisions set forth in the Offering Memorandum under the
         caption "Transfer Restrictions," including the legend required thereby,
         shall apply to the Securities except as otherwise agreed by the Issuers
         and the Initial Purchasers. Following the sale of the Securities by the
         Initial Purchasers to each Subsequent Purchaser pursuant to the terms
         hereof, the Initial Purchasers shall not be liable or responsible to
         any Issuer for any losses, damages or liabilities suffered or incurred
         by any Issuer, including any losses, damages or liabilities under the
         1933 Act, arising from or relating to any subsequent resale or transfer
         of any Security.

         (b)      Covenants of the Issuers. The Company, and where specifically
indicated, each of the Issuers, severally, covenants with each Initial Purchaser
as follows:

                  (i)      Integration. Each Issuer agrees that it will not and
         will cause its Affiliates not to, directly or indirectly, solicit any
         offer to buy, sell or make any offer or sale of, or otherwise negotiate
         in respect of, securities of such Issuer or any Affiliate thereof of
         any class if, as a result of the doctrine of "integration" referred to
         in Rule 502 under the 1933 Act, such offer and sale would render
         invalid (for the purpose of (A) the sale of the Securities by such
         Issuer to the Initial Purchasers, (B) the resale of the Securities by
         the Initial Purchasers to Subsequent Purchasers, or (C) the resale of
         the Securities by such Subsequent Purchasers to others) the exemption
         from the registration requirements of the 1933 Act provided by Section
         4(2) thereof or by Rule 144A thereunder or otherwise.

                  (ii)     Rule 144A Information. Each Issuer agrees that, in
         order to render the Securities eligible for resale pursuant to Rule
         144A under the 1933 Act, while any of the Securities remain
         outstanding, it will make available, upon request, to any holder of
         Securities or prospective purchasers of Securities the information
         specified in Rule 144A(d)(4), unless such Issuer furnishes information
         to the Commission pursuant to Section 13 or 15(d) of the 1934 Act.

                  (iii)    Restriction on Purchases. Until the expiration of two
         years after the original issuance of the Securities, each Issuer will
         not, and will cause its "affiliates" (as such term is defined in Rule
         144(a)(l) under the 1933 Act) not to, purchase or agree to purchase or
         otherwise acquire any Securities which are "restricted securities" (as
         such term is defined under Rule 144(a)(3) under the 1933 Act), whether
         as beneficial owner or otherwise (except as agent on behalf of and for
         the account of customers in the ordinary course of business as a
         securities broker in unsolicited broker's transactions) unless,

                                       22

<PAGE>

         immediately upon any such purchase, such Issuer or any such affiliate
         shall submit such Securities to the Trustee for cancellation.

         (c)      Qualified Institutional Buyer. Each Initial Purchaser,
severally and not jointly, represents and warrants to, and agrees with, the
Company and Guarantor that it is an "accredited investor" within the meaning of
Regulation D under the Securities Act and a Qualified Institutional Buyer.

         SECTION 7. Indemnification.

         (a)      Indemnification of Initial Purchasers by the Company. The
Company agrees to indemnify and hold harmless each Initial Purchaser and each
person, if any, who controls such Initial Purchaser within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

                  (i)      against any and all loss, liability, claim, damage
         and expense whatsoever, as incurred, arising out of any untrue
         statement or alleged untrue statement of a material fact contained in
         the Offering Memorandum (or any amendment or supplement thereto), or
         the omission or alleged omission therefrom of a material fact necessary
         in order to make the statements therein, in the light of the
         circumstances under which they were made, not misleading;

                  (ii)     against any and all loss, liability, claim, damage
         and expense whatsoever, as incurred, to the extent of the aggregate
         amount paid in settlement of any litigation, or any investigation or
         proceeding by any governmental agency or body, commenced or threatened,
         or of any claim whatsoever based upon any such untrue statement or
         omission, or any such alleged untrue statement or omission; provided
         that (subject to Section 7(e) below) any such settlement is effected
         with the prior written consent of the Company;

                  (iii)    against any and all loss, liability, claim, damage
         and expense whatsoever, as incurred, arising out of or based upon, in
         whole or in part, from the failure by the other Issuer to perform its
         obligations hereunder; and

                  (iv)     against any and all expense whatsoever, as incurred
         (including the reasonable fees and disbursements of counsel chosen by
         Merrill Lynch), reasonably incurred in investigating, preparing or
         defending against any litigation, or any investigation or proceeding by
         any governmental agency or body, commenced or threatened, or any claim
         whatsoever based upon any such untrue statement or omission, or any
         such alleged untrue statement or omission, to the extent that any such
         expense is not paid under (i), (ii) or (iii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company and
Guarantor by and with respect to any Initial Purchaser through Merrill Lynch
expressly for use in the Offering Memorandum (or any amendment or supplement
thereto), and provided further that the Issuers will not be liable to an Initial
Purchaser with

                                       23

<PAGE>

respect to the Offering Memorandum to the extent that the Issuers shall sustain
the burden of proving that any such loss, liability, claim, damage or expense
resulted from the fact that such Initial Purchaser sold Securities to a person
to whom such Initial Purchaser failed to send or give, at or prior to the
Closing Date, a copy of the Offering Memorandum, as then amended or supplemented
if the Issuers have previously furnished copies of the Offering Memorandum, as
so amended or supplemented, (sufficiently in advance of the Closing Date to
allow for distribution by the Closing Date) to the Initial Purchasers and the
loss, liability, claim, damage or expense of such Initial Purchaser resulted
from an untrue statement or omission of a material fact contained in or omitted
from the Offering Memorandum which was corrected in the Offering Memorandum, as
so amended or supplemented, prior to the Closing Date.

         (b)      Indemnification of Initial Purchasers by the Guarantor. The
Guarantor agrees to indemnify and hold harmless each Initial Purchaser and each
person, if any, who controls such Initial Purchaser within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

                  (i)      against any and all loss, liability, claim, damage
         and expense whatsoever, as incurred, arising out of any untrue
         statement or alleged untrue statement of a material fact contained in
         the Offering Memorandum (or any amendment or supplement thereto), or
         the omission or alleged omission therefrom of a material fact necessary
         in order to make the statements therein, in the light of the
         circumstances under which they were made, not misleading;

                  (ii)     against any and all loss, liability, claim, damage
         and expense whatsoever, as incurred, to the extent of the aggregate
         amount paid in settlement of any litigation, or any investigation or
         proceeding by any governmental agency or body, commenced or threatened,
         or of any claim whatsoever based upon any such untrue statement or
         omission, or any such alleged untrue statement or omission; provided
         that (subject to Section 7(d) below) any such settlement is effected
         with the prior written consent of the Company;

                  (iii)    against any and all loss, liability, claim, damage
         and expense whatsoever, as incurred, arising out of or based upon, in
         whole or in part, from the failure by the other Issuer to perform its
         obligations hereunder; and

                  (iv)     against any and all expense whatsoever, as incurred
         (including the reasonable fees and disbursements of counsel chosen by
         Merrill Lynch), reasonably incurred in investigating, preparing or
         defending against any litigation, or any investigation or proceeding by
         any governmental agency or body, commenced or threatened, or any claim
         whatsoever based upon any such untrue statement or omission, or any
         such alleged untrue statement or omission, to the extent that any such
         expense is not paid under (i), (ii) or (iii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company and
Guarantor by and with respect to any Initial Purchaser through

                                       24

<PAGE>

Merrill Lynch expressly for use in the Offering Memorandum (or any amendment or
supplement thereto), and provided further that the Issuers will not be liable to
an Initial Purchaser with respect to the Offering Memorandum to the extent that
the Issuers shall sustain the burden of proving that any such loss, liability,
claim, damage or expense resulted from the fact that such Initial Purchaser sold
Securities to a person to whom such Initial Purchaser failed to send or give, at
or prior to the Closing Date, a copy of the Offering Memorandum, as then amended
or supplemented if the Issuers have previously furnished copies of the Offering
Memorandum, as so amended or supplemented, (sufficiently in advance of the
Closing Date to allow for distribution by the Closing Date) to the Initial
Purchasers and the loss, liability, claim, damage or expense of such Initial
Purchaser resulted from an untrue statement or omission of a material fact
contained in or omitted from the Offering Memorandum which was corrected in the
Offering Memorandum, as so amended or supplemented, prior to the Closing Date.

         (c)      Indemnification of Issuers. Each Initial Purchaser severally
agrees to indemnify and hold harmless the Issuers and each person, if any, who
controls the Company and the Guarantor within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsections
(a)(i) and (ii) and b(i) and (ii) of this Section, as incurred, but only with
respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Offering Memorandum (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by and with respect to such Initial Purchaser through Merrill
Lynch expressly for use in the Offering Memorandum (or any amendment or
supplement thereto).

         (d)      Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section 7(a)
above, counsel to the indemnified parties shall be selected by Merrill Lynch,
and, in the case of parties indemnified pursuant to Section 7(c) above, counsel
to the indemnified parties shall be selected by the Issuers. An indemnifying
party may participate at its own expense in the defense of any such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties (which shall not be
unreasonably withheld or delayed), settle or compromise or consent to the entry
of any judgment with respect to any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever in respect of which indemnification or contribution could be
sought under this Section 7 or Section 8 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,

                                       25

<PAGE>

proceeding or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.

         (e)      Settlement without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for reasonable fees and expenses of counsel,
such indemnifying party agrees that it shall be liable for any settlement of a
claim indemnifiable pursuant to Section 7(a)(ii) or 7(b)(ii) effected without
its written consent if (i) such settlement is entered into more than 45 days
after receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into, and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.

         SECTION 8. Contribution. If the indemnification provided for in Section
7 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Issuers on the one
hand and the Initial Purchasers on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) 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 of the
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.

         The relative benefits received by the Issuers on the one hand and the
Initial Purchasers on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Issuers and the total purchase discount received by the Initial Purchasers,
bear to the aggregate initial offering price of the Securities.

         The relative fault of the Issuers on the one hand and the Initial
Purchasers on the other hand shall be determined by reference to, among other
things, whether any such 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 or by the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

         Each of the Issuers and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 8 were determined
by pro rata allocation (even if the Initial Purchasers were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
8. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 8 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or

                                       26

<PAGE>

defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue or alleged untrue statement or omission or alleged
omission.

         Notwithstanding the provisions of this Section 8, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities purchased and sold by it hereunder exceeds
the amount of any damages which such Initial Purchaser has otherwise been
required to pay by reason of any such untrue or alleged untrue statement or
omission or alleged omission.

         No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

         For purposes of this Section 8, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each person, if any, who controls an Issuer within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same
rights to contribution as such Issuer. The Initial Purchasers' respective
obligations to contribute pursuant to this Section are several in proportion to
the principal amount of Securities set forth opposite their respective names in
Schedule A hereto and not joint.

         SECTION 9. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Issuers submitted pursuant
hereto shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Initial Purchaser or any person who
controls an Initial Purchaser within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act, or by or on behalf of the Issuers, and shall
survive delivery of the Securities to the Initial Purchasers.

         SECTION 10. Termination of Agreement.

         (a)      Termination: General. The Representative may terminate this
Agreement, by notice to the Company and Guarantor, at any time at or prior to
the Closing Time (i) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Offering Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), any material adverse change in the
condition, financial or otherwise, or in the earnings, business or business
prospects of the Guarantor and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, or (ii) if there has
occurred any material adverse change in the financial markets in the United
States or in the international financial markets, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the judgment of the Representative, impracticable or inadvisable to market
the Securities or to enforce contracts for the sale of the Securities, or (iii)
if trading in any securities of the Guarantor or Company has been suspended or
materially limited by the Commission or the New York Stock Exchange or if
trading generally on the NYSE, the

                                       27

<PAGE>

American Stock Exchange or in the New York Stock Exchange has been suspended or
materially limited, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority or a material
disruption has occurred in commercial banking or securities settlement or
clearance services in the United States, or (iv) if a banking moratorium has
been declared by either federal or New York authorities.

         (b)      Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 7, 8 and 9 shall survive such termination and remain in full force and
effect.

         SECTION 11. Default by One or More of the Initial Purchasers. If one or
more of the Initial Purchasers shall fail at the Closing Time to purchase the
Securities which it or they are obligated to purchase under this Agreement (the
"DEFAULTED SECURITIES"), the Initial Purchasers shall have the right, within 24
hours thereafter, to make arrangements for one or more of the nondefaulting
Initial Purchasers, or any other initial purchasers, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, the Initial Purchasers shall
not have completed such arrangements within such 24-hour period, then:

                  a)       if the number of Defaulted Securities does not exceed
         10% of the aggregate principal amount of the Securities to be purchased
         hereunder, each of the non-defaulting Initial Purchasers shall be
         obligated, severally and not jointly, to purchase the full amount
         thereof in the proportions that their respective underwriting
         obligations hereunder bear to the underwriting obligations of all
         non-defaulting Initial Purchasers, or

                  b)       if the number of Defaulted Securities exceeds 10% of
         the aggregate principal amount of the Securities to be purchased
         hereunder, this Agreement shall terminate without liability on the part
         of any non-defaulting Initial Purchaser.

         No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.

         In the event of any such default which does not result in a termination
of this Agreement, either the Initial Purchasers or the Company shall have the
right to postpone the Closing Time for a period not exceeding seven days in
order to effect any required changes in the Offering Memorandum or in any other
documents or arrangements. As used herein, the term "Initial Purchaser" includes
any person substituted for an Initial Purchaser under this Section.

         SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to Merrill Lynch at 4 World Financial Center, 250
Vesey Street, New York, New York 10080, attention of Investment Banking Counsel;
and notices to the Company and Guarantor shall be directed to

                                       28

<PAGE>

them at 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034, attention of
Linda Mitchell, General Counsel (Fax: 480-693-5155).

         SECTION 13. Parties. This Agreement shall inure to the benefit of and
be binding upon the Initial Purchasers and the Issuers and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Initial Purchasers and the Issuers and their respective successors and the
controlling persons referred to in Sections 7 and 8 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Initial Purchasers and the Issuers and their respective
successors, and said controlling persons and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation. No
purchaser of Securities from the Initial Purchasers shall be deemed to be a
successor by reason merely of such purchase. Notwithstanding anything to the
contrary herein, and for the avoidance of doubt: (a) this Agreement shall be
deemed to be (i) separate severable agreement between the Company and the
Initial Purchasers, and (ii) a separate severable agreement between the
Guarantor and the Initial Purchasers; (b) nothing herein shall constitute a
contract or agreement by the Company with or for the benefit of the Guarantor;
and (c) neither the Guarantor nor the Company shall have third party beneficiary
rights in respect of their separate agreements with the Initial Purchasers.

         SECTION 14. Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

         SECTION 15. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.

         SECTION 16. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

                                       29

<PAGE>

         If the foregoing is in accordance with your understanding of our
agreement with the Initial Purchasers, please sign and return to the Company a
counterpart hereof, whereupon this instrument, along with all counterparts, will
become a binding agreement between the Initial Purchasers and the Issuers in
accordance with its terms.

                                        Very truly yours,

                                        AMERICA WEST AIRLINES, INC.
                                        as Issuer

                                        BY: /s/ D. J. Kerr
                                           ---------------------------
                                           Name:  Derek J. Kerr
                                           Title: Senior Vice President  and
                                                  Chief Financial Officer

                                        AMERICA WEST HOLDINGS CORPORATION
                                        as Guarantor

                                        By: /s/ D. J. Kerr
                                           ---------------------------
                                           NAME:  DEREK J. KERR
                                           TITLE: SENIOR VICE PRESIDENT  AND
                                                  CHIEF FINANCIAL OFFICER

<PAGE>

                                   SCHEDULE A

<TABLE>
<CAPTION>
                                                                    Principal
                                                                    Amount at
                                                                   Maturity of
Name of Initial Purchaser                                          Securities
-------------------------                                          ----------
<S>                                                               <C>
Merrill Lynch, Pierce, Fenner & Smith
         Incorporated.....................................        $ 152,789,700
Citigroup Global Markets Inc..............................           65,481,300
                                                                  -------------
         Total............................................        $ 218,271,000
</TABLE>

                                     SCH A-1

<PAGE>

                                   SCHEDULE B

                           AMERICA WEST AIRLINES, INC.

                       SENIOR EXCHANGEABLE NOTES DUE 2023

         (i)      The initial offering price per $ 1,000 principal amount at
maturity of the Securities shall be $343.61, which represents a yield to
maturity of 7.25% per annum (computed on a semiannual bond equivalent basis),
adjusted for any cash interest.

         (ii)     The purchase price per $ 1,000 principal amount at maturity to
be paid by the Initial Purchasers for the Securities shall be $333.30, being an
amount equal to the initial offering price set forth above, less $10.31 per
$1,000 principal amount at maturity of Securities.

         (iii)    Cash interest on the Securities at the rate of 2.4912% per
annum on the principal amount at maturity shall be payable semiannually in
arrears on January 30 and July 30 of each year, beginning January 30, 2004 until
July 30, 2008.

         (iv)     The Securities shall be exchangeable for shares of Class B
common stock, $0.01 par value (the "COMMON STOCK"), of Guarantor at an initial
rate of 32.0382 shares of Common Stock per $1,000 principal amount at maturity
of Securities.

         (v)      Prior to July 30, 2008, the Securities will not be redeemable.

         (vi)     The redemption price shall be $343.61 plus original issue
discount or accrued cash interest, if any, as of the applicable redemption date.

         (vii)    The purchase dates and the purchase prices included in the
Offering Memorandum and correspondingly in the Indenture shall be:

<TABLE>
<CAPTION>
Purchase Date               Purchase Price
-------------               --------------
<S>                         <C>
July 30, 2008                  $  343.61
July 30, 2013                  $  490.58
July 30, 2018                  $  700.42
July 30, 2023                  $1,000.00
</TABLE>

         (viii)   Contingent Exchange Triggers:

         (a)      In any fiscal quarter (commencing after September 30, 2003),
if, as of the last day of the preceding fiscal quarter, the closing sale price
of the Common Stock for at least 20 trading days in a period of 30 consecutive
trading days ending on the last trading day of such preceding fiscal quarter is
more than 110% of the accreted exchange price per share of Common Stock
(excluding accrued cash interest, if any) on the last day of such quarter;

                                     SCH B-1

<PAGE>

         b)       At any time, on or before July 30, 2018, after a consecutive
10 trading-day period in which the average of the trading prices for the
Securities for that 10 trading-day period was less than 103% of the average
exchange value for the Securities during that period, a holder may exchange its
Securities into shares of Common Stock;

         c)       The Securities are called for redemption; and

         d)       Corporate transactions specified in the Offering Memorandum
have occurred.

                                     SCH B-2

<PAGE>

                                   SCHEDULE C

             LIST OF PERSONS SUBJECT TO A LOCK-UP LETTER AGREEMENT

                               DIRECTORS/OFFICERS

                                Herbert M. Baum
                                John L. Goolsby
                                Richard P. Schifter
                                J. Steven Whisler
                                Robert J. Miller
                                W. Douglas Parker
                                John F. Tierney
                                Walter P. Klenz
                                Richard C. Kraemer
                                Denise M. O'Leary
                                Jeffrey D. McClelland
                                J. Scott Kirby
                                Derek J. Kerr
                                Hal M. Heule
                                Thomas T. Weir
                                John R. Wilson
                                Anthony V. Mule
                                Linda M. Mitchell
                                Michael R. Carreon
                                C. A. Howlett
                                Joseph C. Beery

                                WARRANT HOLDERS

                         Air Transportation Safety Board
                         AFS Cayman Limited
                         Citibank, N.A.
                         debis Air Finance Leasing USA
                         General Electric Capital Corporation

                                     SCH C-1

<PAGE>

                                    EXHIBIT A

                     FORM OF REGISTRATION RIGHTS AGREEMENT

                                   Exhibit A-l

<PAGE>

                                    EXHIBIT B

                        FORM OF OPINION OF LINDA MITCHELL
                             COUNSEL OF THE ISSUERS,
                    TO BE DELIVERED PURSUANT TO SECTION 5(a)

         (i)      The Company is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which its ownership or
lease of property or the conduct of its businesses require such qualification
and has all power and authority necessary to own or hold its properties and
conduct the businesses in which it is engaged, except where the failure to be so
qualified or to be in good standing as a foreign corporation have not had and
would not, singularly or in the aggregate, have a material adverse effect on the
condition, financial or otherwise, earnings, business or business prospects of
the Guarantor and its subsidiaries considered as one enterprise ("MATERIAL
ADVERSE EFFECT").

         (ii)     Each of the Guarantor and The Leisure Company is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which its ownership or lease of property or the conduct of
its business requires such qualification and has all power and authority
necessary to own or hold its properties and conduct the business in which its is
engaged, except where the failure to be so qualified or to be in good standing
as a foreign corporation has not and would not, singularly or in the aggregate,
have a Material Adverse Effect.

         (iii)    All of the issued shares of capital stock of the Guarantor
have been duly and validly authorized and issued, are non-assessable and, to my
knowledge, fully-paid. None of the outstanding shares of the Guarantor were
issued in violation of preemptive rights of any securityholder of the Guarantor.

         (iv)     All of the issued shares of capital stock of the Company have
been duly and validly authorized and issued, are non-assessable and fully-paid
and are owned directly or indirectly by Guarantor, free and clear of all liens,
encumbrances, equities or claims (other than as set forth in the Offering
Memorandum).

         (v)      To my knowledge, other than as set forth in the Offering
Memorandum, there are no legal or governmental proceedings pending or threatened
to which the Guarantor or any of its subsidiaries or of which any property or
assets of the Guarantor or any of its subsidiaries is the subject which,
singularly or in the aggregate, would result in a Material Adverse Effect.

         (vi)     The statements contained in the Offering Memorandum or in the
documents incorporated by reference under the captions "Item 1.
Business--Environmental Matters," and "Item 3. Legal Proceedings", insofar as
they describe charter documents, contracts, legal proceedings, federal and state
statutes, rules and regulations, constitute a fair summary thereof.

         (vii)    The issue and sale of the Securities and the execution,
delivery and performance by the Company and the Guarantor with all of the
provisions of the Purchase Agreement, the Indenture, the Registration Rights
Agreement, the Guarantee and Exchange Agreement and the Securities and the
consummation of the transactions contemplated thereby do not and will not

                                   Exhibit B-l

<PAGE>

result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument in the form filed or incorporated by
reference by the Company and the Guarantor as exhibits to the Company's and the
Guarantor's combined Annual Report on Form 10-K for the year ended December 31,
2002 and combined Quarterly Reports on Form 10-Q for the quarters ended March
31, 2003 and June 30, 2003 or would be required to be filed as an exhibit if the
Company and the Guarantor were filing an Annual Report on Form 10-K on the date
hereof (as amended, supplemented or otherwise modified by (i) the Waiver dated
as of July 23, 2003 to the Loan Agreement dated as of January 18, 2002 among the
Company, Citibank, N.A., KPMG Consulting, Inc. and the Air Transportation
Stabilization Board, (ii) the Waiver dated as of July 23, 2003 to the Amended
and Restated Loan Agreement dated as of January 18,2002 among the Company, the
financial institutions party thereto and Mizuho Corporate Bank Limited, and
(iii) the Cash Collateral Agreement, to be dated as of July 30, 2003, between
the Company and Citibank, N.A.), nor will such actions result in any violation
of the provisions of the charter or by-laws of the Company or the Guarantor.

                                   Exhibit B-2

<PAGE>

                                    EXHIBIT C

                      FORM OF OPINION OF COOLEY GODWARD LLP
                            COUNSEL FOR THE ISSUERS,
                    TO BE DELIVERED PURSUANT TO SECTION 5(a)

                  (i)      The Company has been duly incorporated, is validly
existing as a corporation and is in good standing under the laws of the state of
Delaware. The Company is duly qualified to do business and is in good standing
as a foreign corporation under the laws of the state of Arizona, Nevada,
California, Ohio, Florida, Texas and Colorado.

                  (ii)     The Guarantor has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the State of
Delaware and is duly qualified to do business and is in good standing as a
foreign corporation under the laws of the states of Delaware and Arizona.

                  (iii)    The Guarantor has an authorized capitalization as set
forth in the Offering Memorandum. All of the issued shares of capital stock of
Guarantor conform to the description thereof contained in the Offering
Memorandum.

                  (iv)     The documents incorporated by reference in the
Offering Memorandum (except for financial statements and schedules and notes
thereto and financial and statistical information derived therefrom, as to which
we express no opinion), when they were filed with the Commission complied as to
form in all material respects with the requirements of the 1934 Act and the 1934
Act Regulations.

                  (v)      The statements contained in the Offering Memorandum
or in the documents incorporated by reference therein under the captions,
"Description of the Notes", "Description of Our Capital Stock", "Description of
Certain Indebtedness and Other Obligations," "Transfer Restrictions," and
"Certain United States Federal Income Tax Considerations," insofar as they
describe charter documents, contracts, legal proceedings, federal and state
statutes, rules and regulations and other legal matters, constitute a fair
summary thereof.

                  (vi)     The Purchase Agreement has been duly authorized,
executed and delivered by the Company and the Guarantor.

                  (vii)    The Indenture has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).

                  (viii)   The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except as the enforcement thereof

                                   Exhibit C-1

<PAGE>

may be limited by bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or similar
laws affecting enforcement of creditors' rights generally and except as
enforcement thereof is subject to general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).

                  (ix)     The Securities are in the form contemplated by the
Indenture, have been duly authorized, executed, issued and delivered by the
Company, and when authenticated by the Trustee in the manner provided in the
Indenture, will constitute valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement thereof is
subject to general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).

                  (x)      The Guarantee has been duly and validly authorized by
the Guarantor and, when the Securities are issued, authenticated and delivered
by the Company against payment by the Initial Purchasers in accordance with the
terms of the Purchase Agreement and the Indenture, will be legal, valid and
binding obligations of the Guarantor, enforceable against it in accordance with
its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and except as enforcement thereof is
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law), and will be in the form
contemplated by, and entitled to the benefits of, the Indenture.

                  (xi)     Upon issuance and delivery of the Securities in
accordance with the Purchase Agreement and the Indenture, the Securities will be
exchangeable at the option of the holder thereof for shares of Common Stock in
accordance with the terms of the Securities and the Indenture; the shares of
Common Stock issuable upon exchange of the Securities have been duly authorized
and reserved for issuance upon such exchange by all necessary corporate action,
and when issued upon such exchange, will be validly issued and will be fully
paid and nonassessable; and the issuance of such shares upon such exchange will
not be subject to the preemptive or other similar rights of any securityholder
of Guarantor.

                  (xii)    The issue and sale of the Securities and the
execution, delivery and performance by the Company and the Guarantor with all of
the provisions of the Purchase Agreement, the Indenture, the Registration Rights
Agreement, the Guarantee and Exchange Agreement and the Securities and the
consummation of the transactions contemplated thereby do not and will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under; any Material Agreement as amended,
supplemented or otherwise modified by the Waiver Agreements, nor will such
actions result in any violation of the provisions of the charter or by-laws of
the Company or any Guarantor; and no consent, approval, authorization or order
of, or filing or registration with, any such court or governmental agency or
body is required for the execution, delivery and performance of the Purchase
Agreement, the Registration Rights Agreement, the Guarantee and Exchange
Agreement, the Securities or the Indenture or the consummation of the
transactions contemplated thereby, except

                                   Exhibit C-2

<PAGE>

for (a) such consents, approvals, authorizations, orders, filings or
registrations as have been obtained or made and or as may be required in the
Registration Rights Agreement, (b) the qualification of the Indenture under the
1939 Act and the listing of the Common Stock issued upon exchange of the
Securities on the New York Stock Exchange, (c) such consents, approvals,
authorizations, orders, filings or registrations as may be required in
connection with any redemption or purchase of the Securities upon a Change of
Control (as defined in the Indenture), and (d) such consents, approvals,
authorizations, orders, filings or registrations as may be required under state
securities laws in connection with the distribution of the Securities by the
Initial Purchasers.

                  (xiii)   It is not necessary in connection with the offer,
sale and delivery of the Securities to the Initial Purchasers and each
Subsequent Purchaser in the manner contemplated by the Purchase Agreement and
the Offering Memorandum to register the Securities under the 1933 Act or to
qualify the Indenture or Guarantee and Exchange Agreement under the 1939 Act.

                  (xiv)    Neither the Guarantor nor any of its subsidiaries is,
nor as of the Closing Date after giving effect to the offering and sale of the
Securities and the application of the net proceeds therefrom will be, an
"investment company" as defined in the Investment Company Act of 1940, as
amended.

                  (xv)     The Securities, the Common Stock, the Registration
Rights Agreement and the Indenture conform in all material respects to the
descriptions thereof contained in the Offering Memorandum.

         In rendering such opinion, such counsel may state that their opinion is
limited to matters governed by the Federal laws of the United States of America,
the laws of the State of New York, the General Corporation Law of the State of
Delaware and the State of California. Such opinion shall also be to the effect
that (x) such counsel has acted as counsel to the Company and Guarantor in
connection with the preparation of the Offering Memorandum (and the documents
incorporated by reference) and (y) based on the foregoing, no facts have come to
the attention of such counsel which lead them to believe that the Offering
Memorandum or any amendment or supplement thereto (including the documents
incorporated by reference therein) (except for the financial statements and
related schedules and other financial data included or incorporated by reference
therein, as to which such counsel need express no belief), at the time the
Offering Memorandum was issued, at the time any such amended or supplemented
Offering Memorandum was issued or at the Closing Time, contained or contains any
untrue statement of a material fact or omitted or omits 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. The foregoing opinion and statement
may be qualified by a statement to the effect that such counsel does not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum (other than as set forth in clause (vii)
above).

                                   Exhibit C-3

<PAGE>

                                    EXHIBIT D

                    FORM OF OPINION OF BAKER & HOSTETLER LLP,
                       REGULATORY COUNSEL FOR THE ISSUERS,
                    TO BE DELIVERED PURSUANT TO SECTION 5(c)

         (i)      The statements contained in the Offering Memorandum or in the
documents incorporated by reference under the captions "Government Regulations,"
and "Item 7.-Management's Discussion and Analysis of Financial Condition and
Results of Operations-Other Information -Government Regulations," insofar as
they describe charter documents, contracts, legal proceedings, federal and state
statutes, rules and regulations, constitute a fair summary thereof.

                                   Exhibit D-1

<PAGE>

                                    EXHIBIT E

                            FORM OF DIRECTOR/OFFICER

                            LOCK-UP LETTER AGREEMENT

                                                                   July 23, 2003

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
         Incorporated
As Representative of the several Initial Purchasers named
    in the mentioned Purchase Agreement
c/o Merrill Lynch, Pierce, Fenner & Smith
          Incorporated
4 World Financial Center
New York, New York 10080

                  Re:      Proposed Offering by America West Airlines, Inc. of
                           Senior Exchangeable Notes due 2023, guaranteed by
                           America West Holdings Corporation

Ladies and Gentlemen:

         The undersigned understands that you, as Representative of the several
Initial Purchasers, propose to enter into a Purchase Agreement (the "PURCHASE
AGREEMENT") with America West Airlines, Inc., a Delaware corporation (the
"COMPANY") and America West Holdings Corporation, a Delaware corporation, as
guarantor (the "GUARANTOR," together with the Company, the "ISSUERS"), providing
for the offering (the "OFFERING"), pursuant to Rule 144A under the Securities
Act of 1933, as amended (the "SECURITIES Act"), by the several Initial
Purchasers named in Schedule A to the Purchase Agreement (the "INITIAL
PURCHASERS"), of Senior Exchangeable Notes due 2023 of the Company (the "INITIAL
SECURITIES") and the grant by the Issuers to the Initial Purchasers of the
option to purchase additional Senior Exchangeable Notes due 2023 to cover
over-allotments, if any (the "OPTION SECURITIES"). The Initial Securities,
together with the Option Securities and the Guarantee, are collectively referred
to as the "SECURITIES". Capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Purchase Agreement.

         In consideration of the Initial Purchasers' agreement to purchase and
make the Offering of the Securities, and for other good and valuable
consideration receipt of which is hereby acknowledged, the undersigned hereby
agrees that, without the prior written consent of the Representative on behalf
of the Initial Purchasers, the undersigned will not, during the period
commencing the date hereof and ending 90 days from the date of the Offering
Memorandum relating to the Offering, (1) offer, pledge, announce the intention
to sell, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or lend or otherwise transfer or dispose of, directly or
indirectly, any shares of the Guarantor's class B common stock, $.01 par value
(the "COMMON STOCK") or any

                                   Exhibit E-l

<PAGE>

securities convertible into or exercisable or exchangeable for or repayable with
Common Stock (including without limitation, Common Stock which may be deemed to
be beneficially owned by the undersigned in accordance with the rules and
regulations of the Securities and Exchange Commission and securities which may
be issued upon exercise of a stock option or warrant) or (2) enter into any swap
or other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, any of the economic consequences of ownership of the
Common Stock, or any securities convertible into or exchangeable or exercisable
for or repayable with Common Stock, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The undersigned agrees that, without the
prior written consent of the Representative on behalf of the Initial Purchasers,
it will not, during the period commencing the date hereof and ending 90 days
from the date of the Offering Memorandum, make any demand for or exercise any
right with respect to, the registration of any shares of Common Stock or any
security convertible into or exercisable or exchangeable for or repayable with
Common Stock.

         The foregoing paragraph shall not apply to (a) offers, sales, gifts,
assignments or transfers of shares of Common Stock or options to purchase shares
of Common Stock made to (i) members of the immediate family of the undersigned,
(ii) corporations, partnerships, limited liability companies or other entities
to the extent such entities are wholly-owned by the officer and/or members of
the immediate family of the undersigned, or (iii) charitable organizations,
solely to the extent that in the case of clauses (i), (ii) and (iii) each
recipient agrees to be bound by the restrictions set forth herein, (b) transfers
of shares of Common Stock or options to purchase shares of Common Stock made to
any trust for the direct or indirect benefit of the undersigned or any party
listed in clause (a) above, provided that the trustee of the trust agrees to be
bound by restrictions set forth above, (c) the exercise of options and transfers
of shares of Common Stock to the Guarantor or by the undersigned in connection
with the exercise of options and/or reloading those options in accordance with
the Guarantor's stock option arrangements, or (d) shares of Common Stock
acquired after the date hereof in an open market transaction.

         In furtherance of the foregoing, the Issuers, and any duly appointed
transfer agent for the registration or transfer of the securities described
herein, are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this Letter Agreement.

         The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Letter Agreement. All authority
herein conferred or agreed to be conferred and any obligations of the
undersigned shall be binding upon the successors, assigns, heirs or personal
representatives of the undersigned.

         The undersigned understands that, if the Purchase Agreement does not
become effective, or if the Purchase Agreement (other than the provisions
thereof which survive termination) shall terminate or be terminated prior to
payment for and delivery of the Securities to be sold thereunder, the
undersigned shall be released from all obligations under this Letter Agreement.

         The undersigned understands that the Initial Purchasers are entering
into the Purchase Agreement and proceeding with the Offering in reliance upon
this Letter Agreement.

                                   Exhibit E-2

<PAGE>

         This lock-up agreement shall be governed by and construed in accordance
with the laws of the State of New York.

                                   Very truly yours,

                                   Signature: ________________________

                                   Print Name: _______________________

                                   Exhibit E-3

<PAGE>

                                    EXHIBIT F

                             FORM OF WARRANT HOLDER

                            LOCK-UP LETTER AGREEMENT

                                                               July______ , 2003

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
         Incorporated
As Representative of the several Initial Purchasers named
     in the mentioned Purchase Agreement
c/o Merrill Lynch, Pierce, Fenner & Smith
         Incorporated
4 World Financial Center
New York, New York 10080

                  Re:      Proposed Offering by America West Airlines, Inc. of
                           Senior Exchangeable Notes due 2023, guaranteed by
                           America West Holdings Corporation

Ladies and Gentlemen:

         The undersigned understands that you, as Representative of the several
Initial Purchasers, propose to enter into a Purchase Agreement (the "PURCHASE
AGREEMENT") with America West Airlines, Inc., a Delaware corporation (the
"COMPANY") and America West Holdings Corporation, a Delaware corporation, as
guarantor (the "GUARANTOR," together with the Company, the "ISSUERS"), providing
for the offering (the "OFFERING"), pursuant to Rule 144A under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), by the several Initial
Purchasers named in Schedule A to the Purchase Agreement (the "INITIAL
PURCHASERS"), of Senior Exchangeable Notes due 2023 of the Company (the "INITIAL
SECURITIES") and the grant by the Issuers to the Initial Purchasers of the
option to purchase additional Senior Exchangeable Notes due 2023 to cover
over-allotments, if any (the "OPTION SECURITIES"). The Initial Securities,
together with the Option Securities, are collectively referred to as the
"SECURITIES". Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Purchase Agreement. The Guarantor, under the
Purchase Agreement, has agreed to guarantee the obligations of the Company in
respect of the securities.

         In consideration of the Initial Purchasers' agreement to purchase and
make the Offering of the Securities, and for other good and valuable
consideration receipt of which is hereby acknowledged, the undersigned hereby
agrees that, without the prior written consent of the Representative on behalf
of the Initial Purchasers, the undersigned will not, during the period
commencing the date hereof and ending 90 days from the date of the Offering
Memorandum relating to the Offering, (1) exercise its warrant to purchase class
B common stock, $.01 par value (the "COMMON STOCK") of the Guarantor, dated
January 18, 2002 (the "WARRANT"), (2) offer, pledge, announce the intention to
sell, sell, contract to sell, lend or otherwise transfer or dispose of, directly
or indirectly, the Warrant, (3) offer, pledge, announce the intention to sell,

                                   Exhibit F-1

<PAGE>

sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant for the sale of,
or lend or otherwise transfer or dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for or repayable with Common Stock (including without limitation,
Common Stock which may be deemed to be beneficially owned by the undersigned in
accordance with the rules and regulations of the Securities and Exchange
Commission and securities which may be issued upon exercise of a stock option or
warrant) or (4) enter into any swap or other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, any of the economic
consequences of ownership of the Common Stock, or any securities convertible
into or exchangeable or exercisable for or repayable with Common Stock, whether
any such transaction described in clause (1), (2), (3) or (4) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The undersigned agrees that, without the prior written consent of the
Representative on behalf of the Initial Purchasers, it will not, during the
period commencing the date hereof and ending 90 days from the date of the
Offering Memorandum, make any demand for or exercise any right with respect to,
the registration of any shares of Common Stock or any security convertible into
or exercisable or exchangeable for or repayable with Common Stock.

         In furtherance of the foregoing, the Issuers, and any duly appointed
transfer agent for the registration or transfer of the securities described
herein, are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this Letter Agreement.

         The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Letter Agreement. All authority
herein conferred or agreed to be conferred and any obligations of the
undersigned shall be binding upon the successors, assigns, heirs or personal
representatives of the undersigned.

         The undersigned understands that, if the Purchase Agreement does not
become effective, or if the Purchase Agreement (other than the provisions
thereof which survive termination) shall terminate or be terminated prior to
payment for and delivery of the Securities to be sold thereunder, the
undersigned shall be released from all obligations under this Letter Agreement.

         The undersigned understands that the Initial Purchasers are entering
into the Purchase Agreement and proceeding with the Offering in reliance upon
this Letter Agreement.

         This lock-up agreement shall be governed by and construed in accordance
with the laws of the State of New York.

                                   Exhibit F-2

<PAGE>

                                         Very truly yours,

                                         Signature: _________________________

                                         Print Name: ________________________

                                   Exhibit F-3Exhibit 10.1
                                                                    ------------

                         AGREEMENT OF PURCHASE AND SALE

                                     Between

                        ELEC COMMUNICATIONS CORP., SELLER

                                       And

                           BLUEGILL REALTY, LLC, BUYER

                                    Property
                              _____________________
                                 543 Main Street
                             New Rochelle, New York

<PAGE>

                                TABLE OF CONTENTS
                                -----------------

                                                                            Page
                                                                            ----

1.   AGREEMENT TO PURCHASE AND SELL; DOWN PAYMENT............................1

2.   OTHER PROPERTY INCLUDED IN PURCHASE AND SALE............................1

3.   BUYER'S INSPECTION OF THE PROPERTY......................................2

4.   TITLE...................................................................3

5.   FINANCING CONTINGENCY...................................................3

6.   SPECIAL CONDITIONS......................................................3

7.   REPRESENTATIONS AND WARRANTIES..........................................3

8.   CONDITIONS TO CLOSING...................................................7

9.   CLOSING.................................................................8

10.  PRORATIONS; HOLDBACK....................................................9

11.  EXPENSES................................................................9

12.  RISK OF LOSS; CASUALTY AND EMINENT DOMAIN..............................10

13.  BROKER'S COMMISSIONS...................................................11

14.  MANAGEMENT OF THE PROPERTY.............................................11

15.  DEFAULTS...............................................................12

16.  NOTICES................................................................12

17.  ASSIGNMENT.............................................................13

18.  ESCROW.................................................................13

19.  GENERAL PROVISIONS.....................................................16

EXHIBITS
"A"       -    Legal Description of the Real Property
"B"       -    Intentionally Deleted
"C"       -    Permitted Exceptions

<PAGE>

                         AGREEMENT OF PURCHASE AND SALE
                         ------------------------------

     THIS AGREEMENT OF PURCHASE AND SALE (this "Agreement") made as of the 2nd
day of June, 2003, between eLEC Communications Corp., a New York corporation
having an address at 543 Main Street, New Rochelle, New York 10801 ("Seller"),
and Bluegill Realty, LLC, a New York limited liability company, having an office
at 250 West 30th Street, New York, NY 10001 ("Buyer").

     1. Agreement to Purchase and Sell; Down Payment.
        --------------------------------------------

        1.1 Agreement to Purchase and Sell. Subject to and upon the terms and
            ------------------------------
conditions contained in this Agreement, Seller agrees to sell and convey to
Buyer and Buyer agrees to purchase from Seller the real property described on
Exhibit A attached hereto, together with all buildings and improvements thereon
---------
(the "Building"; the Building and the real property are, collectively, the
"Property"). For purposes of this Agreement, the improvements included under the
terms of this Agreement shall not include any server room air conditioners or
other equipment which Seller is permitted to remove from the Building prior to
Closing under the terms of Subsection 8.1.1 below. The total purchase price for
the Property under the terms and conditions of this Agreement shall be Two
Million Two Hundred Thousand and 00/100 Dollars ($2,200,000.00) (the "Purchase
Price").

     1.2 Down Payment; Payment of Purchase Price. Contemporaneously with the
         ----------------------------------------
execution and delivery of this Agreement, Buyer has paid a good faith deposit in
the amount of One Hundred Eight-Five Thousand and 00/100 Dollars ($185,000.00)
(together with the accrued interest the "Down Payment") to Buyer's attorney,
Anderson & Rottenberg, P.C. (the "Escrow Agent"), in its capacity as escrow
agent. The Down Payment constitutes a deposit to be applied, subject to the
provisions of this Agreement, toward the payment of the Purchase Price.
Notwithstanding the foregoing, in the event Buyer terminates this Agreement
pursuant to the terms hereof, the Down Payment and all interest earned thereon
shall be returned to Buyer. The Down Payment shall be invested by the Escrow
Agent in an interest-bearing account and all interest earned on the Down Payment
shall be paid to the party entitled to received the Down Payment. Buyer shall
pay Seller by wire transfer of federal funds at the Closing (hereinafter
defined) an amount (the "Closing Payment") equal to (i) the Purchase Price, (ii)
plus or minus net prorations provided for in this Agreement, and (iii) minus the
Down Payment (excluding any interest earned thereon). The Down Payment, less the
Holdback Payment, if applicable, shall be disbursed by the Escrow Agent in
accordance with the provisions of Article 18 of this Agreement.

     2. OTHER PROPERTY INCLUDED IN PURCHASE AND SALE.
        --------------------------------------------

     In addition to the Property, all right, title and interest of Seller, if
any, in and to the following, to the extent that the same apply to the Property
and are transferable or assignable, shall be included within the term "Property"
and shall be transferred from Seller to Buyer at Closing:

<PAGE>

        2.1 all easements, rights of way, privileges, licenses, appurtenances
and other rights and benefits running with the Property; and

        2.2 all consents, authorizations, variances, licenses, permits and
certificates of occupancy (collectively, the "Permits"), issued by any
governmental authority with respect to the Property.

     3. BUYER'S INSPECTION OF THE PROPERTY.
        ----------------------------------

        3.1 Inspection and Examination. During the period extending to and
            --------------------------
including the date that is sixty (60) days after the date hereof (the "Due
Diligence Period"), Buyer and Buyer's agents will be given the right to perform
nondestructive physical tests (except that Buyer may perform minor intrusive
testing to determine the presence of asbestos-containing materials), provided
that all damage resulting therefrom is promptly repaired by Buyer at its sole
expense and (ii) conduct any and all necessary engineering, environmental and
other inspections at the Property including test borings to the concrete slab of
the Building and examine and evaluate all relevant agreements and documents
within the possession of Seller or subject to its control, as Buyer may
reasonably request, provided that all damage resulting therefrom is promptly
repaired by Buyer at its sole expense. No soil and/or ground water sampling
shall be performed unless and until the location, scope and methodology of such
sampling and the environmental consultant selected by Buyer to perform such
sampling have all been approved by Seller, which approval shall not be
unreasonably withheld or delayed. Prior to conducting such sampling, Buyer shall
have a utility mark-out performed for the Property. Seller acknowledges that
Buyer shall have the right to perform testing of any underground or above ground
storage tanks on or beneath the Property, and, if necessary, perform soil
sampling of adjoining areas in connection therewith. With respect to Buyer's
right to inspect the Property, Buyer agrees that (i) Seller shall receive not
less than forty-eight (48) hours prior notice of each inspection, (ii) each
inspection shall be performed during normal business hours or at such other
times as Seller and Buyer shall mutually agree and (iii) Buyer and Buyer's
agents shall use all reasonable efforts to minimize any disruption to the
tenants, guests, employees, occupants of the Property and the operation thereof.
Buyer or Buyer's agents shall not perform any such inspection or examination
unless accompanied by Seller or its designee. Buyer's repair obligation set
forth in the first sentence of this Section shall survive the termination of
this Agreement.

        3.2 Right of Termination; Extension of Due Diligence Period. Except as
            -------------------------------------------------------
otherwise provided herein, Buyer's obligations under this Agreement shall be
contingent, only during the Due Diligence Period, upon Buyer being satisfied in
its sole discretion with the results of its investigation and evaluation of the
Property (the "Due Diligence Condition") and the Special Conditions set forth in
Article 6 hereof. Not later than five (5) business days prior to the expiration
of the Due Diligence Period, Buyer shall deliver a Notice to Seller that (i)
Buyer is not satisfied with the Due Diligence Condition and/or the Special
Conditions and Buyer has elected to terminate this Agreement (a "Termination
Notice"); or (ii) Buyer has elected to extend the Due Diligence Period for a
single thirty (30) day period to conduct further investigations and/or satisfy
the Special Conditions set forth in Article 6 (the "Extension Notice"); provided
however, that Buyer's right to deliver the one-time Extension Notice is subject
to the Extension Fee (as

                                       2

<PAGE>

hereinafter defined) held by the Escrow Agent as part of the Down payment being
deemed earned by Seller and non-refundable (provided Seller is not in default
under this Agreement). For the purposes hereof, the "Extension Fee" shall be the
sum of $18,000. If Buyer delivers the Termination Notice to Seller prior to the
expiration of the Due Diligence Period, the Down Payment and all interest earned
thereon shall be promptly returned to Buyer, less the Extension Fee which shall
be returned to Seller, and the parties hereto shall be released from all further
obligations and liabilities hereunder, except with respect to the covenants and
indemnities which survive the termination of this Agreement. In the event that
Buyer does not deliver the Extension Notice or the Termination Notice to Seller
prior to the expiration of the Due Diligence Period, Buyer shall be deemed to
have waived the Special Conditions and the Due Diligence Condition and Buyer's
right to terminate this Agreement pursuant to this Section 3.2, Article 5 and
Article 6, and this Agreement shall continue in effect subject to the other
provisions hereof. In the event Buyer has delivered the Extension Notice, the
Due Diligence Period shall be extended for a period of thirty (30) days to
conduct further investigations and/or attempt to fulfill the Special Conditions
and Buyer shall have the right to deliver a Termination Notice) not later than
five (5) business days prior to the expiration of the such extended Due
Diligence Period.

        3.3 Inspection Indemnity. Notwithstanding anything to the contrary
            --------------------
contained in this Agreement, any investigation or examination of the Property,
or materials provided by Seller with respect to the Property performed by Buyer
or Buyer's agents prior to the Closing shall be performed at the sole risk and
expense of Buyer, and Buyer shall be solely responsible for the acts or
omissions of any of Buyer's agents brought on, or to, the Property by Buyer. In
addition, Buyer shall defend, indemnify and hold Seller harmless from and
against all loss, expense (including, but not limited to, reasonable attorneys'
fees and court costs arising from the enforcement of this indemnity), damage and
liability resulting from claims for personal injury, wrongful death or property
damage against Seller or any of the Property arising from or as a result of, any
act or omission of Buyer and Buyer's agents in connection with any inspection or
examination of the Property or the books and records with respect thereto by
Buyer or Buyer's agents. The provisions of this Section 3.3 shall survive the
Closing or the earlier termination of this Agreement.

        3.4 Condition. As a material inducement to Seller to execute this
            ---------
Agreement, Buyers acknowledges, represents and warrants that, upon the
satisfaction or waiver of the Due Diligence Condition and the Special
Conditions, (i) Buyer will have fully examined and inspected the Property,
including the construction, renovation, operation and leasing of the Property,
together with the review materials and such other documents and materials with
respect to the Property which Buyer deems necessary or appropriate in connection
with its investigation and examination of the Property, (ii) Buyer will have
accepted and will be fully satisfied in all respects with the foregoing and with
the physical condition, value, presence/absence of hazardous or toxic materials,
financing status, use, leasing, operation, tax status, income and expenses of
the Property, (iii) the Property will be purchased by Buyer "AS IS" and "WHERE
IS" and with all faults and, upon Closing, Buyer shall assume responsibility for
the physical and environmental condition of the Property and (iv) Buyer will
have decided to purchase the Property solely on the basis of its own independent
investigation. Except as expressly set forth herein or in any document executed
by Seller and delivered to Buyer at Closing ("Seller's Documents") Seller has
not made, does not make, and has not authorized anyone else to make

                                       3

<PAGE>

any representation as to the present or future physical condition, value,
presence/absence of hazardous or toxic materials, financing status, leasing,
operation, use, tax status, income and expenses or any other matter or thing
pertaining to the Property, and Buyer acknowledges that no such representation
or warranty has been made and that in entering into this Agreement it does not
rely on any representation or warranty other than those expressly set forth in
this Agreement or in Seller's Documents. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT OR IN SELLER'S DOCUMENTS, SELLER MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED OR ARISING BY OPERATION OF LAW, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY, OR FITNESS
FOR A PARTICULAR PURPOSE OF THE PROPERTY. Seller shall not be liable for or
bound by any verbal or written statements, representations, real estate broker's
"setups" or information pertaining to the Property furnished by any real estate
broker, agent, employee, servant or other person unless the same are
specifically set forth in this Agreement or in Seller's Documents. The
provisions of this Section 3.4 shall survive the Closing.

        3.5 Vacate Notice. Prior to the expiration of the Due Diligence Period,
            -------------
Buyer shall have the right to deliver a 60-day notice to Seller (the "Vacate
Notice), requiring that Seller vacate the Property and place the Property in the
condition required at the Closing (as set forth in Subsection 8.1.1 below)
within 60 days thereafter. Buyer's delivery of the Vacate Notice shall be deemed
waiver by Buyer to terminate this Agreement pursuant to Section 3.2, Article 6
and the financing contingency set forth in Article 5 hereof.

     4. Title.
        -----

        4.1 Title. Buyer shall cause a nationally recognized title insurance
            -----
company (the "Title Company") to issue to Buyer (with a copy to Seller), within
thirty (30) days after the date hereof, a title insurance commitment for the
Property (the "Title Commitment"). The title insurance policy to be issued at
the Closing by the Title Company pursuant to the Title Commitment (the "Title
Policy") shall be a standard form of owner's ALTA policy insuring Buyer's fee
simple interest in the Property. Seller shall cause the Title Policy to be
issued to Buyer subject only to the Permitted Exceptions (hereinafter defined)
and free and clear of all standard or general exceptions contained in the Title
Commitment which the Title Company is permitted by applicable law to remove or
modify upon delivery of the Survey (hereinafter defined) and standard title
affidavits from Seller.

        4.2 Survey. Buyer may obtain a current "as-built" survey of the Building
            ------
situated on the Property (the "Survey") (with a copy to Seller) after the date
hereof certified to Buyer, the Title Company and any other party required by
Buyer.

        4.3 Title Defects. Buyer shall give Notice to Seller (the "Defects
            -------------
Notice") of any claim, lien or exception materially and adversely affecting
title to the Property and which Buyer is not willing to waive (a "Defect").
Seller shall have the right, but not the obligation, to cure any Defect within
fifteen (15) days after its receipt of the Defects Notice, or in the case of any
Defect which cannot with due diligence be cured within such 15-day period, such
later date

                                       4

<PAGE>

by which such Defect can reasonably be cured, provided that Seller commences to
cure such Defect within such 15-day period and thereafter continues diligently
and in good faith to cure the Defect. The Closing shall be extended, if
necessary, in order to permit the cure described above, but in no event shall
the date of the Closing be extended for more than sixty (60) days. In the event
that Seller elects not to cure any such Defect, Seller shall notify Buyer of
such election within five (5) business days after its receipt of the Defects
Notice. If Seller elects not to cure any Defect as set forth above or, if by the
expiration of the cure period provided for above, Seller has failed to cure all
Defects, Buyer may, at its option, either (i) proceed to close subject to any
such Defects, with no offset against, or reduction in, the Purchase Price or
(ii) terminate this Agreement by written notice given to Seller within five (5)
business days after the expiration of the cure period or Seller's notice of
election not to cure any Defect, as the case may be. In the event this Agreement
is so terminated by Buyer, the Down payment shall be delivered to Buyer and the
parties shall be released from all further obligations and liabilities
hereunder, except with respect to the covenants and indemnities which expressly
survive the Closing or termination of this Agreement. Notwithstanding anything
to the contrary contained in this Section 4.3, in the event that any Defect(s)
is a mechanic's or materialmen's lien or other encumbrance securing the payment
in the aggregate of a readily ascertainable sum of money of up to $30,000,
Seller shall satisfy such Defect(s) of record or, as an alternative to causing
such Defect(s) to be satisfied of record and provided that the Title Company
agrees to omit such Defect(s) from the Title Policy by (i) bond or cause to be
bonded such Defect(s); (ii) delivering or cause to be delivered to Buyer or the
Title Company, on the date of the Closing, instruments in recordable form and
sufficient to satisfy such Defect(s) of record, together with the appropriate
recording or filing costs; (iii) depositing or cause to be deposited with the
Title Company sufficient monies, acceptable to and reasonably requested by the
Title Company, to assure the obtaining and recording of a satisfaction of the
Defect(s); or (iv) otherwise cause the Title Company to omit such Defect(s) from
the Title Policy.

     4.4 Permitted Title Exceptions. All items set forth in the Exhibit C
         --------------------------                             ---------
annexed hereto and made a part hereof shall be deemed "Permitted Exceptions".

     5. FINANCING CONTINGENCY.
        ---------------------

     5.1 Mortgage Commitment Contingency. (a) In addition to the satisfaction of
         -------------------------------
the Due Diligence Condition and the Special Conditions, the obligation of Buyer
to purchase under this Agreement is conditioned upon issuance, on or before 60
days after the date hereof, subject to an extension for any extension of the Due
Diligence Period (the "Commitment Date"), of a written commitment from an
Institutional Lender pursuant to which such Institutional Lender agrees to make
a first mortgage acquisition and development loan to Buyer, at Buyer's sole cost
and expense, at the prevailing fixed or adjustable rate of interest and on other
customary commitment terms for similar transactions (the "Commitment"). A
commitment conditioned on the Institutional Lender's approval of an appraisal
shall not be deemed a "Commitment" hereunder until an appraisal is approved (and
if that does not occur before the Commitment Date, Buyer may cancel this
Agreement unless the Commitment Date is extended).

                                       5

<PAGE>

     5.2 Buyer shall (i) make prompt application to one or, at Buyer's election,
more than one Institutional Lender for such mortgage loan, (ii) pay all fees,
points and charges required in connection with such application and loan, (iii)
pursue such application with diligence, and (iv) cooperate in good faith with
such Institutional Lender(s) to obtain a Commitment. Buyer shall accept a
Commitment meeting the terms set forth above and shall comply with all
requirements of such Commitment (or any other commitment accepted by Buyer).
Buyer shall furnish Seller with a copy of the Commitment promptly after receipt
thereof.

     5.3 If all Institutional Lenders to whom applications were made deny such
applications in writing prior to the Commitment Date, Buyer may cancel this
Agreement.

     5.4 If no Commitment is issued by the Institutional Lender on or before the
Commitment Date, then, unless Buyer has accepted a written commitment from an
Institutional Lender that does not conform to the terms set forth herein, Buyer
may cancel this Agreement by giving Notice to Seller within 5 business days
after the Commitment Date.

     5.5 If this Agreement is canceled by Buyer neither party shall thereafter
have any further rights against, or obligations or liabilities to, the other by
reason of this Agreement, except that the Down Payment shall be promptly
refunded to Buyer.

     5.6 If Buyer fails to give timely notice of cancellation or if Buyer
accepts a written commitment from an Institutional Lender that does not conform
to the terms set forth in herein, then Buyer shall be deemed to have waived
Buyer's right to cancel this Agreement and to receive a refund of the Down
Payment by reason of the financing contingency.

     5.7 The attorneys for the parties are hereby authorized to give and receive
on behalf of their clients all Notices and deliveries under this Section.

     5.8 For purposes of this Agreement, the term "Institutional Lender" shall
mean any bank, savings bank, private banker, trust company, savings and loan
association, credit union or similar banking institution whether organized under
the laws of this state, the United States or any other state; foreign banking
corporation licensed by the Superintendent of Banks of New York or regulated by
the Comptroller of the Currency to transact business in New York State;
insurance company duly organized or licensed to do business in New York State;
mortgage banker licensed pursuant to Article 12-D of the Banking Law; and any
instrumentality created by the United States or any state with the power to make
mortgage loans.

<PAGE>

     6. Special Conditions. Buyer contemplates acquiring the Property for the
        -------------------
construction and development of a 7-story multi-family housing project
containing ground floor retail space and six floors of residential space
comprising not less than 96,000 gross square feet in the aggregate, together
with parking and other appurtenant facilities. Seller acknowledges that the
Property may be of no use to Buyer unless certain conditions precedent to such
use exists, but nothing in this Agreement, by implication or otherwise, shall be
interpreted to require Buyer to construct or operate any improvement on the
Property. Buyer's obligation to close the transaction contemplated herein shall
be conditioned upon Buyer satisfying itself within the Due Diligence Period that
the following contingencies (collectively, the "Special Conditions") are met:

        6.1 The construction of the improvements contemplated by Buyer will not
require extraordinary, excessive, or unusually costly construction techniques,
and drainage of both surface and subsurface water can be accomplished by
ordinary construction techniques not involving unusual or excessive costs.

        6.2 All utilities, including electricity, telephone, gas, water (fire
and domestic), storm and sanitary sewer, are, or will be at the time of Closing,
available on site or on the Property's side of abutting streets of size and
capacity sufficient to serve the contemplated uses.

        6.3 Buyer shall be satisfied with the Due Diligence Conditions.

        6.4 Buyer shall have received all necessary governmental approvals for
the site plan for the use and development of the Property (the "Final Site
Plan"), including the granting of any variances or rezoning of the Property and
parking requirements, acceptable to Buyer in Buyer's sole and absolute
discretion, and all time periods for appeal of such approvals have expired
without contest.

        6.5 If, in addition to approval of the Final Site Plan, the Property
must be platted, a plat map acceptable to Buyer, in Buyer's sole and absolute
discretion has received all necessary approvals, (the "Plat Plan"). The plat
plan shall not be acceptable to Buyer if it (or any municipal ordinance enacted
in conjunction with the approval of it) contains any conditions to, or
reservation of, approvals necessary for the issuance of building permits or a
certificate of occupancy, other than compliance with applicable building codes.

        6.6 All permits, licenses and other governmental and quasi-governmental
authorizations (exclusive of building permits) required or deemed necessary by
Buyer for the development of the Property in accordance with the Final Site Plan
have been issued and are outstanding, (ii) shall not be subject to any
conditions other than the closing of the transaction contemplated by this
Agreement and the obtaining of building permits, and (iii) the time periods for
appeal of issuance of such permits, licenses and other authorizations shall have
expired without contest (collectively, the "Approvals").

                                       7
<PAGE>

        6.7 The City of New Rochelle industrial development authority (or
similar governmental agency(ies) or authorities providing benefits to promote
housing and economic development) shall have issued its Approvals for the
exemption of the Property from the payment of sales taxes in connection with the
costs of development and an exemption from the payment of mortgage recording tax
in connection with any acquisition and construction financing.

     If any of the special conditions set forth in this Article 6 have not been
obtained to the satisfaction of Buyer, in its sole and absolute discretion, then
Buyer may, at its sole option, terminate this Agreement by giving written notice
to Seller at any time on or before the expiration of the Due Diligence Period,
as same may be extended. Upon such termination, both parties shall be released
from all duties and obligations under this Agreement, except as otherwise
provided in this Agreement. The Special Conditions set forth in this Article 6
are for Buyer's sole benefit, and Buyer may, in its sole and absolute
discretion, waive (conditionally or absolutely) the fulfillment of any one or
more of the conditions, or any part thereof.

     7. Representations and Warranties.
        ------------------------------

        7.1 Representations and Warranties of Seller. Seller makes the following
            ----------------------------------------
representations and warranties to Buyer, which representations and warranties
shall be true and correct in all material respects as of the date hereof and as
of the Closing:

        7.1.1 Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York.

        7.1.2 The execution, delivery and performance of this Agreement and all
other documents, instruments and agreements now or hereafter to be executed and
delivered by Seller pursuant to this Agreement are within the power of Seller
and have been duly authorized by all necessary or proper corporate action.

        7.1.3 Seller is not a "foreign person" as defined in Section 1445(f) (3)
of the Internal Revenue Code of 1986, as amended.

        7.1.4 As of the date hereof there is no pending suit or action against
Seller which, if adversely decided, would prevent the consummation of the
transaction contemplated by this Agreement. Without limiting the generality of
the foregoing, to the best of Seller's knowledge, as of the date hereof there
are no actual or threatened suits, actions or proceedings with respect to all or
part of the building or the Property (a) for condemnation or (b) alleging any
material violation of any applicable law, regulation, ordinance or code
(collectively, "Laws and Regulations").

        7.1.5 Seller has not received any written notice (which remains uncured)
from any governmental authority stating that any of the improvements or the
Property violates any Laws and Regulations in any material respect.

                                       8

<PAGE>

        7.1.6 As of the date hereof and as of the Closing, the improvements
located on the Property are, to the best of Seller's knowledge, in good working
condition, and there are no outstanding repairs or work orders which remain to
be done.

        7.1.7 As of the date hereof, there are no lease agreements affecting the
Real Property or any portion thereof.

        7.1.8 With respect to the Service Contracts (as hereinafter defined):

          (a) As of the date hereof, there are no equipment leases or service,
     maintenance or other similar contracts or agreements affecting the Property
     or any portion thereof (collectively, the "Service Contracts"); and

          (b) As of the Closing Date, Seller shall have terminated all of the
     Service Contracts, shall have paid for all the work performed under the
     Service Contracts and will not be indebted for labor or materials that
     might result in the filing of a mechanic's line against the Sign or the
     Property.

        7.2 Limitations of Seller's Representations. The representations and
            ---------------------------------------
warranties of Seller contained in Section 7.1 are made as of the date hereof and
shall be true and correct as of the Closing. The representations and warranties
set forth in Subsections 7.1.1, 7.1.2, 7.1.3 and 7.1.4 shall survive the
Closing. The representations and warranties set forth in Subsections 7.1.5,
7.1.7 and 7.1.8 shall survive the Closing to the date (the "Representation
Termination Date") occurring six (6) months after the date of the Closing, at
which time such representations and warranties shall terminate and be of no
further force or effect. All other representations and warranties made by Seller
in this Agreement, unless expressly provided otherwise, shall not survive the
Closing.

        7.3 Representations and Warranties of Buyer. Buyer makes the following
            ---------------------------------------
representations and warranties to Seller, which representations and warranties
shall be true and correct in all material respects on the date hereof and as of
the Closing:

        7.3.1 Buyer is a limited liability company, duly organized, validly
existing and in good standing under the laws of the State of New York.

        7.3.2 The execution, delivery and performance of this Agreement and all
other documents, instruments and agreements now or hereafter to be executed and
delivered by Buyer pursuant to this Agreement are within the corporate power of
Buyer and have been duly authorized by all necessary or proper action.

The representations and warranties of Buyer contained in this Section 7.3 shall
survive the Closing.

     8. ConditionS to Closing.
        ---------------------

        8.1 Conditions to Obligations of Buyer. The obligations of Buyer to
            ----------------------------------
execute and deliver the applicable Buyer's Closing Documents, to pay the
Purchase Price and to perform

                                       9
<PAGE>

Buyer's other obligations at the Closing under this Agreement are and shall be
subject to the satisfaction of each of the following conditions at or prior to
the Closing:

        8.1.1 Seller shall have capped off or otherwise terminated all fiber
optic internet connections or other cabling connections to Seller's business
equipment in the Building and shall have removed all trade fixtures, equipment,
racks, servers, switches, routers, shelving installations, inventory, furniture,
furnishings and all other personal property in the Building and shall deliver
the Property to Buyer at Closing in "broom clean" condition. Seller shall have
the right, on or prior to Closing, to remove any server room air conditioners
and other equipment utilized in Seller's business operations which may be
incorporated into the improvements to the Building and deemed a fixture;
provided Seller repairs any damage caused by such removal and delivers the
Property in "broom clean" condition. Any server room air conditioners and other
equipment incorporated as an improvement to the Building which is not removed on
or prior to Closing shall be deemed abandoned by Seller and may be sold,
disposed or demolished by Buyer, in Buyer's sole discretion.

        8.1.2 Seller shall have simultaneously executed (where applicable) and
delivered the Seller's Closing Documents to be executed and delivered by Seller
and delivered to Buyer all other documents and items required of Seller under
this Agreement.

        8.1.3 The Title Company shall have delivered to Buyer, upon Buyer's
payment of the premium therefor at its sole cost and expense, a written
commitment to issue a Title Policy insuring Buyer's fee simple interest in the
Property in the amount of the Purchase Price, subject to no title exception,
other than the Permitted Exceptions.

        8.1.4 All of the representations and warranties of Seller contained in
this Agreement shall have been true and correct when made, and shall be true and
correct on the Closing Date with the same effect as if made on and as of such
date.

        8.1.5 Seller shall have performed, observed, and complied with all
covenants, agreements, and conditions required by this Agreement to be
performed, observed, and complied with on Seller's part prior to or as of the
Closing Date.

        8.1.6 All of the Special Conditions have been satisfied or waived in
writing by Buyer.

     8.2 Conditions to Obligations of Seller. The obligations of Seller to
         -----------------------------------
execute and deliver the applicable Seller's Closing Documents, and to perform
Seller's other obligations at the Closing under this Agreement are and shall be
subject to the satisfaction of each of the following conditions:

        8.2.1 Buyer shall have simultaneously executed (where applicable) and
delivered the Buyer's Closing Documents to be executed and delivered by Buyer
and delivered to Seller all other documents and items required of Buyer under
this Agreement.

        8.2.2 Buyer shall pay the Purchase Price and all other amounts as
required hereunder. The Purchaser agrees, on reasonable prior notice prior to
Closing, to provide

                                       10
<PAGE>

for certified or bank checks out of the proceeds of sale, in the sums provided
by Seller, to be delivered at Closing.

        8.2.3 Buyer shall have performed, observed, and complied with all
covenants, agreements, and conditions required by this Agreement to be
performed, observed, and complied with on Buyer's part prior to or as of the
Closing Date.

     9. Closing.
        -------

        9.1 Time and Place. The closing contemplated by this Agreement (the
            --------------
"Closing") shall take place on or before the date which shall be sixty (60) days
(the "Closing Date") after the expiration of the Due Diligence Period, as same
may be extended, at the offices of the Buyer's attorneys or at the offices of
Buyer's purchase money lender ("Lender") or at such other place as the parties
shall mutually agree. Notwithstanding the foregoing, Buyer may elect to
accelerate the Closing Date once the conditions precedent in Articles 3, 5 and 6
have been satisfied or waived by Buyer, provided Seller shall have not less than
60 days in which to vacate the Building and remove its property therefrom.

        9.2 Seller's Closing Documentation and Requirements. At the Closing,
            -----------------------------------------------
Seller shall deliver the following documents ("Seller's Closing Documents") to
Buyer:

        9.2.1 a bargain and sale deed with covenants (the "Deed"), duly executed
and acknowledged and in recordable form, conveying to Buyer fee simple title to
the Property, subject only to the Permitted Exceptions;

        9.2.2 (Intentionally Deleted);

        9.2.3 an assignment, duly executed and acknowledged, of any other
property included in the purchase and sale of the Property pursuant to the terms
of Article 2 hereof;

        9.2.4 an affidavit stating, under penalty of perjury, Seller's United
States taxpayer identification number and that Seller is not a "foreign person"
as defined in Section 1445(f) (3) of the Internal Revenue Code of 1986, as
amended, and otherwise in the form prescribed by the Revenue Service;

        9.2.5 executed originals of the Service Contracts, to the extent within
Seller's possession or subject to Seller's control;

        9.2.6 a certificate, dated as of the Closing, of the Secretary or an
Assistant Secretary of Seller with respect to (i) the resolutions adopted by the
Board of Directors of the Seller approving this Agreement and the transaction
contemplated hereby and (ii) the incumbency and specimen signature of each
officer of the Seller executing this Agreement and the documents set forth in
this Section 8.2;

        9.2.7 a certified good standing of Seller issued by the Secretary of
State of its State of origination within seven (7) business days of the Closing.

                                       11

<PAGE>

        9.2.8 such other documents and instruments as Buyer may reasonably
request in order to consummate the transaction contemplated hereby.

        9.3 Buyer's Closing Documentation and Requirements. At the Closing,
Buyer shall pay the balance of the Purchase Price in accordance with the
provisions of this Agreement and shall deliver the following documents (the
"Buyer's Closing Documents") to Seller:

        9.3.1 a certificate, dated as of the Closing, of the Managing Member or
Manager, as applicable, of Buyer with respect to (i) the resolutions adopted by
the members of Buyer approving this Agreement and the transaction contemplated
hereby and (ii) the incumbency and specimen signature of each officer of Buyer
executing this Agreement and the documents set forth in this Section 8.3; and

        9.3.2 such other documents and instruments as Seller may reasonably
request in order to consummate the transaction contemplated hereby.

     10. PRORATIONS/HOLDBACK.
         -------------------

        10.1 Prorations. The following shall be prorated between the parties as
             ----------
of 11:59 p.m. of the day preceding the date of the Closing; real estate taxes
and personal property taxes (if any) for the current fiscal year and such other
items of income and expense, if any, as are customarily prorated in transactions
of this nature.

        10.2 Real Estate Taxes. If, on the date of the Closing, the real estate
             -----------------
tax rate and/or the assessed valuation is not fixed for the then current fiscal
year, real estate taxes shall be apportioned upon the basis of the tax rate
and/or the assessed valuation for the next preceding fiscal year, but such taxes
shall be readjusted at the request of Seller or Buyer as soon as the applicable
rate and assessed valuation are fixed. The provisions of this Section shall
survive the Closing.

        10.3 Utilities. Seller shall endeavor to have all meters read and final
             ---------
bills rendered for all utilities servicing the Property, including, without
limitation, water, sewer, gas and electricity, for the period to and including
the day preceding the Closing, and Seller shall pay such bills. The provisions
of this Section shall survive the Closing.

        10.4 Holdback. If Buyer has delivered the Vacate Notice and Seller fails
             --------
to vacate the Building and remove all property as required pursuant to
Subsection 8.1.1 hereof within 60 days thereafter, TIME BEING OF THE ESSENCE, or
if Buyer has not delivered the Vacate Notice, and Seller fails to vacate the
Property and remove all property within 60 days after the expiration of the Due
Diligence Period, TIME BEING OF THE ESSENCE, and the Closing shall occur,
provided that an amount equal to $250,000 (the "Holdback Payment") shall be held
by the Escrow Agent from the proceeds otherwise payable at Closing, pending
written direction by both parties to the Escrow Agent that Seller fulfilled its
obligations pursuant to Subsection 8.1.1. Buyer and Seller shall schedule a
walk-through of the Property approximately 10 days prior to the Closing Date and
both parties shall prepare and execute a schedule of items to be removed and/or
work to be performed prior to the Closing.

                                       12

<PAGE>

        10.5 Errors. If any errors or omissions are made at the Closing
             ------
regarding adjustments or prorations, the parties shall make the appropriate
corrections promptly after the discovery thereof. The provisions of this Section
shall survive the Closing.

     11. Expenses.
         --------

        11.1 Expenses of Buyer. Buyer shall pay (a) the premium for the Title
             -----------------
Policy and the cost of all endorsements and any extended coverage obtained by
Buyer thereunder; and (b) all recording fees on any document recorded pursuant
to this Agreement, and (c) all of its due diligence costs and fees.

        11.2 Expenses of Seller. Seller shall pay all applicable transfer taxes
             ------------------
with respect to the transactions contemplated hereby.

        11.3 Attorney's Fees. Each party shall pay its own attorney's fees and
             ---------------
all of its other expenses, except as otherwise expressly set forth herein.

     12. Risk of Loss; Casualty and Eminent Domain.
         -----------------------------------------

        12.1 Casualty. If, prior to the Closing, the Building or the Property is
             --------
damaged by fire, vandalism, acts of God or other casualty or cause, Seller shall
promptly give Buyer notice of any such damage (the "Damage Notice"), together
with Seller's estimate of the cost and period of repair and restoration. In any
such event: (a) in the case of damage to the Building or the Property of less
than $100,000 and from a risk covered by insurance maintained with respect to
the Building or the Property, Buyer shall take the Building or the Property at
the Closing as it is together with any applicable insurance proceeds or the
right to receive the same without reduction in the Purchase Price (provided that
Seller shall perform any repairs to the Building to the extent required under
applicable law); or (b) in the case of either (i) damage to the Building or the
Property of $100,000 or more or (ii) damage to the Building or the Property from
a risk not covered by insurance, Buyer shall have the option of (x) taking the
Property at the Closing in accordance with item (a) above or (y) terminating
this Agreement. If, pursuant to the preceding sentence, Buyer is either
obligated or elects to take the Property as it is together with any applicable
insurance proceeds or the right to receive the same, Seller agrees to cooperate
with Buyer in any loss adjustment negotiations, legal actions and agreements
with the insurance company, and to assign to Buyer at the Closing its rights to
any such insurance proceeds with respect to such claim, less all reasonable
out-of-pocket documented expenses incurred by Seller in connection with the
settlement of insurance claims. Seller will not settle any insurance claims or
legal actions relating thereto without Buyer's prior written consent, which
consent shall not be unreasonably withheld or delayed.

        12.2 Eminent Domain. If, prior to the Closing, all or substantially all
             --------------
of the Building or the Property is taken by eminent domain, this Agreement shall
be terminated without further act or instrument. If a material part of the
Building or the Property is so taken, Buyer shall have the option, by written
notice given to Seller within fifteen (15) days after receiving notice of such
taking, to terminate this Agreement. If Buyer does not elect to terminate this
Agreement, it shall remain in full force and effect and Seller shall assign,
transfer and set over to

                                       13

<PAGE>

Buyer at the Closing all of Seller's right, title and interest in and to any
awards that may be made for such taking. Notwithstanding anything to the
contrary contained herein, if less than a material part of the Property is so
taken, Buyer shall proceed with the Closing and take the Property as affected by
such taking, together with all awards or the right to receive same. For the
purposes of this Section, a part of the Property shall be deemed "material" if
it (i) includes any of the Building or (ii) otherwise (on a permanent basis)
limits or restricts ingress and egress to and from the Property.

        12.3 Termination. If this Agreement is terminated pursuant to this
             -----------
Section, the Down Payment shall be promptly returned to Buyer and the parties
hereto shall be released from all further obligations and liabilities hereunder,
except with respect to the covenants and indemnities which expressly survive
termination.

        12.4 The provisions of this Article 12 are express provisions to the
contrary of the Uniform Vendor and Purchaser Risk Act (Section 5-1311 of the New
York General Obligations Law).

     13. Broker's Commissions.
         --------------------

     Buyer and Seller represent and warrant to each other that neither they nor
their affiliates have dealt with any broker or finder in connection with the
transaction contemplated by this Agreement. Buyer and Seller each agrees to
indemnify, defend and hold the other harmless from and against all loss, expense
(including reasonable attorneys, fees and court costs), damage and liability
resulting from the claims of any broker or finder (including anyone claiming to
be a broker or finder) on account of any services claimed to have been rendered
to the indemnifying party in connection with the transaction contemplated by
this Agreement. The provisions of this Section shall survive the Closing or the
earlier termination of this Agreement.

     14.  Management of the Property.
          --------------------------

     14.1 Between the date of this Agreement and the date of the Closing: (i)
Seller shall cause the Property to be operated, maintained and managed in a
manner consistent with the present management of the Property and in
substantially the same manner as the same has been operated by Seller prior to
the execution and delivery of this Agreement; and (ii) Seller shall not enter
into any contract or agreement that would remain binding on the owner of the
Property after the Closing without the prior written consent of Buyer, which
consent shall be determined in Buyer's sole discretion.

     15.  Defaults.
          --------

        15.1 By Buyer. If, prior to the Closing, Buyer is in default with
             --------
respect to, or breaches or fails to perform one or more of the representations,
covenants, warranties or other terms of this Agreement, and such default, breach
or failure is not cured or remedied within ten (10) business days after receipt
of written notice thereof given by Seller to Buyer, Seller may terminate this
Agreement and, as its sole remedy, receive the Down Payment from the Escrow
Agent, as liquidated damages, in which event this Agreement shall be deemed null
and void and the parties shall be released from all further obligations and
liabilities under this Agreement,

                                       14

<PAGE>

except with respect to the covenants and indemnities which expressly survive
Closing or other termination. It is recognized by Seller and Buyer that the
damages Seller will sustain by reason of Buyer's default, breach or failure will
be substantial, but difficult, if not impossible, to ascertain. The Down Payment
has been determined by the parties as a reasonable sum for damages.

        15.2 By Seller. If, prior to the Closing, Seller is in default with
             ---------
respect to, or breaches, or fails to perform one or more of the representations,
covenants, warranties or other terms of this Agreement, and such default, breach
or failure is not cured or remedied within ten (10) business days after receipt
of written notice thereof given by Buyer to Seller, Buyer may either (a)
terminate this Agreement, in which event the Down payment and all interest
earned thereon shall be returned by the Escrow Agent to Buyer and the parties
shall be released from all further obligations and liabilities under this
Agreement, except with respect to the covenants and indemnities which expressly
survive termination, or (b) sue for specific performance. The remedies set forth
above shall be Buyer's sole remedies arising from a default, breach or failure
to perform by Seller prior to the Closing.

     16. Notices.
         -------

     Any notice, demand, consent, authorization or other communication
(collectively, a "Notice") which either party is required or may desire to give
to or make upon the other party pursuant to this Agreement shall be effective
and valid only if in writing, signed by the party giving such Notice, and
delivered to the other party by express courier or delivery service or by
registered or certified mail of the United States Postal Service, return receipt
requested, and addressed to the other party as follows (or to such other address
or person as either party or person entitled to notice may by Notice to the
other specify) or sent by facsimile transmission to the fax number shown below
(provided reasonable evidence of delivery is obtainable):

              To Seller:                  Paul H. Riss, President
                                          eLEC Communications Corp.
                                          543 Main Street
                                          New Rochelle, NY 10801
                                          Telephone: (914) 632-8005
                                          Facsimile: (914) 633-6599

                                          With a copy to:
                                          Alexander Minella, Esq.
                                          2815 Middletown Road
                                          Bronx, New York 10461

                                          Telephone: (718) 824-7600
                                          Facsimile:   (718) 792-7478

              To Buyer:                   Bluegill Realty, LLC
                                          250 West 30th Street
                                          New York, NY 10001
                                          Attention: Geoffrey J. Weir, Principal

                                       15

<PAGE>

                                          Telephone: (646) 435-8100
                                          Facsimile: (646) 435-8101

                                          With a copy to:

                                          Anderson & Rottenberg, P.C.
                                          369 Lexington Avenue
                                          New York, NY  10017
                                          Attention: Charles S. Rich, Esq.
                                          Telephone: (212) 661-3080
                                          Facsimile:  (212) 867-1914

                                       15

<PAGE>

     Unless otherwise specified, notices shall be deemed given when received,
but if delivery is not accepted, on the earlier of the date delivery is refused
or the third day after the same is deposited with the United States Postal
Service.

     17. Assignment.
         ----------

     This Agreement and all rights of Buyer arising hereunder shall not be
assigned, sold, pledged or otherwise transferred by Buyer in whole or in part,
without the prior written consent of Seller, except to an entity affiliated with
the Buyer named herein.

     18.  ESCROW.
          ------

        18.1 Seller and Buyer hereby designate the Escrow Agent to receive and
hold subject to the provisions of this Section 18, the Down Payment delivered
herewith by Buyer in accordance with Section 1.2 hereof and the Escrow Agent
hereby acknowledges receipt of the Down Payment and agrees to act as such escrow
agent in accordance with and subject to the provisions of this Section 18.

        18.2 The Down Payment shall be held by the Escrow Agent in an interest
bearing account selected by the Escrow Agent. All interest accruing on the Down
Payment shall be paid to the party entitled to the Down Payment as and when the
Down Payment is paid in accordance with the terms of this Agreement.

        18.3 The Escrow Agent shall deliver the Down Payment to Seller or to
Buyer, as the case may be, in accordance with the following conditions:

               (i) At the Closing, upon consummation of the transaction
          contemplated herein, the Escrow Agent shall pay the Down Payment to
          Seller or as otherwise directed by Seller, and the Down Payment shall
          be credited against the Purchase Price.

               (ii) If the Escrow Agent shall receive a written demand from
          Seller for the Down Payment, stating that Buyer has defaulted in the
          performance of its obligations hereunder and stating the facts and
          circumstances constituting

                                       16
<PAGE>

          such default; the Escrow Agent shall pay the Down Payment to Seller,
          provided, however, that the Escrow Agent shall not honor such demand
          until ten (10) business days after the Escrow Agent has mailed a copy
          of such demand to the Buyer, nor thereafter if the Escrow Agent shall
          have received a written notice of objection from Buyer in accordance
          with the provisions of Section16.4 below.

               (iii) If the Escrow Agent shall receive a written demand from
          Buyer for the Down Payment stating that this Agreement has been
          terminated in accordance with the provisions hereof and that Buyer is
          entitled to a return of the Down Payment, or that Seller has defaulted
          in the performance of its obligations hereunder, and stating the facts
          and circumstances constituting such default; the Escrow Agent shall
          pay the Down Payment to Buyer, provided, however, that the Escrow
          Agent shall not honor such demand until ten (10) business days after
          the Escrow Agent has mailed a copy of such demand to Seller, nor
          thereafter if the Escrow Agent shall have received written notice of
          objection from Seller in accordance with the provisions of Section
          18.4 below.

        18.4 Upon receipt of written demand (the "Demand Notice") for the Down
Payment from Buyer or Seller (the "Claiming Party") pursuant to [Section
18.3(ii) or (iii)] above, the Escrow Agent shall promptly give notice to the
other party (the "Recipient Party"). The Recipient Party shall have the right to
object to the release of the Down Payment by the Escrow Agent by written notice
to the Escrow Agent of such objection (the "Notice of Objection") at any time
prior to the expiration of ten (10) business days after the Escrow Agent has
mailed a copy of the Demand Notice to the Recipient Party. For purposes of this
Section 18 any Notice of Objection sent to the Escrow Agent by any Recipient
Party shall be deemed received by the Escrow Agent on the date actually received
by the Escrow Agent. Notwithstanding the foregoing, as an accommodation, the
Escrow Agent may provide the Recipient Party with an advance copy of the Demand
Notice by personal delivery and/or telecopier, but such advance notice shall not
affect the notice period provided for herein. Any Notice of Objection shall set
forth the basis for objections to the release of the Down Payment by the Escrow
Agent. Upon receipt of such Notice of Objection, the Escrow Agent shall promptly
mail a copy thereof to the Claiming Party.

        18.5 The description and veracity of the facts and circumstances of any
alleged default as set forth in any Demand Notice, and the statement of the
basis of any objection raised in any Notice of Objections, shall not be
considered by the Escrow Agent in the performance of its duties hereunder, but
are only for the information of the other party.

        18.6 In the event the Escrow Agent shall have received the Notice of
Objection provided for in Section 18.4 above within the time period therein
prescribed, the Escrow Agent shall continue to hold the Down Payment until (i)
the Escrow Agent receives written notice signed by both Seller and Buyer
directing the delivery of the Down Payment, in which case the Escrow Agent shall
then deliver the Down Payment in accordance with such direction, or (ii) in the
event of litigation between Seller and Buyer, the Escrow Agent deposits the Down
Payment with the Clerk of the Court in which such litigation is pending, or
(iii) the Escrow Agent takes affirmative steps as the Escrow Agent may, at the
Escrow Agent's option, elect in order to

                                       17
<PAGE>

terminate the Escrow Agent's duties, including without limitation, depositing
the Down Payment in court in an action for interpleader.

        18.7 The Escrow Agent may act upon any instrument or other writing
believed by it in good faith to be genuine and to be executed and presented by
the proper party, and shall not be liable in connection with the performance of
any duty imposed upon the Escrow Agent pursuant to the terms of this Agreement,
except for the Escrow Agent's own gross negligence or willful misconduct. The
Escrow Agent shall have no duties or responsibilities other than as expressly
set forth herein.

        18.8 Upon delivery of the Down Payment to either Buyer, Seller or a
court of competent jurisdiction under and pursuant to the provisions of this
Paragraph 18, the Escrow Agent shall be relieved of all further liability,
responsibility or obligation with respect to or arising out of the Down Payment
and any and all of its obligations arising thereafter.

        18.9 Seller and Buyer hereby jointly and severally agree to indemnify
the Escrow Agent for, and hold the Escrow Agent harmless against, any loss,
liability or expense incurred without willful misconduct or gross negligence on
the part of the Escrow Agent, arising out of or in connection with its
acceptance of, or the performance of, its duties and obligations under this
Section 18 (including, but not limited to, attorneys' costs, fees, disbursements
and court costs), as well as the costs and expenses of defending against any
claim or liability arising out of or relating to this Agreement.

        18.10 The Escrow Agent is the counsel to Buyer, and both parties agree
that the Escrow Agent may represent Buyer in any litigation arising under or by
virtue of this Agreement.

        18.11 The Escrow Agent may resign and be discharged from its duties or
obligations hereunder by giving notice in writing to Buyer and Seller of such
resignation specifying a date when such resignation shall take effect, provided
that upon such resignation the Escrow Agent shall either turn over the Down
Payment to a successor agreed to by Seller and Buyer, or in the alternative
shall file an interpleader action and/or deposit the Down Payment with a court
as set forth in Section 18.6 above.

        18.12 Notwithstanding anything contained herein to the contrary, the
Escrow Agent shall not be required to deposit the Down Payment into an interest
bearing account or to disburse the Down Payment to either party until the Escrow
Agent has received an Internal Revenue Service Form W- 9 from Buyer and Seller.

        18.13 The provisions of this Section 18 shall survive the Closing.

     19. General Provisions.
         ------------------

        19.1 Successors and Assigns. This Agreement shall bind and inure to the
             ----------------------
benefit of the respective successors and permitted assigns of the parties
hereto.

                                       18

<PAGE>

        19.2 Gender and Number. Whenever the context so requires, the singular
             -----------------
number shall include the plural and the plural the singular, and the use of any
gender shall include all genders.

        19.3 Entire Agreement. This Agreement contains the complete and entire
             ----------------
agreement between the parties respecting the transaction contemplated herein and
supersedes all prior negotiations, agreements, representations and
understandings, if any, between the parties respecting such matters.

        19.4 Counterparts. This Agreement may be executed in any number of
             ------------
original counterparts, all of which evidence only one agreement and only one of
which need be produced for any purpose.

        19.5 Modifications. This Agreement may not be modified, discharged or
             -------------
changed in any respect whatsoever, except by a further agreement in writing duly
executed by Buyer and Seller. However, any consent, waiver, approval or
authorization shall be effective if signed by the party granting or making such
consent, waiver, approval or authorization.

        19.6 Exhibits. All exhibits referred to in this Agreement are
             --------
incorporated herein by reference and shall be deemed part of this Agreement for
all purposes as if set forth at length herein.

        19.7 Governing Law. This Agreement shall be construed and enforced in
             -------------
accordance with the laws of the State of New York.

        19.8 Recordation. Upon the execution of this Agreement, Buyer shall have
             -----------
the right to record this Agreement or a memorandum of this Agreement and Seller
agrees to execute such documents or instruments requested by Buyer in connection
with such recordation. In the event this Agreement is terminated in accordance
with the provisions herein prior to Closing, Buyer agrees to execute a written
termination notice, in recordable form, prepared by Seller.

        19.9 Captions. The captions of this Agreement are for convenience and
             --------
reference only and in no way define, describe, extend or limit the scope,
meaning or intent of this Agreement.

        19.10 Severability. The invalidation or unenforceability in any
              ------------
particular circumstance of any of the provisions of this Agreement shall in no
way affect any of the other provisions hereof, which shall remain in full force
and effect.

        19.11 No Joint Venture. This Agreement shall not be construed as in any
              ----------------
way establishing a partnership, joint venture, express or implied agency, or
employer-employee relationship between Buyer and Seller.

        19.12 No Third Party Beneficiaries. This Agreement is for the sole
              ----------------------------
benefit of the parties hereto, their respective successors and permitted
assigns, and no other person or entity shall be entitled to rely upon or receive
any benefit from this Agreement or any term hereof.

                                       19
<PAGE>

        19.13 Survival. Except as otherwise expressly set forth herein, the
              --------
covenants, warranties, representations and indemnities of Seller and Buyer
contained in this Agreement shall not survive the Closing.

        19.14 Execution. The submission of this Agreement for examination does
              ---------
not constitute an offer by or to either party. This Agreement shall be effective
and binding only after due execution and delivery by the parties hereto.

     IN WITNESS WHEREOF, the parties have caused this instrument to be executed
as of the date first above written.

                                             SELLER:

                                             eLEC COMMMUNICATIONS CORp.

                                             By:    /s/ Paul H. Riss
                                                --------------------------------
                                                 Name:  Paul H. Riss
                                                 Title:  Chief Executive Officer

                                             BUYER:

                                             BLUEGILL REALTY, LLC

                                             By:    /s/   Geoffrey J. Weir
                                                --------------------------------
                                                 Name: Geoffrey J. Weir
                                                 Title:  Principal

ESCROW PROVISIONS AGREED TO:

ANDERSON & ROTTENBERG, P.C.

By:      /s/  Charles S. Rich
   --------------------------
     Name:  Charles S. Rich
     Title: Partner

                                       20
<PAGE>

                                    Exhibit A
                                    ---------

                     Legal Description of the Real Property

<PAGE>

                                    Exhibit B
                                    ---------

                              Intentionally Deleted
                              ---------------------

<PAGE>

                                    Exhibit C
                                    ---------

                              Permitted Exceptions
                              --------------------

          (i) General real estate taxes and/or assessments and water and sewer
     charges, if any, not yet due and payable.

          (ii) All covenants, restrictions, easements, reservations, liens,
     encumbrances and agreements which may affect the Building or the Property
     other than those objected to by Buyer in the Defect Notice.

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