Document:

<PAGE>

                                                                    EXHIBIT 10.4

                            AIRTRAN AIRWAYS, INC.,

                                  as Issuer,

        the Subsidiary Guarantors from time to time made party hereto,

                                      and

                           WILMINGTON TRUST COMPANY,

                                  as Trustee

                        ______________________________

                                   INDENTURE

                          Dated as of April 12, 2001

                        ______________________________

                   Series A, Series B, Series C and Series D

                     11.27% Senior Secured Notes due 2008

              __________________________________________________
<PAGE>

                            CROSS-REFERENCE TABLE*

<TABLE>
<S>                                                         <C>
         Trust Indenture..................................  Indenture

         310(a)(1).............................................  8.10
         310(a)(3)..............................................  N/A
         310(a)(4)..............................................  N/A
         310(a)(5).............................................  8.10
         310(b).............................................8.8; 8.10
         310(c).................................................  N/A
         311(a)............................................8.11, 8.12
         311(b)............................................8.11, 8.12
         311(c).................................................  N/A
         312(a).................................................  2.5
         312(b)................................................  12.3
         312(c)................................................  12.3
         313(a).................................................  8.6
         313(b)(1)..............................................  8.6
         313(b)(2)..............................................  8.6
         313(c).................................................  8.6
         313(d).................................................  8.6
         314(a)..............................................  __; __
         314(b)................................................  11.1
         314(c)(1).............................................  12.4
         314(c)(2).............................................  12.4
         314(c)(3)..............................................  N/A
         314(d)................................................  11.4
         314(e)................................................  12.5
         314(f).................................................  N/A
         315(a).................................................  8.1
         315(b).................................................  8.5
         315(c).................................................  8.1
         315(d).................................................  8.1
         315(e)................................................  7.14
         316(a)(last sentence)..................................  2.9
         316(a)(1)(A)...........................................  7.4
         316(a)(1)(B)...........................................  7.3
         316(a)(2)..............................................  N/A
         316(b)............................................  6.7;9.2.
         316(c)................................................  10.4
         317(a)(1)..............................................  7.7
         317(a)(2)..............................................  7.8
         317(b).................................................  2.4
         318(a)................................................  12.1
</TABLE>
<PAGE>

<TABLE>
<S>                                                              <C>
         318(b).................................................  N/A
         318(c)................................................  12.1
</TABLE>

N/A means not applicable.

*This Cross-Reference Table is not part of the Indenture.

NOTE: This Table shall not for any purpose be deemed to be a part of the
Indenture.
<PAGE>

          This INDENTURE, dated as of April 12, 2001, is entered into by and
among AIRTRAN AIRWAYS, INC., a Delaware corporation (the "Issuer"), the
                                                          ------
Subsidiary Guarantors (as defined herein) from time to time party hereto, and
WILMINGTON TRUST COMPANY, as indenture trustee (the "Trustee").
                                                     -------

          Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders (as defined herein) of the
Issuer's 11.27% Series A Senior Secured Amortizing Notes due 2008 (the "Series A
                                                                        --------
Notes"), the Issuer's 11.27% Series B Senior Secured Amortizing Notes due 2008
-----
(the "Series B Notes"; and, together with the Series A Notes, the "Amortizing
      --------------                                               ----------
Notes"), the Issuer's 11.27% Series C Senior Secured Notes due 2008 (the "Series
-----                                                                     ------
C Notes") and the Issuer's 11.27% Series D Senior Secured Notes due 2008 (the
-------
"Series D Notes; and together with the Amortizing Notes and the Series C Notes,
-------------------------------------------------------------------------------
the "Notes").
----------

                                   ARTICLE I
                  DEFINITIONS AND INCORPORATION BY REFERENCE

          Section 1.1  Definitions.
                       -----------

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

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

          "Affiliate Transaction" shall have the meaning ascribed to such term
           ---------------------
in Section 5.20 hereof.
   ------------

          "Agent" means any Registrar, Paying Agent or co-registrar.
           -----

          "Aircraft Acquisition Debt" means Indebtedness or Attributable Debt
           -------------------------
Incurred by the Issuer or any of the Restricted Subsidiaries of the Issuer in
connection with an acquisition (either directly or as lessee in respect of a
Sale/Leaseback Transaction) of aircraft, related engines or spare engines, spare
parts or other related equipment (including ground equipment and simulators)
which in the case of
<PAGE>

Indebtedness either constitutes all or part of the purchase price thereof, or is
Incurred prior to, at the time of or within one year after the acquisition
thereof for the purpose of financing or refinancing part of the purchase price
thereof, and which equipment was not owned by the Issuer or a Restricted
Subsidiary of the Issuer prior to such acquisition provided, however, that in
                                                   --------  -------
either case the proportion (expressed as a percentage) of such Indebtedness to
the greater of the purchase price or Appraised Value of such aircraft, engines,
parts or equipment at the time of such financing does not exceed ninety percent
(90%).

          "Aircraft Mortgage" means the Aircraft Mortgage, dated as of April 12,
           -----------------
2001, between the Issuer and the Collateral Trustee as mortgagee.

          "Amortizing Notes" shall have the meaning ascribed to such term in the
           ----------------
preamble hereof.

          "Appraised Value" means the fair market sale value as of a specified
           ---------------
date of the appraised assets that would be obtained in an arm's length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined by
an Independent Appraiser.

          "Asset Disposition" means any sale, lease, transfer or other
           -----------------
disposition (or series of related sales, leases, transfers or dispositions) by
the Issuer or any Restricted Subsidiary, including any disposition by means of a
merger, consolidation or similar transaction (each referred to for the purposes
of this definition as a "disposition") in one transaction or a series of related
transactions, of (i) any shares of Capital Stock of a Restricted Subsidiary
(other than directors' qualifying shares or shares required by applicable law to
be held by a Person other than the Issuer or a Restricted Subsidiary), (ii) all
or substantially all the assets of any division or line of business of the
Issuer or any Restricted Subsidiary or (iii) sales of aircraft, engines and
related equipment (and leasehold interests therein) and any other assets of the
Issuer or any Restricted Subsidiary outside of the ordinary course of business
of the Issuer or such Restricted Subsidiary; provided that "Asset Disposition"
                                             --------
shall not include (A) any sale, lease, transfer or other disposition by a
Restricted Subsidiary to the Issuer or by the Issuer or a Restricted Subsidiary
to a Restricted Subsidiary so long as where such disposition involves
Collateral, the Restricted Subsidiary has executed the applicable Collateral
Documents, (B) any sale, lease, transfer or other disposition that constitutes a
Restricted Payment permitted by Section 5.3, (C) any exchange of take-off and
                                -----------
landing rights, airport gates or similar property for other take-off and landing
rights, airport gates or similar property, or (D) any sale, lease, transfer or
other disposition of assets in the ordinary course of business.

          "Asset Disposition Basket" means, as of any date, an amount equal to
           ------------------------
(a) $10,000,000 less (b) the sum of the stipulated value for each Encumbered
Engine as set forth on Schedule 4 to the Aircraft Mortgage; provided, that, upon
                                                            --------  ----
(1) Mortgagee's (as defined in the Aircraft Mortgage) receipt of copies of
executed payoff letters, UCC-3 termination statements, mortgage releases,
terminations or other terminations or releases

                                       2
<PAGE>

for the termination of, and release of such Engine from, any Lien applicable to
such Engine, and (2) the filing with the FAA and in other appropriate filing
offices of such releases or terminations, in each case as Mortgagee (as defined
in the Aircraft Mortgage) shall reasonably request, the amount of the Asset
Disposition Basket shall be increased by the stipulated value of such Encumbered
Engine as set forth in Schedule 4 to the Aircraft Mortgage (but in any event not
to exceed $10,000,000).

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

          "Average Life" means, as of the date of determination, with respect to
           ------------
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of (A) the number of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
(B) the amount of such payment by (ii) the sum of all such payments.

          "B717 Subsidiary" means AirTran Airways 717 Leasing Corporation, a
           ---------------
Delaware corporation.

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

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

          "Board of Directors" means the Board of Directors of the Issuer or any
           ------------------
committee of such board duly authorized to act in respect of any particular
matter.

          "Boeing" means The Boeing Company and its Affiliates.
           ------

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

          "Capital Lease Obligations" means an obligation that is required to be
           -------------------------
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.

          "Capital Stock" of any Person means any and all shares interests,
           -------------
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however

                                       3
<PAGE>

designated) equity of such Person, including any Preferred Stock, but excluding
any debt securities convertible into such equity.

          "Cash Equivalents" means (i) United States dollars or foreign currency
           ----------------
that is readily exchangeable into United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than twelve
(12) months from the date of acquisition, (iii) certificates of deposit and
Eurodollar time deposits with maturities of 12 months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding 12 months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
(7) days for the underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, and (v) commercial paper having
the highest or second highest rating obtainable from Moody's or S&P and in each
case maturing not more than ninety (90) days after the date of acquisition.

          "Change in Control" means the occurrence of any of the following
           -----------------
events: (i) any Person (including any entity or group deemed to be a "person"
under Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) is or becomes
the direct or indirect beneficial owner (as determined in accordance with Rule
13d-3 under the Exchange Act) of shares of the Issuer's Capital Stock
representing greater than fifty percent (50%) of the total voting power of all
shares of Capital Stock of the Issuer entitled to vote in the election of
directors of the Issuer under ordinary circumstances or to elect a majority of
the Board of Directors of the Issuer, (ii) the Issuer sells, transfers or
otherwise disposes of all or substantially all of its assets (it being
understood that any sale or disposition of DC-9 or B737 aircraft owned by the
Issuer as of the Issue Date in a single transaction or series of related
transactions does not constitute a sale of all or substantially all of the
Issuer's assets so long as Issuer has sufficient remaining aircraft and other
flight equipment to operate the Issuer's business thereafter in the ordinary
course substantially consistent with past practices), (iii) when, during any
period of 12 consecutive months after the Issue Date, individuals who at the
beginning of any such 12-month period constituted the Issuer's Board of
Directors (together with any new directors whose election by such Board or whose
nomination for election by the stockholders of the Issuer was approved by a vote
of a majority of the directors still in office entitled to vote with respect to
such nomination who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved but
excluding any of the individuals who at the beginning of such 12-month period
constituted such Board but who are no longer members),cease for any reason to
constitute a majority of the Board of Directors then in office or (iv) the date
of the consummation of the merger or consolidation of the Issuer with another
corporation where the stockholders of the Issuer or of the Parent Company,
immediately prior to the merger or consolidation, would not beneficially own,
immediately after the merger or consolidation, shares entitling such
stockholders to fifty percent (50%) or more of all votes (without consideration
of the rights of any class of stock to elect directors by a separate class vote)
to which all

                                       4
<PAGE>

stockholders of the corporation issuing cash or securities in the merger or
consolidation would be entitled in the election of directors or where members of
the Board of Directors or of the board of directors of the Parent Company,
immediately prior to the merger or consolidation, would not, immediately after
the merger or consolidation, constitute a majority of the board of directors of
the corporation issuing cash or securities in the merger or consolidation.

          "Change in Control Offer" shall have the meaning ascribed to such term
           -----------------------
in Section 5.15 hereof.
   ------------

          "Code" means the Internal Revenue Code of 1986, as amended.
           ----

          "Collateral" has the collective meaning given to such term in each of
           ----------
the Collateral Documents, respectively.

          "Collateral Documents" means, collectively, the Collateral Trust
           --------------------
Agreement, the Aircraft Mortgage, the Hangar Mortgage, the Issuer Pledge
Agreement and such other mortgages, assignments and security agreements as may
be executed by the Issuer or any Subsidiary Guarantor pursuant to this Indenture
or any other Collateral Document to grant a security interest in the assets
pledged to secure the Notes, all as the same may be modified or amended from
time to time.

          "Collateral Trustee" means the Person named as the "Collateral
           ------------------
Trustee" under the Collateral Documents until a successor Collateral Trustee
shall have become such pursuant to the applicable provisions of the Collateral
Trust Agreement, and thereafter "Collateral Trustee" shall mean such successor
Collateral Trustee.  The "Mortgagee" under the Aircraft Mortgage shall, for all
purposes, be the same as the Collateral Trustee.

          "Collateral Trust Agreement" means that certain Collateral Trust
           --------------------------
Agreement dated as of April 12, 2001, in the form attached as Exhibit D hereto,
                                                              ---------
among the Collateral Trustee and the Issuer, as amended, supplemented or
modified from time to time.

          "Commission" means the United States Securities and Exchange
           ----------
Commission, as from time to time constituted, created under the Exchange Act, or
if at any time after the execution of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Exchange Act,
the Securities Act or the TIA, as the case may be, then the body performing such
duties at such time.

          "Consolidated Coverage Ratio" means, as of any date of determination,
           ---------------------------
the ratio of (i) the aggregate amount of EBITDA for the period comprised of the
most recent four (4) consecutive fiscal quarters ending prior to the date of
such determination for which financial statements have been made publicly
available to (ii) Consolidated Interest Expense for such four (4) fiscal
quarters; provided, however, that
          --------  -------

                                       5
<PAGE>

               (1)  if the Issuer or any Restricted Subsidiary have Incurred any
     Indebtedness since the beginning of such period that remains outstanding or
     if the transaction giving rise to the need to calculate the Consolidated
     Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and
     Consolidated Interest Expense for such period shall be calculated after
     giving effect on a pro forma basis to such Indebtedness as if such
     Indebtedness had been Incurred on the first day of such period and the
     discharge of any other Indebtedness repaid, repurchased, defeased or
     otherwise discharged with the proceeds of such new Indebtedness as if such
     discharge had occurred on the first day of such period,

               (2)  if the Issuer or any Restricted Subsidiary has repaid,
     repurchased, defeased or otherwise discharged any Indebtedness since the
     beginning of such period or if any Indebtedness is to be repaid,
     repurchased, defeased or otherwise discharged (in each case other than
     Indebtedness Incurred under any revolving credit facility unless such
     Indebtedness has been permanently repaid and has not been replaced) on the
     date of the transaction giving rise to the need to calculate the
     Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for
     such period shall be calculated on a pro forma basis as if such discharge
     had occurred on the first day of such period,

               (3)  if since the beginning of such period the Issuer or any
     Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for
     such period shall be reduced by an amount equal to the EBITDA (if positive)
     directly attributable to the assets which are the subject of such Asset
     Disposition for such period, or increased by an amount equal to the EBITDA
     (if negative), directly attributable thereto for such period and
     Consolidated Interest Expense for such period shall be reduced by an amount
     equal to the Consolidated Interest Expense directly attributable to any
     Indebtedness of the Issuer or any Restricted Subsidiary repaid,
     repurchased, defeased or otherwise discharged with respect to the Issuer
     and its continuing Restricted Subsidiaries in connection with such Asset
     Disposition for such period (or, if the Capital Stock of any Restricted
     Subsidiary is sold, the Consolidated Interest Expense for such period
     directly attributable to the Indebtedness of such Restricted Subsidiary to
     the extent the Issuer and its continuing Restricted Subsidiaries are no
     longer liable for such Indebtedness after such disposition),

               (4)  if since the beginning of such period the Issuer or any
     Restricted Subsidiary (by merger or otherwise) shall have made an
     Investment in any Restricted Subsidiary (or any Person which becomes a
     Restricted Subsidiary) or an acquisition of assets, including any
     acquisition of assets occurring in connection with a transaction requiring
     a calculation to be made hereunder, which constitutes all or substantially
     all of an operating unit of a business, EBITDA and Consolidated Interest
     Expenses for such period shall be calculated after giving pro forma effect
     thereto (including the Incurrence of any Indebtedness) as if such
     Investment or acquisition occurred on the first day of such period, and

                                       6
<PAGE>

               (5)  if since the beginning of such period any Person (that
     subsequently became a Restricted Subsidiary or was merged with or into the
     Issuer or any Restricted Subsidiary since the beginning of such period)
     shall have made any Asset Disposition, any Investment or acquisition of
     assets that would have required an adjustment pursuant to clause (3) or (4)
     above if made by the Issuer or a Restricted Subsidiary during such period,
     EBITDA and Consolidated Interest Expenses for such period shall be
     calculated after giving pro forma effect thereto as if such Asset
     Disposition, Investment or acquisition occurred on the first day of such
     period.

          For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations shall
be determined in good faith by a responsible financial or accounting officer of
the Issuer.  If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest of such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term in excess of one year).

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

          "Consolidated Net Income" means, for any period, the net income of the
           -----------------------
Issuer and its consolidated Subsidiaries determined on a consolidated basis in
accordance with GAAP; provided, however, that there shall not be included in
                      --------  -------
such Consolidated Net Income:

               (i)  any net income of any Person (other than the Issuer) if such
     Person is not a Restricted Subsidiary, except that (A) subject to the
     exclusion contained in clause (iv) below, the Issuer's equity in the net
     income of any such Person for such period shall be included in such
     Consolidated Net Income up to the aggregate amount of cash actually
     distributed by such Person during such period to the Issuer or a Restricted
     Subsidiary as a dividend or other distribution (subject, in the case of a
     dividend or other distribution paid to a Restricted

                                       7
<PAGE>

     Subsidiary, to the limitations contained in clause (iii) below) and (B) the
     Issuer's equity in a net loss of any such Person for such period shall be
     included in determining such Consolidated Net Income;

               (ii)   any net income (or loss) of any Person acquired by the
     Issuer or a Subsidiary in a pooling of interests transaction for any period
     prior to the date of such acquisition;

               (iii)  any net income of any Restricted Subsidiary if such
     Restricted Subsidiary is subject to restrictions, directly or indirectly,
     on the payment of dividends or the making of distributions by such
     Restricted Subsidiary, directly or indirectly, to the Issuer, except that
     (A) subject to the exclusion contained in clause (iv) below, the Issuer's
     equity in the net income of any such Restricted Subsidiary for such period
     shall be included in such Consolidated Net Income up to the aggregate
     amount of cash actually distributed or permitted to be distributed by such
     Restricted Subsidiary during such period to the Issuer or another
     Restricted Subsidiary as a dividend or other distribution (subject, in the
     case of a dividend or other distribution paid to another Restricted
     Subsidiary, to the limitation contained in this clause) and (B) the
     Issuer's equity in a net loss of any such Restricted Subsidiary for such
     period shall be included in determining such Consolidated Net Income;

               (iv)   any gain (but not loss) realized upon the sale or other
     disposition of any of assets of the Issuer or its consolidated Subsidiaries
     including pursuant to any sale-and-leaseback arrangement) which is not sold
     or otherwise disposed of in the ordinary course of business and any gain
     (but not loss) realized upon the sale or other disposition of any Capital
     Stock of any Person; and

               (v)    extraordinary, unusual and non-recurring gains or losses.

          "Consolidated Net Worth" means the total of the amounts shown on the
           ----------------------
balance sheet of the Issuer and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Issuer for which financial statements have been made
publicly available prior to the taking of any action for the purpose of which
the determination is being made, as (i) the par or stated value of all
outstanding Capital Stock of the Issuer plus paid-in capital or capital surplus
relating to such Capital Stock plus, (ii) any retained earnings or earned
surplus less (A) any accumulated deficit and (B) only to the extent otherwise
included in the amount specified in clauses (i) or (ii) of this definition, any
amounts attributable to Disqualified Stock.

          "Corporate Trust Office" shall be at the address of the Trustee
           ----------------------
specified in Section 13.2 or such other address as the Trustee may specify by
             ------------
notice to the Issuer.

          "Covenant Defeasance" shall have the meaning ascribed to such term in
           -------------------
Section 9.3 hereof.
-----------

                                       8
<PAGE>

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

          "Custodian" means any receiver, trustee, assignee, liquidator or
           ---------
similar official under any Bankruptcy Law.

          "Default" means any event which is, or after notice or passage of time
           -------
or both would be, an Event of Default.

          "Definitive Notes" shall have the meaning ascribed to such term in
           ----------------
Section 2.1 hereof.
-----------

          "Depositary" means the Person specified in Section 2.3 as the
           ----------                                -----------
Depositary with respect to the Notes issuable in global form, until a successor
shall have been appointed and become such pursuant to the applicable provision
of this Indenture, and, thereafter, "Depositary" shall mean or include such
successor.

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

          "DTC" means The Depository Trust Company.
           ---

          "EBITDA" for any period means the sum of Consolidated Net Income, plus
           ------
Consolidated Interest Expense and the following, in each case to the extent
deducted in calculating such Consolidated Net Income and not included in
Consolidated Interest Expense: (a) all income tax expense of the Issuer and its
consolidated Restricted Subsidiaries, (b) depreciation expense of the Issuer and
its Consolidated Restricted Subsidiaries, (c) amortization expense of the Issuer
and its Restricted Subsidiaries (excluding amortization expense attributable to
a prepaid cash item that was paid in a prior period) and (d) all other non-cash
charges of the Issuer and its Consolidated Restricted Subsidiaries (excluding
any such non-cash charge to the extent that it represents an accrual of or
reserve for cash expenditures in any future period), in each case for such
period.  Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization and non-cash charges
of, a

                                       9
<PAGE>

Restricted Subsidiary shall be added to Consolidated Net Income to compute
EBITDA only to the extent (and in the same proportion) that the net income of
such Restricted Subsidiary was included in calculating Consolidated Net Income
and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Issuer by such Restricted Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Restricted
Subsidiary or its stockholders.

          "Equity Offering" means a public or private offering by the Issuer for
           ---------------
cash of Capital Stock or warrants, options and other rights to acquire Capital
Stock.

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
           -----
amended from time to time.

          "Event of Default" shall have the meaning ascribed to such term in
           ----------------
Section 7.1 hereof.
-----------

          "Excess Cash Flow" means, with respect to any fiscal year, the
           ----------------
Issuer's EBITDA for such fiscal year, less the sum of (i) the Issuer's
Consolidated Interest Expense that is paid in cash during such fiscal year, (ii)
all capital expenditures (including without limitation, progress payments and
deferred interest thereon to the manufacturer and other third parties under
purchase contracts but not including any capital expenditures to the extent
financed whether through Indebtedness or off-balance sheet leases) of the issuer
and its Subsidiaries that are actually paid during such year and, without
duplication from year to year, capital expenditures committed for payment within
ninety (90) days after the end of such fiscal year, (iii) principal payments
made during such year on Indebtedness existing on the Issue Date or permitted to
be Incurred pursuant to Section 5.17, (iv) income or gross receipts taxes
                        ------------
payable by the Issuer (or properly attributable to the issuer and its
Subsidiaries if the Issuer's tax liability is computed as a part of any
consolidated group), and (v) Restricted Payments permitted by Section 5.3 that
                                                              -----------
are made during such year or (without duplication from year to year) declared
for payment within ninety (90) days after the end of such fiscal year.

          "Excess Cash Flow Offer" shall have the meaning ascribed to such term
           ----------------------
in Section 5.24 hereof.
   ------------

          "Excess Cash Flow Offer Amount" shall have the meaning ascribed to
           -----------------------------
such term in Section 5.24 hereof.
             ------------

          "Excess Cash Flow Offer Period" shall have the meaning ascribed to
           -----------------------------
such term in Section 5.24 hereof.
             ------------

          "Excess Proceeds" shall have the meaning ascribed to such term in
           ---------------
Section 5.19 hereof.
------------

          "Exchange Act" means the Securities Exchange Act of 1934, as amended.
           ------------

                                      10
<PAGE>

          "Exchanged Flight Equipment" has the meaning set forth in Section 5.19
           --------------------------                               ------------
hereof.

          "Exchange Offer" means the offer that may be made by the Issuer
           --------------
pursuant to the Registration Rights Agreement to exchange Series A Notes for
Series B Notes and Series C Notes for Series D Notes.

          "FAA" means the Federal Aviation Administration or similar regulatory
           ---
authority established to replace it.

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

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

          "GAAP" means generally accepted accounting principles in the United
           ----
States of America as in effect from time to time, including those set forth in
(i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the Commission
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the
Commission.

          "Global Notes" shall have the meaning ascribed to such term in Section
           ------------                                                  -------
2.1 hereof.
---

          "Government Entity" means (i) any federal, state, provincial, or
           -----------------
similar government, and any body, board, department, commission, court,
tribunal, authority, agency, or other instrumentality of any such government or
otherwise exercising any executive, legislative, judicial, administrative, or
regulatory functions of such government, or (ii) any other government entity
having jurisdiction over any matter contemplated by this Indenture or any of the
Collateral Documents or relating to the observance or performance of the
obligation of any of the parties to this Indenture or any of the Collateral
Documents.

                                      11
<PAGE>

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

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

          "Guarantee" means any obligation, contingent or otherwise, of any
           ---------
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
condition or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
--------  -------
collection or deposit in the ordinary course of business.  The term "guarantee"
used as a verb has a corresponding meaning.

          "Guaranteed Indebtedness" shall have the meaning ascribed to such term
           -----------------------
in Section 5.22 hereof.
   ------------

          "Hangar Mortgage" means the Mortgage, dated as of April 12, 2001,
           ---------------
between the Issuer and the Collateral Trustee.

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

                                      12
<PAGE>

          "Holder" means the Person in whose name a Note is registered on the
           ------
Registrar's books.

          "Holdings' Convertible Notes" means the 12.27% Series B Senior Secured
           ---------------------------
Convertible Notes due 2009 issued pursuant to the Holdings' Convertible Note
Issuance.

          "Holdings' Convertible Notes Issuance" has the meaning assigned to
           ------------------------------------
such term in the Purchase Agreement.

          "Holdings' Series A Notes" means the 13.00% Series A Senior Secured
           ------------------------
Notes due 2009 issued pursuant to the Holdings' Series A Notes Issuance.

          "Holdings' Series A Notes Issuance" has the meaning assigned to such
           ---------------------------------
term in the Purchase Agreement.

          "Identified Liens" has the meaning assigned to such term in the
           ----------------
Purchase Agreement.

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

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

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

               (ii)  all Capital Lease Obligations of such Person;

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

               (iv)  all Obligations of such Person for the reimbursement of any
     obligor on any letter of credit, banker's acceptance or similar credit
     transaction (other

                                      13
<PAGE>

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

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

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

               (vii)  all Obligations of the type referred to in clauses (i)
     through (vi) above of other Persons secured by any Lien on any property or
     asset of such Person (whether or not such obligation is assumed by such
     Person), the amount of such Obligation being deemed to be the lesser of the
     value of such property or assets or the amount of the obligation so
     secured; and

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

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

          "Indenture" means this Indenture as amended, supplemented or otherwise
           ---------
modified from time to time.

          "Independent Appraiser" means a Person (i) engaged in a business which
           ---------------------
includes appraising aircraft and assets and rights related to the operation and
maintenance of aircraft from time to time and (ii) who (a) is in fact
independent of the parties to the transaction in question and their respective
Affiliates; (b) does not have any direct financial interest or any material
indirect financial interest in the Issuer or any of the Restricted Subsidiaries
or any of their respective Affiliates and (c) is not connected with the Issuer,
any of the Restricted Subsidiaries or any of such Affiliates as an officer,
director, employee, promoter, underwriter, trustee, partner or person performing
similar functions.

          "Independent Appraiser's Certificate" means a certificate signed by an
           -----------------------------------
Independent Appraiser and delivered to the Trustee and/or the Collateral Trustee
pursuant to the Indenture or the applicable Collateral Document, which shall
include

                                      14
<PAGE>

the statements provided for in Section 13.5 of the Indenture if and to the
                               ------------
extent required by the provisions thereof.

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

          "Insolvency Event" means an Event of Default pursuant to Section
           ----------------                                        -------
7.1(a)(ix)or Section 7.1(x).
----------   --------------

          "Interest Payment Date" means April 15th and October 15th of each year
           ---------------------
during which any Note is outstanding (commencing October 15, 2001) and the date
on which the Notes mature, if different.

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

          "Investment" in any Person means any direct or indirect advance, loan
           ----------
or other extensions of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of transfer of cash or other
property to others or any payment for property or other services for the account
or use of others), or any purchase or acquisition of Capital Stock, Indebtedness
or other similar instruments issued by such Person.  For purposes of the
definition of "Unrestricted Subsidiary", the definition of "Restricted Payment"
and Section 5.3 hereof, (i) "Investment" shall include the portion
    -----------
(proportionate to the Issuer equity interest in such Subsidiary) of the fair
market value of the net assets of any Subsidiary of the Issuer at the time that
such Subsidiary is designated an Unrestricted Subsidiary; provided, however,
                                                          --------  -------
that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the
Issuer shall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary equal to an amount (if positive) equal to (x) the
Issuer's "Investment" in such Subsidiary at the time of such redesignation less
(y) the portion (proportionate to the Issuer's equity interest in such
Subsidiary) of the fair market value of the net assets of such Subsidiary at the
time of such redesignation; and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer, in each case as determined in good faith by the Board of
Directors.

          "Issue Date" means the date on which the Notes were originally issued.
           ----------

          "Issuer" shall have the meaning ascribed to such term in the preamble
           ------
hereof.

          "Issuer Appraiser" means an Independent Appraiser selected by the
           ----------------
Issuer.

          "Issuer Appraiser's Certificate" means an Independent Appraiser's
           ------------------------------
Certificate signed by a Issuer Appraiser.

                                      15
<PAGE>

          "Issuer Order" means a written request or order signed in the name of
           ------------
the Issuer by an Officer and delivered to the Trustee.

          "Issuer Pledge Agreement" means, the Issuer Pledge and Security
           -----------------------
Agreement, dated as of April 12, 2001, between the Issuer and the Trustee, as
amended, supplemented, amended and restated or otherwise modified from time to
time.

          "Law" or "law" means (i) and constitution, treaty, statute, law,
           ---      ---
decree, regulation, order, rule, or directive of any Government Entity, and (ii)
any judicial or administrative interpretation or application or, or decision
under, any of the foregoing.

          "Legal Defeasance" shall have the meaning ascribed to such term in
           ----------------
Section 9.2 hereof.
-----------

          "Legal Holiday" means a Saturday, Sunday or any other day on which
           -------------
banks located in The City of New York are authorized or obligated by law to
remain closed.

          "Lender" means a Person that is not an Affiliate of the Issuer and is
           ------
a lender under any Senior Credit Facility.

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

          "Mandatory Redemption" has the meaning assigned to such term in the
           --------------------
Purchase Agreement.

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

          "Net Available Cash" from an Asset Disposition means cash payments
           ------------------
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
and proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
indebtedness or other obligations relating to such properties or assets or
received in any other non-cash form), in each case net of (i) all legal, title
and recording tax expenses, commissions and other fees and expenses incurred,
and all federal, state, provincial, foreign and local taxes required to be
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien upon
or other security agreement of any kind with respect to such assets, or which
must by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of such

                                      16
<PAGE>

Asset Disposition and (iv) the deduction of appropriate amounts provided by the
seller as a reserve, in accordance with GAAP, against any liabilities associated
with the property or other assets disposed in such Asset Disposition and
retained by the Issuer or any Restricted Subsidiary after such Asset
Disposition.

          "Net Cash Proceeds" means, with respect to any issuance or sale of
           -----------------
Capital Stock, the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.

          "Notes" shall have the meaning ascribed to such term in the preamble
           -----
hereof.

          "Obligation" means any principal, premium, interest, penalty, fee,
           ----------
indemnification, reimbursement, damage and other obligation and liability
payable under the documentation governing any liability.

          "Offer to Purchase" means an offer to purchase all or a pro rata
           -----------------
portion, as the case may be, of the Notes by the Issuer from the Holders
commenced by the mailing (by first class mail, postage prepaid) by the Issuer
(or, if requested by the Issuer on at least five (5) Business Days prior notice
to the Trustee and at the Issuer's expense, by the Trustee) of a notice to each
Holder (and, if mailed by the Issuer, to the Trustee) at such Holder's address
appearing in the Note register, stating: (i) the covenant pursuant to which the
offer is being made and that all Notes validly tendered will be accepted for
payment on a pro rata basis; (ii) the purchase price and the date of purchase
(which shall be a Business Day no earlier than thirty (30) days nor later than
sixty (60) days from the date such notice is mailed) (the "Payment Date"); (iii)
that any Note not tendered will continue to accrue interest pursuant to its
terms; (iv) that, unless the Issuer defaults in the payment of the purchase
price, any Note accepted for payment pursuant to the Offer to Purchase shall
cease to accrue interest on and after the Payment Date; (v) that Holders
electing to have a Note purchased pursuant to the Offer to Purchase will be
required to surrender the Note, together with the form entitled "Option of the
Holder to Elect Purchase" on the reverse side of the Note completed, to the
Paying Agent at the address specified in the notice prior to the close of
business on the Business Day immediately preceding the Payment Date (or, if such
day is not a Business Day, on the next subsequent Business Day), and such Holder
shall be entitled to receive from the Paying Agent a non-transferable receipt of
deposit evidencing such deposit; (vi) that, unless the Issuer defaults in making
the payment of the purchase price or shall otherwise, in its sole discretion,
consent thereto, Holders will be entitled to withdraw their election only if the
Trustee receives, not later than the close of business on the fifth Business Day
immediately preceding the Payment Date, a telegram, facsimile transmission or
letter setting forth the name of such Holder, the principal amount at maturity
of Notes delivered for purchase and a statement that such Holder is withdrawing
his election to have such Notes purchased; and (vii) that Holders whose Notes
are being purchased only in part will be issued new Notes equal in principal
amount to the unpurchased portion of the

                                      17
<PAGE>

Notes surrendered; provided that each Note purchased and each new Note issued
                   --------
shall be in a principal amount at maturity of $1,000 or integral multiples
thereof. The Issuer shall place such notice in a financial newspaper of general
circulation in The City of New York. No failure of the Issuer to give the
foregoing notice shall limit any Holder's right to exercise a repurchase right.
On the Payment Date, the Issuer shall (i) accept for payment on a pro rata basis
Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii)
deposit with the Trustee money sufficient to pay the purchase price of all Notes
or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to
the Trustee all Notes or portions thereof so accepted together with an officers'
certificate specifying the Notes or portions thereof accepted for payment by the
Issuer. The Trustee shall promptly mail to the Holders of Notes so accepted
payment in an amount equal to the purchase price, and the Trustee shall promptly
authenticate, and the Issuer shall promptly execute and mail (or cause to be
mailed) to such Holders a new Note equal in principal amount at maturity to any
unpurchased portion of the Note surrendered; provided that each Note purchased
                                             --------
and each new Note issued shall be in a principal amount at maturity of $1,000 or
integral multiples thereof; provided further that if the Payment Date is between
                            ----------------
a regular record date and the next succeeding interest payment date, Notes to be
repurchased must be accompanied by payment of an amount equal to the interest
and Special Interest, if any, payable on such succeeding interest payment date
on the principal amount to be repurchased, and the interest on the principal
amount of the Note being repurchased, and Special Interest, if any, with respect
thereto, will be paid on such next succeeding interest payment date to the
registered holder of such Note on the immediately preceding record date. A Note
repurchased on an interest payment date need not be accompanied by any such
payment, and the interest on the principal amount of the Note being repurchased
and Special Interest, if any, with respect thereto, will be paid on such
interest payment date to the registered holder of such Note on the corresponding
record date. The Issuer will publicly announce the results of an Offer to
Purchase as soon as practicable after the Payment Date. The Trustee shall act as
the Paying Agent for an Offer to Purchase. The Issuer will comply with Rule l4e-
1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable, in the event
that the Issuer is required to repurchase Notes pursuant to an Offer to
Purchase. Both the notice of the Issuer and the notice of the Holder having been
given as specified above, the Notes so to be repurchased shall, on the Payment
Date become due and payable at the purchase price applicable thereto and from
and after such date (unless Issuer shall default in the payment of such purchase
price) such Notes shall cease to bear interest. If any Note shall not be paid
upon surrender thereof for repurchase, the principal shall, until paid, bear
interest from the Payment Date at the rate borne by such Note. Any Note which is
to be submitted for repurchase only in part shall be delivered pursuant to the
above provisions with (if the Issuer or Trustee so requires) due endorsement by,
or a written instrument of transfer in form satisfactory to Issuer and the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing.

          "Officer" means the chief executive officer, president or a vice
           -------
president in the disciplines of finance, accounting, or law of the Issuer.

                                      18
<PAGE>

          "Officers' Certificate" means a certificate signed by an Officer and
           ---------------------
attested to by another Officer satisfying the requirements of Sections 13.4 and
                                                              -------------
13.5 of the Indenture.
----

          "Opinion of Counsel" means a written opinion from the General Counsel
           ------------------
of the Issuer, legal counsel to the Issuer or another legal counsel who is
reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with
Sections 13.4 and 13.5.  The counsel may be an employee of the Issuer.  The
-------------     ----
acceptance by the Trustee or the Collateral Trustee, as applicable (without
written objection to the Issuer during the fifteen (15) Business Days following
receipt) of, or its action on, an opinion of counsel not specifically referred
to above shall be sufficient evidence that such counsel is acceptable to the
Trustee or the Collateral Trustee, as applicable.

          "Outstanding" or "outstanding" when used with respect to Notes or a
           -----------      -----------
Note, means all Notes theretofore authenticated and delivered under the
Indenture, except:

          (a)  Notes theretofore canceled by the Trustee or delivered to the
     Trustee for cancellation;

          (b)  Notes for which payment has been deposited with the Trustee or
     any Paying Agent in trust other than deposits pursuant to Section 9.1; and
                                                               -----------

          (c)  Notes which have been paid, or for which other Notes shall have
     been authenticated and delivered in lieu thereof or in substitution
     therefor pursuant to the terms of Section 2.7, unless proof satisfactory to
                                       -----------
     the Trustee is presented that any such Securities are held by holders in
     due course.

          A Note does not cease to be Outstanding because the Issuer or one of
its Affiliates holds the Note; provided, however, that in determining whether
                               --------  -------
the Holders of the requisite aggregate principal amount of Notes Outstanding
have given any request, demand, authorization, direction, notice, consent or
waiver under the Indenture, Section 2.8 shall be applicable.
                            -----------

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

          "Paying Agent" shall have the meaning ascribed to such term in Section
           ------------                                                  -------
2.3  and Section 9.5, solely for purposes of Section 9.5 hereof.
---      -----------                         -----------

          "Payment Date" with respect to any Offer to Purchase, has the meaning
           ------------
specified in the definition of Offer to Purchase.

          "Payments" means such monies as the Issuer shall cause to be delivered
           --------
to the Trustee or any Paying Agent for the purpose of paying principal, purchase
price or redemption price of, or interest or Special Interest, if any, on the
Notes on any Interest Payment Date, Payment Date, redemption date or
acceleration; and "Pay" means paying such monies.

                                      19
<PAGE>

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

          "Permitted Investment" means an Investment by the Issuer or any
           --------------------
Restricted Subsidiary in (i) the Issuer, a Restricted Subsidiary or a Person
that will, upon the making of such Investment, become a Restricted Subsidiary;
(ii) another Person if as a result of such Investment such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Issuer or a Restricted Subsidiary; (iii)
Temporary Cash Investments; (iv) receivables owing to the Issuer or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
                                                                       --------
however, that such trade terms may include such concessionary trade terms as the
-------
Issuer or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with the past practices of Issuer or such Restricted Subsidiary in an
aggregate amount outstanding at any time of not more than $1.0 million; (vii)
any Investment arising as a result of any Hedging Obligations: (viii) stock,
obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Issuer or any Restricted Subsidiary
or in satisfaction of judgments; (ix) any Investment to the extent such
Investment represents the non-cash portion of the consideration received for an
Asset Disposition as permitted pursuant to Section 5.19, (x) Investments in the
                                           ------------
normal course of business in any Persons the primary business of which is
substantially related to the airline business and (xi) Investments in airline
jointly-owned corporations and ventures established for the ownership or
operation of communications, take-off and landing fights, ticket office and
airport facilities and for other joint airline purposes..

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

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

               (b)  Liens granted on or after the Issue Date in favor of the
     holders of the Notes, the holders of the Holdings' Series A Notes, or the
     holders of the Holdings' Convertible Notes;

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

               (d)  Liens for employee wages and pledges or deposits by such
     Person under worker's compensation laws, unemployment insurance laws or
     similar legislation, or good faith deposits in connection with bids,
     tenders,

                                      20
<PAGE>

     contracts (other than for the payment of Indebtedness) or leases to which
     such Person is a party, or deposits to secure public or statutory
     obligations of such Person or deposits of cash or United States government
     bonds to secure surety or appeal bonds to which such Person is a party, or
     deposits as security for contested taxes or import duties or for the
     payment of rent, in each case Incurred in the ordinary course of business;

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

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

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

               (h)  minor survey exceptions, minor encumbrances, easements or
     reservations of, or rights of others for, licenses, rights-of-way, sewers,
     electric lines, telegraph and telephone lines and other similar purposes,
     or zoning or other restrictions as to the use of real property or Liens
     incidental to the conduct of the business of such Person or to the
     ownership of its properties which were not Incurred in connection with
     Indebtedness and which do not in the aggregate materially adversely affect
     the value of said properties or materially impair their use in the
     operation of the business of such Person;.

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

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

               (k)  Liens on property at the time such Person or any of its
     Subsidiaries acquires the property, including any acquisition by means of a
     merger or consolidation with or into such Person or a Subsidiary of such
     Person;

                                      21
<PAGE>

     provided, however, that such Liens are not created, incurred or assumed in
     --------  -------
     connection with, or in contemplation of, such acquisition; provided
                                                                --------
     further, however, that the Liens may not extend to any other property owned
     -------  -------
     by such Person or any of its Subsidiaries;
               (l)  Liens securing Hedging Obligations permitted under the
     Indenture;

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

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

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

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

               (q)  Liens securing Indebtedness permitted pursuant to Section
                                                                      -------
     5.17 of the Indenture;
     ----

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

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

                                      22
<PAGE>

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

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

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

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

          "Principal" of a Note means the principal of the Note plus the
           ---------
premium, if any, payable on the Note which is due or overdue or is to become due
at the relevant time.

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

          "Purchase Agreement" means the Purchase Agreement, dated as of the
           ------------------
Issue Date, by and among the Issuer, the Parent Company and the Initial
Purchaser as such agreement may be amended, modified or supplemented from time
to time.

          "QIB" means a "qualified institutional buyer" as defined in Rule 144A.
           ---

          "Receivables" means accounts receivables, chattel paper, instruments,
           -----------
documents or general intangibles evidencing or relating to the right to payment
of money and other similar assets, in each case, relating to such receivables,
including any interest in merchandise or goods, the sale or lease of which gave
rise to such receivables, related contractual rights, guarantees, insurance
proceeds, collections, other related assets and proceeds of all of the
foregoing.

          "Recordation" shall have the meaning ascribed to such term in Section
           -----------                                                  -------
12.2 hereof.
----

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

                                      23
<PAGE>

          "Refinancing Indebtedness" means Indebtedness that Refinances any
           ------------------------
Indebtedness of the Issuer or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
                                     --------  -------
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced, provided further,
however, that Refinancing Indebtedness shall not include Indebtedness of a
Subsidiary that Refinances the Issuer's Indebtedness or (y) Indebtedness of the
Issuer or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.

          "Registrar" shall have the meaning ascribed to such term in Section
           ---------                                                  -------
2.3 hereof.
---

          "Registration Rights Agreement" means the Registration Rights
           -----------------------------
Agreement, dated as of the Issue Date, in the form attached hereto as Exhibit F,
                                                                      ---------
by and among the Issuer and the Initial Purchaser as such agreement may be
amended, modified or supplemented from time to time.

          "Responsible Officer" when used with respect to the Trustee, means any
           -------------------
officer within the corporate trust department of the Trustee (or any successor
group of the Trustee) or any other officer of the Trustee customarily performing
functions similar to those performed by any of the designated officers, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.  When used with respect to the Collateral Trustee,
"Responsible Officer" means any Officer of the Collateral Trustee (or any
successor group of the Collateral Trustee) or any other officer of the
Collateral Trustee customarily performing functions similar to those performed
by any of the designated officers, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.

          "Restricted Payment" with respect to any Person means (i) the
           ------------------
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Issuer or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly-Owned Subsidiary to minority stockholders (or
owners of

                                      24
<PAGE>

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

          "Restricted Securities" means Notes that bear or are required to bear
           ---------------------
the legends relating to restrictions on transfer set forth on Exhibit A hereto.

          "Restricted Subsidiary" means B717 Subsidiary and any Subsidiary of
           ---------------------
the Issuer that is not an Unrestricted Subsidiary.  Notwithstanding anything to
the contrary contained in this Indenture, B717 Subsidiary shall be deemed a
Restricted Subsidiary notwithstanding the fact that such B717 Subsidiary may not
be a Subsidiary Guarantor hereunder.

          "Rule 144" means Rule 144 under the Securities Act, as such Rule may
           --------
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.

          "Rule 144A" means Rule 144A under the Securities Act, as such Rule may
           ---------
be amended from time to time, or under any similar rule or regulation hereafter
adopted by the Commission.

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

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

          "Senior Credit Facilities" means one or more credit facilities between
           ------------------------
the Issuer and one or more financial institutions named therein as lenders
providing for term borrowings and/or revolving borrowings, including all related
notes, collateral documents, instruments and agreements executed in connection
therewith, in each case as may be amended, supplemented, restated or otherwise
modified from time to time and

                                      25
<PAGE>

including any replacement, extension, modification or renewal thereof, provided,
that, a credit facility shall not be a "Senior Credit Facility" unless (a) the
lenders and/or agent for the lenders of such credit facility have entered into
an amended and restated Collateral Trust Agreement subject to the provisions of
Section 8.13 thereof and (b) counsel to the Issuer has delivered a non-
contravention opinion to the Indenture Trustee reasonably satisfactory to the
Indenture Trustee.

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

          "Senior Indebtedness" of any Person means (i) the outstanding
           -------------------
principal amount of, and premium (if any) on, the Indebtedness of such Person,
whether outstanding on the Issue Date or thereafter Incurred and (ii) accrued
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Issuer to the extent post-
filing interest is allowed in such proceeding) in respect of (A) indebtedness
for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person is responsible or
liable unless, in the case of (i) and (ii), in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
                                                                        --------
that such obligations are subordinate in right of payment to the Notes;
provided, however, that Senior Indebtedness shall not include (1) any obligation
--------  -------
of such Person to any Subsidiary of such Person, (2) any liability for Federal,
state local or other taxes owed or owing by such Person, (3) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of such Person (and any accrued interest in
respect thereof) which is subordinate or junior in any respect to any other
Indebtedness or other obligation of such Person or (5) that portion of any
Indebtedness which at the time of Incurrence is Incurred in violation of the
Indenture.

          "Series A Notes" shall have the meaning ascribed to such term in the
           --------------
preamble hereof.

          "Series B Notes" shall have the meaning ascribed to such term in the
           --------------
preamble hereof.

          "Series C Notes" shall have the meaning ascribed to such term in the
           --------------
preamble hereof.

          "Series D Notes" shall have the meaning ascribed to such term in the
           --------------
preamble hereof.

          "Significant Subsidiary" has the meaning set forth in Commission
           ----------------------
Regulation S-X.

          "Special Interest" has the meaning assigned to such term in the
           ----------------
Registration Rights Agreement.

                                      26
<PAGE>

          "Stated Maturity" means, with respect to any security, the date
           ---------------
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).

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

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

          "Subsidiary Guarantors" means any Subsidiary that has executed and
           ---------------------
delivered in accordance with the Indenture a Subsidiary Guaranty, and each such
Person's successors and assigns; provided, however, notwithstanding anything to
the contrary in this Indenture or any Collateral Documents, the B717 Subsidiary
shall not be required to become a Subsidiary Guarantor.

          "Subsidiary Guaranty" means, when and if required by this Indenture,
           -------------------
the Guarantee by a Restricted Subsidiary of the Issuer's obligations with
respect to the Notes; provided, however, notwithstanding anything to the
contrary in this Indenture or any Collateral Documents, the B717 Subsidiary
shall not be required to so deliver a Subsidiary Guaranty.  The form of such
Guarantee is provided for in the Indenture.  Each Subsidiary Guaranty will be
             --------
limited in amount to an amount not to exceed the maximum amount that can be
guaranteed by the applicable Restricted Subsidiary without rendering the
Subsidiary Guaranty, as it relates to such Restricted Subsidiary, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.

          "Successor Company" shall have the meaning ascribed to such term in
           -----------------
Section 6.1 hereof.
-----------

          "Temporary Cash Investments" means any of the following: (i) any
           --------------------------
investment in U.S.  Government Obligations; (ii) investments in time deposit
accounts, certificates of deposit and money market deposits maturing within one
hundred eighty (180) days of the date of acquisition thereof issued by a bank or
trust issuer which is organized under the laws of the United States of America,
any state thereof or any foreign country recognized by the United States, and
which bank or trust issuer has capital, surplus and undivided profits
aggregating in excess of $50.0 million (or the foreign

                                      27
<PAGE>

currency equivalent thereof) and has outstanding debt which is rated "A" (or
such similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act) or any money market fund sponsored by a registered broker dealer or mutual
fund distributor; (iii) repurchase obligations with a term of not more than
thirty (30) days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) investments in commercial paper, maturing not more than ninety
(90) days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Issuer) organized and in existence under the laws of the United
States of America or any foreign country recognized by the United States of
America with a rating at the time as of which any investment therein is made of
"P-1" (or higher) according to Moody's, or A-1 (or higher) according to S&P's
Ratings Group; and (v) investments in securities with maturities of six months
or less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by S&P's Ratings
Group or "A" by Moody's.

          "Third Party Appraiser" means an Independent Appraiser jointly
           ---------------------
selected by the Issuer Appraiser and the Trustee Appraiser.

          "TIA" means the Trust Indenture Act of 1939 (15 U.S.  Code
           ---
(S)(S)77aaa- 77bbbb) as in effect on the date of the Indenture; provided,
                                                                --------
however, that in the event the Trust Indenture Act of 1939 is amended after such
-------
date, "Trust Indenture Act" means, to the extent required by any such amendment,
the Trust Indenture Act of 1939 as so amended.

          "Transaction Aircraft" means those aircraft which are being acquired
           --------------------
by Issuer from Boeing after the date hereof and which are being lease financed
under that certain financing commitment, dated March 8, 2000, between Boeing
Capital Corporation and the Issuer, as the same has or may be amended by the
parties thereto.

          "Transaction Document" means the Indenture, the Purchase Agreement,
           --------------------
the Notes, the Collateral Documents, each Subsidiary Guaranty, and the other
agreements, documents, certificates and instruments now or hereafter executed or
delivered by the Issuer, Holdings or any Subsidiary or Affiliate of Issuer or
Holdings in connection with this Indenture.

          "Trigger Date" shall have the meaning ascribed to such term in Section
           ------------                                                  -------
5.19 hereof.
----

          "Trustee" means the Person named as the "Trustee" in the preamble
           -------
hereto until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.

          "Trustee Appraiser" means an Independent Appraiser selected by the
           -----------------
Trustee.

                                      28
<PAGE>

          "Trustee Appraiser's Certificate" means an Independent Appraiser's
           -------------------------------
Certificate signed by a Trustee Appraiser.

          "Unrestricted Subsidiary" means (i) any Subsidiary of the Issuer that
           -----------------------
at the time of determination shall be, or have been, designated an Unrestricted
Subsidiary by the Board of Directors of Issuer in the manner provided below and
(ii) any Subsidiary of an Unrestricted Subsidiary.  The Board of Directors may
designate any Subsidiary of the Issuer (including any newly acquired or newly
formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or
any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any
Lien on any property of, the Issuer or any other Subsidiary of the Issuer that
is not a Subsidiary of the Subsidiary to be so designated: provided, however,
                                                           --------  -------
that either (A) the Subsidiary to be so designated has total assets of $1,000 or
less or (B) if such Subsidiary has assets greater than $1,000, such designation
would be permitted under Section 5.3.  The Board of Directors may designate any
                         -----------
Unrestricted Subsidiary as a Restricted Subsidiary; provided, however, that
                                                    --------  -------
immediately after giving effect to such designation (x) the Issuer could Incur
$1.00 of additional Indebtedness under paragraph (a) of Section 5.17 and (y) no
                                                        ------------
Default shall have occurred and be continuing.  Any such designation by the
Board of Directors shall be made by the Issuer to the Trustee by promptly filing
with the Trustee a copy of the resolution of the Board of Directors giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.

          "U.S." or "United States" means the United States of America.
           ----      -------------

          "U.S.  Government Obligations" means direct obligations (or
           ----------------------------
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the Issuer's option.

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

          "Wholly-Owned Subsidiary" means a Restricted Subsidiary all the
           -----------------------
Capital Stock of which (other than directors' qualifying shares) is owned by the
Issuer or one or more Wholly-Owned Subsidiaries.

          Section 1.2  Incorporation by Reference of Trust Indenture Act.
                       -------------------------------------------------

          Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.

          The following TIA terms used in this Indenture have the following
meanings:

                                      29
<PAGE>

          "indenture securities" means the Notes;
           --------------------

          "indenture security holder" means a Holder of a Note;.
           -------------------------

          "indenture to be qualified" means this Indenture;
           -------------------------

          "indenture trustee" or "institutional trustee" means the Trustee;
           -----------------      ---------------------

          "obligor" on the Notes means the Issuer, the Parent Company, the
           -------
Subsidiary Guarantors and any successor obligor upon the Notes.

          All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute, or defined by Commission rule under
the TIA have the meanings so assigned to them.

          Section 1.3  Rules of Construction.
                       ---------------------
          Unless the context otherwise requires:

                  (a)  a term has the meaning assigned to it;

                  (b)  an accounting term not otherwise defined has the meaning
     assigned to it in accordance with GAAP;

                  (c)  "or" is not exclusive;

                  (d)  words in the singular include the plural, and in the
     plural include the singular;

                  (e)  "herein," "hereof" and other words of similar import
     refer to this Indenture as a whole and not to any particular Article,
     Section or other subdivision, and the terms "Article," "Section," "Exhibit"
     and "Schedule," unless otherwise specified or indicated by the context in
     which used, mean the corresponding Article or Section of, or the
     corresponding Exhibit or Schedule to, this Indenture;

                  (f)  references to agreements and other instruments include
     subsequent amendments, supplements and waivers to such agreements or
     instruments but only to the extent not prohibited by this Indenture; and

                  (g)  provisions apply to successive events and transactions.

                                      30
<PAGE>

                                  ARTICLE II
                                   THE NOTES

          Section 2.1   Designation; Form and Dating.
                        ----------------------------

          The Indebtedness evidenced by the Series A Notes, the Series B Notes,
the Series C Notes, and the Series D Notes and otherwise arising under this
Indenture is hereby designated as "senior indebtedness" (i) for all purposes of
the provisions evidencing subordination contained in agreements that provide
that the Indebtedness of the Issuer issued pursuant to such agreements is
subordinate to Indebtedness designated as senior indebtedness, and (ii) for the
purposes of any future Indebtedness of the Issuer which the Issuer expressly
makes subordinate to senior indebtedness.  The Series A Notes, the Series B
Notes, the Series C Notes, and the Series D Notes will rank pari passu with each
other in right of payment and in respect of the Collateral and in respect of
their respective related Guarantees.

          The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A attached hereto, the terms of which are
                             ---------
incorporated in and made a part of this Indenture.  Each Note shall include the
Subsidiary Guaranty in the form of Exhibit C attached hereto, executed by each
                                   ---------
of the Subsidiary Guarantors existing on the date of issuance of such Note, the
terms of which are incorporated in and made a part of this Indenture.  The Notes
may have notations, legends or endorsements required by law, stock exchange
rule, agreements to which the Issuer is subject or usage.  Each Note shall be
dated the date of its authentication.  The Notes shall be issued in
denominations of $1,000 and integral multiples thereof.

          The Notes will be issued (a) in global form (the "Global Notes"),
                                                            ------------
substantially in the form of Exhibit A attached hereto (including the legends
                             ---------
contained in the introduction thereto) and (b) upon the initial issuance thereof
and under certain other circumstances, in definitive form (the "Definitive
                                                                ----------
Notes"), substantially in the form of Exhibit A attached hereto (excluding the
-----                                 ---------
legends contained in the introduction thereto).  Each Global Note shall
represent the aggregate amount of outstanding Notes from time to time endorsed
thereon; provided, that the aggregate amount of outstanding Notes represented
         --------
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions.  Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the amount of outstanding Notes
represented thereby shall be made by the Trustee, in accordance with
instructions given by the Holder thereof, as required by Section 2.6 hereof.
                                                         -----------

          Section 2.2   Execution and Authentication.
                        ----------------------------

          The Notes shall be executed on behalf of the Issuer, by manual or
facsimile signature, by an Officer and attested by another Officer by manual or
facsimile signature.  If an Officer whose signature is on a Note no longer holds
that office at the time the Note is authenticated, the Note shall nevertheless
be valid.

                                      31
<PAGE>

          A Note shall not be valid until authenticated by the manual signature
of the Trustee.  The signature of the Trustee shall be conclusive evidence that
the Note has been authenticated under this Indenture.  The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in Exhibit A attached hereto.
             ---------

          The Trustee shall, upon an Issuer Order, authenticate for original
issue Notes in the aggregate principal amount of up to $166,400,000.

          The Trustee may appoint an authenticating agent acceptable to the
Issuer to authenticate Notes.  Unless limited by the terms of such appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authenticating by the Trustee includes
authenticating by such authenticating agent.  An authenticating agent has the
same rights as an Agent to deal with the Issuer or an Affiliate of the Issuer.

          The Issuer, the Trustee, the Collateral Trustee and any agent of the
Issuer, the Trustee or the Collateral Trustee may treat the Person in whose name
any Note is registered as the owner of such Note for the purpose of receiving
payment of principal (and premium, if any) of and (subject to the provisions of
this Indenture and the Notes with respect to record dates) interest on such Note
and for all other purposes whatsoever, regardless of whether such Note is
overdue, and none of the Issuer, the Trustee, the Collateral Trustee or any
agent of any of the Issuer, the Trustee or the Collateral Trustee shall be
affected by notice to the contrary.

          Section 2.3   Registrar, Paying Agent and Depositary.
                        --------------------------------------

          The Issuer shall maintain (a) an office or agency where Notes may be
presented for registration of transfer or for exchange (the "Registrar") and (b)
                                                             ---------
an office or agency where Notes may be presented for payment (the "Paying
                                                                   ------
Agent").  The Issuer initially appoints the Trustee as Registrar and Paying
-----
Agent.  The Registrar shall keep a register of the Notes and of their transfer
and exchange.  The Issuer may appoint one or more co-registrars and one or more
additional paying agents.  The term "Registrar" includes any co-registrar and
the term "Paying Agent" includes any additional paying agent.  The Issuer may
change any Paying Agent or Registrar without notice to any Holder.  The Issuer
shall notify the Trustee of the name and address of any Agent not a party to
this Indenture.  If the Issuer fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such.  The Issuer or any of
its Subsidiaries may act as Paying Agent or Registrar, except that for purposes
of Articles III and IX and Sections 5.1, 5.15 and 5.19, neither the Issuer nor
   ------------     --     -------- ---  ----     ----
any of its Subsidiaries shall act as Paying Agent.

          The Issuer shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA.  The agreement shall implement the provisions of this Indenture that
relate to such Agent.

                                      32
<PAGE>

          The Issuer initially appoints DTC to act as Depositary with respect to
the Global Notes.  The Trustee shall act as custodian for the Depositary with
respect to the Global Notes.

          Section 2.4   Paying Agent to Hold Money in Trust.
                        -----------------------------------

          The Issuer shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Notes and shall notify the
Trustee in writing of any default by the Issuer in making any such payment.
While any such default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee.  The Issuer at any time may require a
Paying Agent to pay all money held by it to the Trustee.  Upon payment over to
the Trustee, the Paying Agent (if other than the Issuer or a Subsidiary of the
Issuer) shall have no further liability for the money delivered to the Trustee.
If the Issuer or a Subsidiary of the Issuer acts as Paying Agent (subject to
Section 2.3), it shall segregate and hold in a separate trust fund for the
-----------
benefit of the Holders a sum sufficient to pay all payments of principal,
interest and Special Interest, if any, when due.

          Section 2.5   Holder Lists.
                        ------------

          The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a).  If the Trustee is
not the Registrar, the Issuer shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders,
including the aggregate principal amount of Notes held by each such Holder, and
the Issuer shall otherwise comply with TIA (S) 312(a).

          Section 2.6   Transfer and Exchange.
                        ---------------------

                  (a)   Transfer and Exchange of Definitive Notes. When
                        -----------------------------------------
     Definitive Notes are presented by a Holder to the Registrar with a request
     (1) to register the transfer of the Definitive Notes or (2) to exchange
     such Definitive Notes for an equal principal amount of Definitive Notes of
     other authorized denominations, the Registrar shall register the transfer
     or make the exchange as requested if its requirements for such transactions
     are met; provided, that the Definitive Notes so presented (A) have been
              --------
     duly endorsed or accompanied by a written instruction of transfer in form
     satisfactory to the Registrar duly executed by such Holder or by his or her
     attorney, duly authorized in writing; and (B) in the case of a Restricted
     Security, such request shall be accompanied by the following additional
     documents:

                        (i)  if such Restricted Security is being delivered to
          the Registrar by a Holder for registration in the name of such Holder,
          without

                                      33
<PAGE>

          transfer, a certification to that effect (in substantially the form of
          Exhibit B attached hereto); or
          ---------

                        (ii)   if such Restricted Security is being transferred
          to a QIB in accordance with Rule 144A or pursuant to an effective
          registration statement under the Securities Act, a certification to
          that effect (in substantially the form of Exhibit B attached hereto);
                                                    ---------
          or

                        (iii)  if such Restricted Security is being transferred
          in reliance on another exemption from the registration requirements of
          the Securities Act, a certification to that effect (in substantially
          the form of Exhibit B attached hereto) and an opinion of counsel
                      ---------
          reasonably acceptable to the Issuer and the Registrar to the effect
          that such transfer is in compliance with the Securities Act.

                   (b)  Transfer of a Definitive Note for a Beneficial Interest
                        -------------------------------------------------------
     in a Global Note. A Definitive Note may be exchanged for a beneficial
     ----------------
     interest in a Global Note only upon receipt by the Trustee of a Definitive
     Note, duly endorsed or accompanied by appropriate instruments of transfer,
     in form satisfactory to the Trustee, together with:

                        (i)    written instructions directing the Trustee to
          make an endorsement on the appropriate Global Note to reflect an
          increase in the aggregate principal amount of the Notes represented by
          such Global Note, and

                        (ii)   if such Definitive Note is a Restricted Security,
          a certification (in substantially the form of Exhibit B attached
                                                        ---------
          hereto) and, if applicable, a legal opinion, in each case similar to
          that required pursuant to clause (iii) of Section 2.6(a);
                                                    --------------

          in which case the Trustee shall cancel such Definitive Note and cause
          the aggregate principal amount of Notes represented by the appropriate
          Global Note to be increased accordingly.  If no Global Note is then
          outstanding, the Issuer shall issue and the Trustee shall authenticate
          a new Global Note in the appropriate principal amount.

                   (c)  Transfer and Exchange of Global Notes.  The transfer and
                        -------------------------------------
     exchange of Global Notes or beneficial interests therein shall be effected
     through the Depositary in accordance with this Indenture and the procedures
     of the Depositary therefor, which shall include restrictions on transfer
     comparable to those set forth herein to the extent required by the
     Securities Act.

                   (d)  Transfer of a Beneficial Interest in a Global Note for a
                        --------------------------------------------------------
     Definitive Note. Upon receipt by the Trustee of twenty (20) days prior
     ---------------
     written transfer instructions (or such other form of instructions as is
     customary for the Depositary) from the Depositary (or its nominee) on
     behalf of any Person having

                                      34
<PAGE>

     a beneficial interest in a Global Note, the Trustee shall, in accordance
     with the standing instructions and procedures existing between the
     Depositary and the Trustee, cause the aggregate principal amount of Global
     Notes to be reduced accordingly and, following such reduction, the Issuer
     shall execute and the Trustee shall authenticate and deliver to the
     transferee a Definitive Note in the appropriate principal amount; provided,
                                                                       --------
     that in the case of a Restricted Security, such instructions shall be
     accompanied by the following additional documents:

                    (i)   if such beneficial interest is being transferred to
          the Person designated by the Depositary as being the beneficial owner,
          a certification to that effect (in substantially the form of Exhibit
                                                                       -------
          B attached hereto); or
          -

                    (ii)  if such beneficial interest is being transferred to a
          QIB in accordance with Rule 144A or pursuant to an effective
          registration statement under the Securities Act, a certification to
          that effect (in substantially the form of Exhibit B attached hereto)
                                                    ---------
          and an opinion of counsel reasonably acceptable to the Issuer and to
          the Registrar to the effect that such transfer is in compliance with
          the Securities Act; or

                    (iii) if such beneficial interest is being transferred in
          reliance on another exemption from the registration requirements of
          the Securities Act, a certification to that effect (in substantially
          the form of Exhibit B attached hereto) and an opinion of counsel
                      ---------
          reasonably acceptable to the Issuer and to the Registrar to the effect
          that such transfer is in compliance with the Securities Act.

Definitive Notes issued in exchange for a beneficial interest in a Global Note
shall be registered in such names and in such authorized denominations as the
Depositary shall instruct the Trustee.

               (e)  Transfer and Exchange of Global Notes. Notwithstanding any
                    -------------------------------------
     other provision of this Indenture, the Global Note may not be transferred
     as a whole except by the Depositary to a nominee of the Depositary or by a
     nominee of the Depositary to the Depositary or another nominee of the
     Depositary or by the Depositary or any such nominee to a successor
     Depositar y or a nominee of such successor Depositary; provided, that if:
                                                            --------

                    (i)   the Depositary (a) notifies the Issuer that the
          Depositary is unwilling or unable to continue as Depositary and a
          successor Depositary is not appointed by the Issuer within ninety (90)
          days after delivery of such notice, or (b) has ceased to be a clearing
          agency registered under the Exchange Act; or

                    (ii)   the Issuer, at its sole discretion, notifies the
          Trustee in writing that it elects to cause the issuance of Definitive
          Notes under this Indenture,

                                      35
<PAGE>

          then the Issuer shall execute and the Trustee shall authenticate and
          deliver, Definitive Notes in an aggregate principal amount equal to
          the aggregate principal amount of the Global Note in exchange for such
          Global Note.

               (f)  Cancellation and/or Adjustment of Global Notes. At such time
                    ----------------------------------------------
     as all beneficial interests in the Global Note have either been exchanged
     for Definitive Notes, redeemed, repurchased or canceled, the Global Note
     shall be returned to (or retained by) and canceled by the Trustee. At any
     time prior to such cancellation, if any beneficial interest in the Global
     Note is exchanged for Definitive Notes, redeemed, repurchased or canceled,
     the aggregate principal amount of Notes represented by such Global Note
     shall be reduced accordingly and an endorsement shall be made on such
     Global Note by the Trustee to reflect such reduction.

               (g)  General Provisions Relating to Transfers and Exchanges. To
                    ------------------------------------------------------
     permit registrations of transfers and exchanges, the Issuer shall execute
     and the Trustee shall authenticate Definitive Notes and Global Notes at the
     Registrar's request. All Definitive Notes and Global Notes issued upon any
     registration of transfer or exchange of Definitive Notes or Global Notes
     shall be legal, valid and binding obligations of the Issuer, evidencing the
     same debt, and entitled to the same benefits under this Indenture, as the
     Definitive Notes or Global Notes surrendered upon such registration of
     transfer or exchange.

          No service charge shall be made to a Holder for any registration of
     transfer or exchange, but the Issuer or the Trustee may require payment of
     a sum sufficient to cover any transfer tax or similar governmental charge
     payable in connection therewith (other than any such transfer taxes or
     similar governmental charge payable upon exchange (without transfer to
     another person) pursuant to Sections 2.10, 3.7, 5.15, 5.19, and 10.5).
                                 -------- ----- ---- ----- -----    -----

          Neither the Issuer nor the Trustee shall not be required to (i) issue,
     register the transfer of or exchange of Notes during a period beginning at
     the opening of business fifteen (15) days before the day of any selection
     of Notes for redemption under Section 3.2 and ending at the close of
                                   -----------
     business on the day of selection; or (ii) register the transfer of or
     exchange of any Note so selected for redemption in whole or in part, except
     the unredeemed portion of any Note being redeemed in part; or (iii)
     register the transfer of or exchange a Note between a record date and the
     next succeeding interest payment date.

          Prior to due presentment for the registration of a transfer of any
     Note, the Trustee, the Collateral Trustee, any Agent and the Issuer may
     deem and treat the Person in whose name any Note is registered as the
     absolute owner of such Note for all purposes, and none of the Trustee, the
     Collateral Trustee, any Agent or the Issuer shall be affected by notice to
     the contrary.  The Trustee is not required to ascertain whether any
     transfer complies with the securities laws provided, however, that the
                                                --------- -------
     Trustee shall be required to review for accuracy any and all

                                      36
<PAGE>

     certificates that are required to be provided in connection with any
     contemplated transfer.

               (h)  Exchange of Series A Notes for Series B Notes and Series C
                    ----------------------------------------------------------
     Notes for Series D Notes. Series A Notes may be exchanged for Series B
     ------------------------
     Notes and Series C Notes may be exchanged for Series D Notes pursuant to
     the terms of the Exchange Offer. The Trustee and Registrar shall make the
     exchange as follows:

          The Issuer shall present the Trustee with an Officers' Certificate
     certifying the following:

                    (i)   upon issuance of the Series B Notes and the Series D
          Notes, as applicable, the transactions contemplated by the Exchange
          Offer have been consummated; and

                    (ii)  the principal amount of Series A Notes and Series C
          Notes properly tendered in the Exchange Offer that are represented by
          a Global Note and the principal amount of Series A Notes and Series C
          Notes properly tendered in the Exchange Offer that are represented by
          Definitive Notes; the name of each Holder of such Definitive Notes;
          the principal amount properly tendered in the Exchange Offer by each
          such Holder; and the name and address to which Definitive Notes for
          Series B Notes and Series D Notes, respectively, shall be registered
          and sent for each such Holder.

          The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
     Opinion of Counsel (1) to the effect that the Series B Notes and the Series
     D Notes have been registered under Section 5 of the Securities Act and this
     Indenture has been qualified under the TIA and (2) with respect to the
     matters set forth in Section 6(o) of the Registration Rights Agreement and
     (iii) an Issuer Order, shall authenticate (1) a Global Note for each of the
     Series B Notes and Series D Notes in the respective aggregate principal
     amounts equal to the aggregate principal amounts of Series A Notes and
     Series C Notes represented by Global Notes indicated in such Officers'
     Certificate as having been properly tendered and (2) Definitive Notes
     representing Series B Notes and Series D Notes registered in the names of,
     and in the principal amounts indicated in such Officers' Certificate.

          The Trustee shall deliver such Definitive Notes for Series B Notes and
     Series D Notes to the Holders thereof as indicated in such Officers'
     Certificate.

          Section 2.7  Replacement Notes.
                       -----------------

          If any mutilated Note is surrendered to the Trustee, or the Issuer and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Note, the Issuer shall issue and the Trustee shall authenticate a
replacement Note if the Trustee's requirements for replacements of Notes are
met.  If required by the Trustee or

                                      37
<PAGE>

the Issuer, an indemnity bond must be supplied by the Holder that is sufficient
in the judgment of the Trustee and the Issuer to protect the Issuer, the
Trustee, any Agent or any authenticating agent from any loss that any of them
may suffer if a Note is replaced. The Issuer or the Trustee may charge for their
expenses in replacing a Note.

          Every replacement Note is an obligation of the Issuer and shall be
entitled to all of the benefits of this Indenture and the Collateral Documents
equally and proportionately with all other Notes duly issued hereunder.

          Section 2.8    Outstanding Notes.
                         -----------------

          The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section 2.8 as not outstanding.
-----------

          If a Note is replaced pursuant to Section 2.7, the replaced Note
                                            -----------
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.

          If the principal amount of any Note is considered paid under Section
                                                                       -------
5.1, it ceases to be outstanding and interest on it ceases to accrue.
---

          Subject to Section 2.9, a Note does not cease to be outstanding
                     -----------
because the Issuer or an Affiliate of the Issuer holds the Note.

          Section 2.9    Treasury Notes.
                         --------------

          In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Issuer or any Affiliate of the Issuer shall be considered as though not
outstanding, except that for purposes of determining whether the Trustee shall
be protected in relying on any such direction, waiver or consent, only Notes
that a Responsible Officer of the Trustee knows to be so owned shall be
considered as not outstanding.

          Section 2.10   Temporary Notes.
                ---------------

          Pending the preparation of Definitive Notes, the Issuer (and the
Subsidiary Guarantors) may execute, and upon an Issuer Order, the Trustee shall
authenticate and deliver, temporary Notes that are printed, lithographed,
typewritten, mimeographed or otherwise reproduced, in any authorized
denomination, substantially of the tenor of the Definitive Notes in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Notes may
determine, as conclusively evidenced by their execution of such Notes.

          If temporary Notes are issued, the Issuer (and the Subsidiary
Guarantors) shall cause Definitive Notes to be prepared without unreasonable
delay.  The Definitive

                                      38
<PAGE>

Notes shall be printed, lithographed or engraved, or provided by any combination
thereof, or in any other manner permitted by the rules and regulations of any
principal national securities exchange, if any, on which the Notes are listed,
all as determined by the Officers executing such Definitive Notes. After the
preparation of Definitive Notes, the temporary Notes shall be exchangeable for
Definitive Notes upon surrender of the temporary Notes at the office or agency
maintained by the Issuer for such purpose pursuant to Section 5.2, without
                                                      -----------
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes, the Issuer (and the Subsidiary Guarantors) shall execute, and
the Trustee shall authenticate and make available for delivery, in exchange
therefor the same aggregate principal amount of Definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as Definitive Notes.

          Section 2.11    Cancellation.
                          ------------

          The Issuer at any time may deliver Notes to the Trustee for
cancellation.  The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment and
not previously received by the Trustee.  The Trustee and no one else shall
cancel all Notes surrendered for registration of transfer, exchange, payment,
replacement or cancellation and shall retain or destroy canceled Notes in
accordance with its normal practices (subject to the record retention
requirement of the Exchange Act) unless the Issuer directs the Notes to be
returned to it.  The Issuer may not issue new Notes to replace Notes that have
been redeemed or paid or that have been delivered to the Trustee for
cancellation.  All such Notes shall be canceled by the Trustee and returned to
the Issuer pursuant to a written order signed by one Officer of the Issuer.

          Section 2.12    Defaulted Interest.
                          ------------------

          If the Issuer defaults in a payment of interest on the Notes, they
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, which date shall be at the earliest
practicable date but in all events at least ten (10) Business Days prior to the
payment date, in each case at the rate provided in the Notes and in Section 5.1.
                                                                    -----------
The Issuer shall, with the consent of the Trustee, fix or cause to be fixed each
such special record date and payment date.  At least thirty (30) days before the
special record date, the Issuer (or the Trustee, in the name of and at the
expense of the Issuer, upon fifteen (15) days written notice to the Trustee)
shall mail to the Holders a notice that states the special record date, the
related payment date and the amount of such interest to be paid.

          Section 2.13    Legends.
                          -------

                  (a)     Except as permitted by subsections (b) or (c) of this
     Section 2.13, each Note shall bear legends relating to restrictions on
     ------------
     transfer

                                      39
<PAGE>

     pursuant to the securities laws in substantially the form set forth on
     Exhibit A attached hereto.
     ---------

                  (b)    Upon any sale or transfer of a Restricted Security
     (including any Restricted Security represented by a Global Note) pursuant
     to Rule 144 under the Securities Act or pursuant to an effective
     registration statement under the Securities Act:

                         (i)    in the case of any Restricted Security that is a
     Definitive Note, the Registrar shall permit the Holder thereof to exchange
     such Restricted Security for a Definitive Note that does not bear the
     legends required by subsection (a) above; and

                         (ii)   in the case of any Restricted Security
     represented by a Global Note, such Restricted Security shall not be
     required to bear the legends required by subsection (a) above, but shall
     continue to be subject to the provisions of Section 2.6(c); provided, that
                                                 --------------  --------
     with respect to any request for an exchange of a Restricted Security that
     is represented by a Global Note for a Definitive Note that does not bear
     the legends required by subsection (a) above, which request is made in
     reliance upon Rule 144, the Holder thereof shall certify in writing to the
     Registrar that such request is being made pursuant to Rule 144.

                  (c)    The Issuer (and the Subsidiary Guarantors) shall issue
     and the Trustee shall authenticate Series B Notes and Series D Notes in
     exchange for Notes accepted for exchange in the Exchange Offer. The Series
     B Notes and Series D Notes shall not bear the legends required by
     subsection (a) above unless the Holder of such Notes is:

                         (i)    a broker-dealer who purchased such Notes
          directly from the Issuer to resell pursuant to Rule 144A or any other
          available exemption under the Securities Act,

                         (ii)   a Person participating in the distribution of
          the Notes, or

                         (iii)  a Person who is an affiliate (as defined in Rule
          144) of the Issuer.

          Section 2.14    Deposit of Moneys.
                          -----------------

          Subject to Section 3.5, prior to 10:00 a.m.  on each date on which the
                     -----------
principal of, premium, if any, interest and Special Interest, if any, on the
Notes are due, the Issuer shall deposit with the Trustee or Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such date in a timely manner which permits the Trustee or such Paying Agent
to remit payment to the Holders on such date.

                                      40
<PAGE>

          Any money deposited with the Trustee or any Paying Agent, or received
by the Trustee pursuant to Section 3.5 or Article IX, or then held by the
                           -----------    ----------
Issuer, in trust for the payment of the principal of (and premium, if any),
interest or Special Interest, if any, on and remaining unclaimed for two years
after such principal (and premium, if any), interest or Special Interest, if
any, has become due and payable shall be paid to the Issuer upon its written
request (unless otherwise required by mandatory provisions of applicable escheat
or abandoned or unclaimed property law), or (if then held by the Issuer) shall
be discharged from such trust; and the Holder of such Note shall thereafter, as
an unsecured general creditor, look only to the Issuer for payment thereof
(unless the Issuer has remitted required moneys or property to the appropriate
governmental authority under any applicable escheat or abandoned or unclaimed
property laws, or has otherwise been discharged under such laws or laws of
similar applicability, in which case such Holder shall look solely to its
remedies (if any) under such laws and not to the Issuer), and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Issuer as trustee thereof shall thereupon cease; provided,
                                                                  --------
however, that the Trustee or such Paying Agent, before being required to make
-------
any such repayment, may at the expense of the Issuer cause to be published once,
in a newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York or mailed to
Holders entitled to such notice, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than thirty (30)
days from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Issuer.

          Section 2.15    CUSIP Numbers.
                          -------------

          The Issuer in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
                                           --------
state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of a redemption and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers.  The Issuer will promptly notify the Trustee of any
change in the "CUSIP" numbers.

                                  ARTICLE III
                                  REDEMPTION

          Section 3.1    Notices to Trustee.
                         ------------------

          If the Issuer elects or is required to redeem Notes pursuant to
Section 3.7 or Section 3.8, it shall furnish to the Trustee, at least thirty-
-----------    -----------
five (35) days but not more than sixty (60) days before a redemption date, an
Officers' Certificate setting forth (a) the clause of Section 3.7 pursuant to
                                                      -----------
which the redemption shall occur, if any, (b) the redemption date, (c) the
principal amount of Notes to be redeemed and (d) the redemption price.

                                      41
<PAGE>

          Section 3.2    Selection of Notes to Be Redeemed.
                         ---------------------------------

          If less than all the Notes are to be redeemed pursuant to Section 3.7
                                                                    -----------
or Section 3.8, the Trustee shall select the Notes to be redeemed in compliance
   -----------
with the requirements of the principal national securities exchange, if any, on
which the Notes are listed, or, if the Notes are not so listed, pro rata or by
such method as the Trustee deems to be fair and appropriate; provided, that
                                                             --------
Notes in denominations of $1,000 or less may not be redeemed in part.

          The Trustee shall promptly notify the Issuer in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed.  Notes and portions of
Notes selected for redemption shall be in amounts of $1,000 or whole multiples
of $1,000.  Provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.

          Section 3.3    Notice of Redemption.
                         --------------------

          At least thirty (30) days but not more than sixty (60) days before a
redemption date, the Issuer shall mail a notice of redemption by first class
mail to each Holder whose Notes are to be redeemed at such Holder's registered
address.  The notice shall identify the Notes to be redeemed and shall state:

               (a)       the redemption date;

               (b)       the redemption price;

               (c)       if any Note is being redeemed in part only, the portion
     of the principal amount of such Note to be redeemed and that, after the
     redemption date, upon cancellation of the original Note, a new Note or
     Notes in principal amount equal to the unredeemed portion shall be issued;

               (d)       the name and address of the Paying Agent;

               (e)       that Notes called for redemption must be surrendered to
     the Paying Agent to collect the redemption price;

               (f)       that, unless the Issuer defaults in making such
     redemption payment, interest and Special Interest, if any, on Notes or
     portions of Notes called for redemption shall cease to accrue on and after
     the redemption date;

               (g)       the paragraph of the Notes and/or the section of this
     Indenture pursuant to which the Notes called for redemption are being
     redeemed; and

               (h)       the CUSIP number of the Notes to be redeemed.

                                      42
<PAGE>

          At the Issuer's request, the Trustee shall give the notice of
redemption in the name of the Issuer and at the Issuer's expense; provided that
                                                                  --------
the Issuer shall deliver to the Trustee at least thirty-five (35) days (unless a
shorter period is acceptable to the Trustee) prior to the redemption date, an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.

          Section 3.4    Effect of Notice of Redemption.
                         ------------------------------

          Once notice of redemption has been mailed to the Holders in accordance
with Section 3.3, Notes called for redemption become due and payable on the
     -----------
redemption date at the redemption price.  At any time prior to the mailing of a
notice of redemption to the Holders pursuant to Section 3.3, the Issuer may
                                                -----------
withdraw, revoke or rescind any notice of redemption delivered to the Trustee
without any continuing obligation to redeem the Notes as contemplated by such
notice of redemption.

          Section 3.5    Deposit of Redemption Price.
                         ---------------------------

          At or before 10:00 a.m.  on the redemption date, the Issuer shall
deposit with the Trustee (to the extent not already held by the Trustee) or with
the Paying Agent immediately available funds in an amount sufficient to pay the
redemption price of and accrued interest (and Special Interest, if any) on all
Notes to be redeemed on that date.  The Trustee or the Paying Agent shall return
to the Issuer any funds deposited with the Trustee or the Paying Agent by the
Issuer in excess of the amounts necessary to pay the redemption price of, and
accrued interest (and Special Interest, if any) on, all Notes to be redeemed.

          Interest (and Special Interest, if any) on the Notes to be redeemed
shall cease to accrue on the applicable redemption date, regardless of whether
such Notes are presented for payment, if the Issuer makes or deposits the
redemption payment in accordance with this Section 3.5.  If any Note called for
                                           -----------
redemption shall not be paid upon surrender for redemption because of the
failure of the Issuer to comply with the preceding paragraph, interest shall be
paid on the unpaid principal, from the redemption date until such principal is
paid, and to the extent lawful on any interest not paid on such unpaid
principal, in each case at the rate provided in the Notes.

          Section 3.6    Notes Redeemed in Part.
                         ----------------------

          Upon surrender of a Note that is redeemed in part, the Issuer shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Issuer a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.

          Section 3.7    Optional Redemption.
                         --------------------

               (a)       Except as set forth in Section 3.7(b), the Notes are
                                                --------------
     not redeemable at the Issuer's option prior to April 12, 2005. Thereafter,
     the Notes will be subject to redemption at the option of the Issuer, in
     whole or in part, at the

                                      43
<PAGE>

     redemption prices (expressed as percentages of principal amount) set forth
     below, plus accrued and unpaid interest and Special Interest, if any,
     thereon, if any, to the applicable redemption date, if redeemed as set
     forth below.

<TABLE>
<CAPTION>
                                                                                   Percentage
                                                                                   ----------
<S>                                                                                <C>
     On or after April 12, 2005................................................      104.000%
     April 12, 2006 through April 12, 2007....................................       102.000%
     April 12, 2007 and thereafter............................................       100.000%
</TABLE>

               (b)       Notwithstanding Section 3.7(a), the Notes will be
                                         --------------
     redeemable at the Issuer's option prior to April 12, 2004 only in the event
     that on or before April 12, 2004 the Issuer receives Net Cash Proceeds of
     one or more Equity Offerings in which case the Issuer may, at the Issuer's
     option, use all or a portion of any such Net Cash Proceeds to redeem up to
     thirty-five percent (35%) of the aggregate principal amount of Notes within
     ninety (90) days of any such Equity Offering, on not less than thirty (30)
     days, but not more than sixty (60) days, notice to each Holder of the Notes
     to be redeemed, at a redemption price (expressed as a percentage of
     principal amount) of one hundred eleven and twenty-seven hundredths percent
     (111.27%) plus accrued and unpaid interest and Special Interest, if any, to
     the redemption date (subject to the right of Holders of record on the
     relevant record date to receive interest and Special Interest, if any, due
     on the relevant interest payment date); provided, however, that at least
                                             --------  -------
     sixty-five (65%) of the original principal amount of the Notes must remain
     outstanding after such redemption.

           Section 3.8   Mandatory Redemption.
                         ---------------------

               (a)       On each Interest Payment Date, commencing October 15,
     2001 (each a "Mandatory Redemption Date"), the Issuer shall redeem from the
                   --------------------------
     Holders of Amortizing Notes and the Holders of Amortizing Notes shall
     tender for redemption by the Issuer on each Mandatory Redemption Date
     ("Mandatory Redemption"), $3,254,000 aggregate principal amount of
       --------------------
     Amortizing Notes for a purchase price in cash equal to one hundred percent
     (100%) of the principal amount of the notes to be purchased, plus, accrued
     and unpaid interest and Special Interest, if any, thereon, to the Mandatory
     Redemption Date.

               (b)       Except (i) as set forth in Section 3.8(a) and the
                                                    --------------
     Aircraft Mortgage, (ii) the Mandatory Redemption Obligation and (iii) as
     set forth in Sections 5.15, 5.19 and 5.24, the Issuer shall not be required
                  -------------  ----     ----
     to make mandatory redemption payments with respect to the Notes. The Notes
     shall not have the benefit of any sinking fund.

                                      44
<PAGE>

                                  ARTICLE IV
                          SATISFACTION AND DISCHARGE

          Section 4.1  Satisfaction and Discharge of Indenture.
                       ---------------------------------------

          This Indenture shall upon written request of the Trustee by Issuer
cease to be of further effect with respect to Notes (except as to any surviving
rights of registration of transfer, exchange or replacement of such Notes herein
expressly provided for), and the Trustee, at the expense of the Issuer, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture with respect to such Notes, when

                    (a)  either

                         (i)   all such Notes theretofore authenticated and
          delivered (other than (1) such Notes which have been destroyed, lost
          or stolen and which have been replaced or paid as provided in Section
                                                                        -------
          2.7 and (2) such Notes for whose payment money has theretofore been
          ---
          deposited in trust or segregated and held in trust by the Issuer and
          thereafter repaid to the Issuer or discharged from such trust, as
          provided in Section 2.14) have been delivered to the Trustee for
                      ------------
          cancellation; or

                         (ii)  all such Notes not theretofore delivered to the
          Trustee for cancellation

                              (1)  have become due and payable, or

                              (2)  will become due and payable at their Stated
                    Maturity within one year, or

                              (3)  are to be called for redemption within one
                    year under arrangements satisfactory to the Trustee for the
                    giving of notice of redemption by the Trustee in the name,
                    and at the expense, of the Issuer, and the Issuer, in the
                    case of (1), or (2) above, has deposited or caused to be
                    deposited with the Trustee funds in trust for the purpose an
                    amount of the currency or currencies or currency unit or
                    units in which such Notes are payable sufficient to pay and
                    discharge the entire indebtedness with respect to such Notes
                    not theretofore delivered to the Trustee for cancellation,
                    for principal and any premium and interest and Special
                    Interest, if any, to the date of such deposit (in the case
                    of Notes which have become due and payable) or to the Stated
                    Maturity or applicable redemption date, as the case may be;

                    (b)  the Issuer has paid or caused to be paid all other sums
          payable hereunder by the Issuer; and

                                      45
<PAGE>

                    (c)       the Issuer has delivered to the Trustee an
          Officers' Certificate and an Opinion of Counsel, each stating that all
          conditions precedent herein provided for relating to the satisfaction
          and discharge of this Indenture with respect to such Notes have been
          complied with.

               Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Issuer to the Trustee and the Collateral Trustee under
Section 8.7 and to any authenticating agent appointed hereunder, if money shall
-----------
have been deposited with the Trustee pursuant to subclause (ii) of clause (a) of
this Section 4.1, the obligations of the Trustee under Section 5.2, Article VIII
     -----------                                       -----------  ------------
and the last paragraph of Section 2.14 shall survive.
                          ------------

               Section 4.2  Application of Trust Money.
                            --------------------------

               Subject to provisions of the last paragraph of Section 2.14, all
                                                              ------------
money deposited with the Trustee pursuant to Section 4.1 shall be held in trust
                                             -----------
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Issuer acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest and Special Interest, if any, for whose payment such money has been
deposited with the Trustee.

                                   ARTICLE V
                   COVENANTS, REPRESENTATIONS AND WARRANTIES

               Section 5.1  Payment of Notes.
                            ----------------

               The Issuer shall pay the principal of, interest, premium, if any,
and Special Interest, if any, on the Notes on the dates and in the manner
provided in this Indenture and in the Notes.

               The Issuer shall pay interest and Special Interest, if any, semi-
annually in arrears on each Interest Payment Date, commencing October 15, 2001.
Interest and Special Interest, if any, shall be paid on each Interest Payment
Date in an amount equal to the interest and Special Interest, if any, accrued
for the period beginning from the Issue Date, or from the most recent date to
which interest and Special Interest, if any, have been paid.  All interest and
Special Interest, if any, due and payable on the Notes shall be paid in cash,
except that the Issuer may at its option, make such Payments by check mailed to
the address of the Person entitled thereto as it appears in the Register.
Interest and Special Interest, if any, on the Notes shall be computed on the
basis of a 360-day year of twelve 30-day months.

               An installment of principal, premium, if any, interest or Special
Interest, if any, shall be considered paid on the date due if the Trustee or
Paying Agent (other than the Issuer or any Affiliate thereof) holds on that date
Payments designated for and sufficient to pay such installment and the Trustee
or Paying Agent has not received

                                      46
<PAGE>

instructions from the Issuer not to make such payment or is not prohibited from
Paying such Payments to the Holders of the Notes pursuant to this Indenture.

          The Issuer shall pay interest (including post-petition interest) on
overdue principal at the rate equal to two percent (2%) per annum in excess of
the then applicable interest rate on the Notes to the extent lawful; it shall
pay interest (including post-petition interest) on overdue installments of
interest (without regard to any applicable grace period) at the same rate to the
extent lawful.

          Section 5.2  Maintenance of Office or Agency.
                       -------------------------------

          The Issuer shall maintain (a) in the City of Wilmington, Delaware, an
office or agency, and (b) upon demand by the holders of a majority in aggregate
principal amount of the then outstanding Notes in the Borough of Manhattan, The
City of New York, an office or agency, in each case, where Notes may be
surrendered for registration of transfer or exchange, for conversion, for
presentation for payment or repurchase of the Notes and where notices and
demands to or upon the Issuer in respect of the Notes and this Indenture may be
served.  At the request of the Issuer, said offices or agencies may be the
office of an agent appointed by the Trustee for such purpose.  The Issuer shall
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency not designated or appointed by the Trustee.
If at any time the Issuer shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.

          The Issuer may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
                                                                       --------
however, that no such designation or rescission shall in any manner relieve the
-------
Issuer of its obligation to maintain an office or agency in the City of
Wilmington, Delaware, for such purposes.  The Issuer will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.

          The Issuer hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Issuer in accordance with Section 2.3.
                                                              -----------

          Section 5.3  Limitation on Restricted Payments.
                       ---------------------------------

               (a)  The Issuer shall not, and shall not permit any Restricted
     Subsidiary, directly or indirectly, to make a Restricted Payment if at the
     time the Issuer or such Restricted Subsidiary makes such Restricted
     Payment: (1) a Default shall have occurred and be continuing (or would
     result therefrom); (2) the Issuer is not able to Incur an additional $1.00
     of Indebtedness pursuant to paragraph (a) of Section 5.17; or (3) the
                                                  ------------
     aggregate amount of such Restricted Payment and all other Restricted
     Payments since the Issue Date (the amount of any such Restricted Payment,
     if other than cash, as determined in good faith by the Issuer, whose
     determination shall be conclusive and evidenced by a resolution of the
     Board of
                                      47
<PAGE>

     Directors of the Issuer or an Officers' Certificate, delivered to the
     Trustee prior to the making of such Restricted Payment) would exceed the
     sum of:

                    (A)  fifty percent (50%) of the Consolidated Net Income
          accrued during the period (treated as one accounting period) from the
          beginning of the fiscal quarter immediately following the fiscal
          quarter during which the Notes are originally issued to the end of the
          most recent fiscal quarter for which financial statements are publicly
          available prior to the date of such Restricted Payment (or, in case
          such Consolidated Net Income shall be a deficit, minus one hundred
          percent (100%) of such deficit);

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

                    (C)  an amount equal to the sum of (i) the net reduction in
          Investments in Unrestricted Subsidiaries resulting from dividends,
          repayments of loans or advances or other transfers of assets, in each
          case to the Issuer or any Restricted Subsidiary from Unrestricted
          Subsidiaries, and (ii) the portion (proportionate to the Issuer's
          equity interest in such Subsidiary) of the fair market value of the
          net assets of an Unrestricted Subsidiary at the time such Unrestricted
          Subsidiary is designated a Restricted Subsidiary; provided, however,
                                                            --------  -------
          that the foregoing sum shall not exceed, in the case of any
          Unrestricted Subsidiary, the amount of Investments previously made
          (and treated as a Restricted Payment) by the Issuer or any Restricted
          Subsidiary in all Unrestricted Subsidiaries; and

                    (D)  $10 million.

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

                    (i)  any Restricted Payment made by exchange for, or out of
          the net proceeds (including fifty percent (50%) of the fair market

                                      48
<PAGE>

          value of property other than cash (as determined in good faith by the
          Issuer, whose determination shall be conclusive and evidenced by a
          resolution of the Board of Directors or an Officers' Certificate
          delivered to the Trustee prior to the making of such Restricted
          Payment)) of the substantially concurrent sale of, Capital Stock of
          the Issuer (other than Disqualified Stock and other than Capital Stock
          issued or sold to a Subsidiary of the Issuer or an employee stock
          ownership plan or to a trust established by the Issuer or any of its
          Subsidiaries for the benefit of their employees); provided, however,
          that (A) such Restricted Payment shall be excluded in the calculation
          of the amount of Restricted Payments and (B) to the extent used to
          make such Restricted Payment, the net proceeds from such sale shall be
          excluded from the calculation of amounts under clause (3)(B) of
          paragraph (a) above;

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

                    (iii) dividends paid within sixty (60) days after the date
     of declaration thereof if at such date of declaration such dividend would
     have complied with this Section 5.3; provided, however, that such dividends
                             -----------  --------  -------
     shall be included in the calculation of the amount of Restricted Payments;

                    (iv)  the declaration or payment of dividends on or payment
     of liquidated damages with respect to (A) any Preferred Stock outstanding
     on the Issue Date or (B) any Preferred Stock (other than Disqualified
     Stock) issued after the Issue Date that ranks on parity with or junior to
     Preferred Stock outstanding on the Issue Date; provided, however, that any
                                                    --------  -------
     dividend referred to in the foregoing clause (A) or, subject to the
     following proviso, clause (B), shall be included in the calculation of the
     amount of Restricted Payments and provided further, that the Issuer may
     elect to exclude from the calculation of amounts under clause 3(B) of
     paragraph (a) above any Net Cash Proceeds received by the Issuer from the
     issue or sale of Preferred Stock pursuant to the foregoing clause (B)
     (which election must be made by written notice to the Trustee within ten
     (10) Business Days of the receipt of such Net Cash Proceeds) and, if such
     election is made, any dividend, distribution, purchase, redemption,
     acquisition or retirement on or of the Preferred Stock for which such
     election is made shall not be a Restricted Payment;

                                      49
<PAGE>

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

                    (vi)   any purchase or redemption of Capital Stock of the
     Issuer resulting from the consolidation or merger with or into any Person
     or conveyance, transfer or lease of all or substantially all of the
     Issuer's or any Restricted Subsidiary's property to one or more Persons
     substantially as an entirety not prohibited by Section 5.1 (other than any
                                                    -----------
     consolidation, merger or other transactions involving only the Issuer and a
     Restricted Subsidiary of the Issuer or involving only Restricted
     Subsidiaries of the Issuer); provided that the amount of such purchase or
                                  --------
     redemption shall be excluded in the calculation of the amount of Restricted
     Payments; or

                    (vii)  payments of fees, expenses and indemnities to (x) the
     directors of the Issuer, the Parent Company and the Issuer's Restricted
     Subsidiaries and (y) the Parent Company in an amount not in excess of the
     fees and expenses payable to Boeing in connection with the Holdings'
     Convertible Notes Issuance, and the Holdings' Series A Notes Issuance;

                    (viii) to the Parent Company in respect of
     accounting, legal, or other professional or administrative expenses or
     reimbursements or franchise or similar taxes and governmental charges
     incurred by it relating to the business, operations or finances of the
     Issuer, the Parent Company and the Issuer's Restricted Subsidiaries and in
     respect of fees and related expenses associated with any registration
     statements

                                      50
<PAGE>

          relating to the Notes filed with the Commission and subsequent ongoing
          public reporting requirements; and

                    (ix) so long as the Parent Company files consolidated income
          tax returns that include the Issuer, payments to the Parent Company to
          the extent necessary to pay income and franchise taxes..

               (c)  Additionally, at any time not more than ten (10) Business
     Days after an Interest Payment Date, so long as no Default or Event of
     Default shall have occurred and be continuing, and so long as the Issuer
     shall first have made to the Holders all payments of principal, premium (if
     any) and interest (and Special Interest, if any) owing on the Notes
     required to be made under this Indenture or any of the Collateral Documents
     on or prior to such Interest Payment Date (including pursuant to Section
     3.8) the Issuer shall pay cash dividends equal to the sum of the interest
     payments then due on such related interest payment date under the Holdings'
     Series A Notes and the Holdings' Convertible Notes to be used by the Parent
     Company concurrently with such payment (a) to make a scheduled interest
     payment on the Holding's Series A Notes or (b) to make a scheduled interest
     payment on the Holdings' Convertible Notes. The full amount of any
     Restricted Payments made pursuant to this paragraph, however, will be
     deducted in the calculation of the aggregate amount of Restricted Payments
     available to be made pursuant to clause (a) of this covenant.

               (d)  To the extent otherwise permitted under this Section 5.3,
                                                                 -----------
     within forty-five (45) days after the end of each fiscal quarter of Issuer,
     commencing with the fiscal quarter ending June 30, 2001, and for so long as
     there are Holdings' Series A Notes outstanding, the Issuer shall pay cash
     dividends, or advance to the Parent Company in an amount equal to fifty
     percent (50%) of the Issuer's Consolidated Net Income for the immediately
     preceding fiscal quarter.

          Section 5.4  Corporate Existence.
                       -------------------

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

                                      51
<PAGE>

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

               (c)  The Issuer is and, to the extent required to operate its
     business as presently conducted and to perform its obligations under this
     Indenture and the Collateral Documents, shall remain a "citizen of the
     United States" as defined in Section 101(16) of the Federal Aviation Act.

          Section 5.5  Payment of Taxes and Other Claims.
                       ---------------------------------

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

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

          Section 5.6  Intentionally Omitted.
                       ---------------------
          Section 5.7  Maintenance of Properties and Insurance.
                       ---------------------------------------

          The Issuer shall, and shall cause its Subsidiaries to, maintain or
cause to be maintained in good repair, working order and condition all
Collateral and properties used or useful in their businesses; provided, however,
                                                              --------  -------
that, subject to the requirements of the Collateral Documents, neither the
Issuer nor any such Subsidiary shall be prevented from discontinuing those
operations or suspending the maintenance of that Collateral or those properties
which, in the Issuer's reasonable judgment, are no longer necessary or useful in
the conduct of the Issuer's business or that of its Subsidiaries.  For so long
as any Collateral or property is deemed to be useful to the conduct of the
Issuer's business or that of its Subsidiaries, the Issuer shall, or shall cause
such Subsidiaries to, maintain appropriate insurance, generally in accordance
with industry practices, on such Collateral and properties and as required under
the provisions of the Collateral Documents;

                                      52
<PAGE>

provided, notwithstanding the foregoing, the Issuer shall at all times carry and
maintain, or cause to be carried and maintained, insurance on and in respect of
the Aircraft, the Airframes and the Engines (in each case as defined in the
Aircraft Mortgage) in accordance with the provisions of Section 4.06 and Annex B
of the Aircraft Mortgage.

          Section 5.8  Default Notices and Compliance Certificates.
                       -------------------------------------------

               (a)  The Issuer shall deliver to the Trustee, within one hundred
     twenty (120) days after the end of each fiscal year, an Officers'
     Certificate stating that a review of the activities of the Issuer and its
     Subsidiaries during the preceding fiscal year has been made under the
     supervision of the signing officer with a view to determine whether each
     has kept, observed, performed and fulfilled its obligations under this
     Indenture, and further stating, as to each such officer signing such
     certificate, that each of the Issuer and its Subsidiaries has kept,
     observed, performed and fulfilled each and every covenant contained in this
     Indenture and is not in default in the performance or observance of any of
     the terms, provisions and conditions hereof or thereof (or, if a Default or
     Event of Default shall have occurred, describing all such Defaults or
     Events of Default of which he may have knowledge and what action each is
     taking or proposes to take with respect thereto).

               (b)  The year-end financial statements delivered pursuant to
     Section 5.9 shall be accompanied by a written statement of the independent
     -----------
     public accountants of the Issuer (which shall be a firm of established
     national reputation reasonably satisfactory to the Trustee) which states
     that in making the examination necessary for certification of such
     financial statements nothing has come to their attention which would lead
     them to believe that the Issuer or any of its Subsidiaries has violated any
     provisions of this Indenture or, if any such violation has occurred,
     specifying the nature and period of existence thereof, it being understood
     that such accountants shall not be liable directly or indirectly to any
     Person for any failure to obtain knowledge of any such violation.

               (c)  So long as any of the Notes are outstanding, the Issuer
     shall deliver to the Trustee forthwith upon any officer becoming aware of
     (i) any Default or Event of Default or (ii) any event of default under any
     mortgage, indenture or instrument referred to in Section 7.1(a)(v), an
     Officers' Certificate specifying such Default, Event of Default or other
     event of default and what action the Issuer is taking or proposes to take
     with respect thereto.

          Section 5.9  Commission Reports.
                       ------------------

               (a)  The Issuer shall file with the Trustee and provide, or cause
     the Trustee to provide, Holders of Notes, within fifteen (15) days after
     Parent Company files with, or furnishes to, the Commission, copies of its
     annual report and of the information, documents and other reports (or
     copies of such portions of any of the foregoing as the Commission may by
     rules and regulations prescribe)

                                      53
<PAGE>

     which the Parent Company is required to file with the Commission pursuant
     to Section 13 or 15(d) of the Exchange Act or is required to furnish to the
     Commission pursuant to Section 5.9(b). The Issuer shall also comply with
     the other provisions of TIA (S) 314(a).

               (b)  Notwithstanding that the Parent Company may not be required
     to remain subject to the reporting requirements of Section 13 or l5(d) of
     the Exchange Act or otherwise report on an annual and quarterly basis on
     forms provided for such annual and quarterly reporting pursuant to rules
     and regulations promulgated by the Commission, the Issuer shall file with,
     or furnish to, the Commission (i) within ninety (90) days after the end of
     each fiscal year (or such shorter period as the Commission may in the
     future prescribe), annual reports on Form 10-K (or any successor form)
     containing the information required to be contained therein (or required in
     such successor form), including annual financial statements audited by a
     nationally recognized independent public accounting firm with respect to
     such year and prepared in accordance with GAAP and all applicable exhibits,
     (ii) within forty-five (45) days after the end of each of the first three
     fiscal quarters of each fiscal year (or such shorter period as the
     Commission may in the future prescribe), reports on Form 10-Q (or any
     successor form) containing substantially the same information required to
     be contained therein prepared in accordance with GAAP, and (iii) promptly
     from time to time after the occurrence of an event required to be therein
     reported, such other reports on Form 8-K (or any successor form) containing
     substantially the same information required to be contained therein.

               (c)  So long as is required for an offer or sale of the Notes to
     qualify for an exemption under Rule 144A, the Issuer (and the Subsidiary
     Guarantors) shall, upon written request, provide the information required
     by clause (d)(4) thereunder to each Holder and to each beneficial owner and
     prospective purchaser of Notes identified by any Holder of Restricted
     Securities.

          Section 5.10  Waiver of Stay, Extension or Usury Laws.
                        ---------------------------------------

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

                                      54
<PAGE>

          Section 5.11  Amendment to Certain Agreements.
                        -------------------------------

          The Issuer shall not enter into or consent to any amendment,
supplement or other modification of this Indenture or the Collateral Documents
except as permitted under Article X hereof.

          Section 5.12  Title to Collateral; Limitation on Liens.
                        ----------------------------------------

          The Issuer represents and warrants that it has, and covenants that it
shall continue to have, full power and lawful authority to grant, release,
convey, assign, transfer, mortgage, pledge, hypothecate and otherwise create the
security interests in the Collateral referred to in Article XII; the Issuer
                                                    -----------
shall warrant, preserve and defend the interest and title of the Collateral
Trustee to the Collateral, against the claims of all persons and will maintain
and preserve the security interests contemplated by Article XII; and the Issuer
                                                    -----------
shall not, and not permit any of its Restricted Subsidiaries to, directly or
indirectly, Incur or suffer to exist any Lien of any nature whatsoever upon or
with respect to (i) any of its properties other than the Collateral (including
Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or
thereafter acquired, other than Permitted Liens, without effectively providing
that the Notes shall be secured equally and ratably with (or prior to) the
obligations so secured for so long as such obligations are so secured or (ii)
any Collateral other than Permitted Liens.  The Issuer shall cause this
Indenture and the Collateral Documents, including all necessary financing
statements, notifications of secured transactions and other assurances or
instruments to be properly recorded, registered and filed and to be kept,
recorded, registered and filed in such manner and in such places as may be
required by law and shall take all such other actions as may be required in
order to make effective the security interests intended to be created in
connection with this Indenture.  The Issuer shall furnish to the Trustee the
Opinions of Counsel required by Section 13.4 to confirm such action.
                                ------------

          Section 5.13  Books, Records, Access; Confidentiality.
                        ---------------------------------------

               (a)  The Issuer shall, and shall cause each of its Subsidiaries
     to, (i) maintain complete and accurate books and records in which full and
     correct entries in conformity with GAAP shall be made of all dealings and
     transactions in relation to its respective business and activities, (ii)
     permit authorized representatives of the Trustee, and/or the Collateral
     Trustee to visit and inspect the Properties of the Issuer or its
     Subsidiaries, and any or all books, records and documents in the possession
     of the Issuer relating to the Collateral, including the records, logs, and
     other similar materials and to make copies and take extracts therefrom and
     to visit and inspect the Collateral, all upon reasonable notice and at such
     reasonable times during normal business hours and as often as may be
     reasonably requested, and (iii) permit the authorized representatives of
     any Trustee Appraiser or Third Party Appraiser to visit and inspect the
     Properties, books, records and documents described in clause (ii), at such
     times and to such extent as may be necessary to allow timely completion of
     any Independent

                                      55
<PAGE>

     Appraiser's Certificate to be prepared by such Trustee Appraiser or Third
     Party Appraiser.

               (b)  The Trustee and its authorized representatives referred to
     in clause (a) above agree not to use any information obtained pursuant to
     this Section 5.13 for any purpose other than as required in order to
          ------- ----
     discharge their respective duties hereunder and under the Collateral
     Documents and except as otherwise required for such purpose to keep
     confidential and not to disclose any such information to any person except
     that (i) the recipient of the information may disclose any information
     which becomes publicly available other than as a result of disclosure by
     such recipient, (ii) the recipient of the information may disclose any
     information which its counsel reasonably concludes is necessary to be
     disclosed by law, pursuant to any court or administrative order or ruling
     or in any pending legal or administrative proceeding or investigation after
     notice to the Issuer adequate, subject to applicable laws, to allow the
     Issuer to obtain a protective order or other appropriate remedy, provided
     that the recipient of the information will (if not otherwise required in
     order to discharge its duties as aforesaid) cooperate with the Issuer's
     efforts to obtain a protective order or other reliable assurance that
     confidential treatment will be accorded any such information required to be
     so disclosed, and (iii) the recipient of the information may disclose any
     information necessary to be disclosed pursuant to any provision of the TIA.

          Section 5.14  Security Interests.
                        ------------------

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

          The Issuer and its Subsidiaries shall deliver or cause to be delivered
to the Indenture Trustee from time to time such other documentation, consents,
authorizations, approvals and orders in form and substance satisfactory to the
Indenture Trustee as it shall deem reasonably necessary or advisable to perfect
or maintain the Liens for the benefit of the Holders.

          Section 5.15  Repurchase of Notes Upon a Change in Control.
                        --------------------------------------------

               (a)  In the event that there shall occur a Change in Control, the
     Issuer shall make an Offer to Purchase all of the outstanding Notes, at a
     purchase price equal to one hundred one percent (101%) of the aggregate
     principal amount of the Notes outstanding, plus accrued and unpaid interest
     and Special Interest, if

                                      56
<PAGE>

     any, to and including the repurchase date (a "Change in Control Offer").
                                                   -----------------------
     The right to require such repurchase of Notes shall not continue after a
     discharge of the Issuer from its obligations with respect to the Notes in
     accordance with Article IX.
                     ----------

               (b)  The Issuer shall commence such Change in Control Offer
     within thirty (30) days after the occurrence of a Change in Control.

          Section 5.16  Restrictions on Becoming an Investment Company.
                        ----------------------------------------------

          The Issuer shall not become an investment company within the meaning
of the Investment Company Act of 1940 as such statute and the regulations
thereunder and any successor statute or regulations thereto may from time to
time be in effect.

          Section 5.17  Limitation on Indebtedness.
                        --------------------------

               (a)  Neither the Issuer nor the Restricted Subsidiaries shall
     Incur, directly or indirectly, any Indebtedness; provided, however, that
                                                      --------  -------
     the Issuer may Incur Indebtedness so long as, on the date of such
     Incurrence and after giving effect thereto, the Consolidated Coverage Ratio
     exceeds 2.5 to 1.

               (b)  Notwithstanding the foregoing paragraph (a), the Issuer and
     the Restricted Subsidiaries may Incur any or all of the following
     Indebtedness:

                         (1)  Indebtedness under the Senior Credit Facility in
               an aggregate principal amount at any one time outstanding not in
               excess of the Senior Credit Facility Limit;

                         (2)  Aircraft Acquisition Debt;

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

                         (4)  the Indebtedness evidenced by the Notes;

                         (5)  Indebtedness Incurred to finance the cost
               (including the cost of design, development, acquisition,
               construction, installation, improvement, transportation or
               integration) of plant, property and/or equipment used or to be
               used in the airline business or any other business that is
               substantially

                                      57
<PAGE>

               related, ancillary or complementary thereto (including any
               Capital Lease Obligation and the cost of the Capital Stock of a
               Person that becomes a Restricted Subsidiary to be acquired by the
               Issuer or a Restricted Subsidiary after the Issue Date; provided
               that (A) such Indebtedness is incurred within two hundred seventy
               (270) days after such plant, property and/or equipment has been
               placed into service; and (B) the principal amount of such
               Indebtedness does not exceed one hundred percent (100%) of the
               cost of such plant, property or equipment financed thereby, and
               provided further that the limitation described in clause B shall
               -------- -------
               not apply to Indebtedness Incurred to finance and which does not
               exceed the greater of one hundred percent (100%) of (y) the cost,
               or (z) the Appraised Value of any airport facilities, take-off
               and landing rights, reservations centers or maintenance
               facilities or (ii) information technology systems, including all
               related hardware and software so financed;

                         (6)  Indebtedness outstanding on the Issue Date (other
               than Indebtedness described in clause (1), (2), (3), (4) or (5)
               of this Section 5.17);
                       ------------

                         (7)  Refinancing Indebtedness in respect of
               Indebtedness Incurred pursuant to paragraph (a) or pursuant to
               clause (1), (2), (3), (4), (5) or (6) of this Section 5.17;
                                                             ------------

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

                         (9)  Hedging Obligations consisting of Interest Rate
               Agreements, Fuel Protection Agreements or Currency Agreements;
               and

                         (10) Indebtedness Incurred in satisfaction of payment
               obligations arising out of collective bargaining

                                      58
<PAGE>

               agreements with labor unions representing employees (and any
               corresponding obligations in favor of non-contract employees) of
               the Issuer.

               (c)  Notwithstanding the foregoing, neither the Issuer nor any
     Restricted Subsidiary shall Incur any Indebtedness pursuant to the
     foregoing paragraph (b) if the proceeds thereof are used, directly or
     indirectly, to Refinance any Subordinated Obligations unless the
     Indebtedness so Incurred shall be subordinated to the Notes, to at least
     the same extent as such Subordinated Obligations.

               (d)  For purposes of determining compliance with this Section
                                                                     -------
     5.17, (i) in the event that an item of Indebtedness meets the criteria of
     ----
     more than one of the types of Indebtedness described above, the Issuer, in
     its sole discretion, will classify such item of Indebtedness and only be
     required to include the amount and type of such Indebtedness in one of the
     above clauses.

          Section 5.18  Limitation on Distributions from Restricted
                        -------------------------------------------
          Subsidiaries.
          ------------

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

                 (i)    any encumbrance or restriction pursuant to an agreement
     in effect at or entered into on the Issue Date;

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

                 (iii)  any encumbrance or restriction pursuant to an agreement
     effecting a Refinancing of Indebtedness or Preferred Stock Incurred
     pursuant to an agreement referred to in clause (i) or (ii) of this Section
                                                                        -------
     5.18 or this clause (iii) or contained in any amendment to an agreement
     ----
     referred to in clause (i) or (ii) of this Section 5.18 or this clause
                                               ------------
     (iii); provided, however, that the encumbrances and restrictions with
            --------  -------
     respect to such Restricted Subsidiary contained in any such refinancing
     agreement or amendment are in the aggregate no less favorable to the

                                      59
<PAGE>

     Holders than encumbrances and restrictions with respect to such Restricted
     Subsidiary contained in such predecessor agreements;

                 (iv)   any restriction with respect to a Restricted Subsidiary
     imposed pursuant to an agreement entered into for a sale or disposition
     which is not prohibited under Section 5.19 of all or substantially all the
                                   ------------
     Capital Stock or assets of such Restricted Subsidiary pending the closing
     of such sale or disposition;

                 (v)   any encumbrances and restrictions existing under or by
     reason of applicable law or regulation;

                 (vi)  any encumbrances and restrictions (A) that restrict in a
     customary manner the subletting, assignment or transfer of any property or
     asset that is a lease, license, conveyance or contract, (B) existing by
     virtue of any transfer of, agreement to transfer, option or right with
     respect to, or Lien on, any property or assets of the Issuer or any
     Restricted Subsidiary not otherwise prohibited by the Indenture or the
     other Collateral Documents or (C) arising or agreed to in the ordinary
     course of business not relating to any Indebtedness, and that do not (as
     determined by the Issuer and certified in a resolution of the Board of
     Directors or an Officer's Certificate delivered to the Trustee prior to or
     promptly following such encumbrance or restriction becoming effective),
     individually or in the aggregate, (1) detract from the value of property or
     assets of the Issuer or any Restricted Subsidiary in any manner material to
     the Issuer or any Restricted Subsidiary or (2) materially adversely affect
     the Issuer's ability to make principal (and premium, if any) or interest
     (including Special Interest, if any) payments on the Notes; and

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

          Nothing contained in this Section 5.18 shall prevent the Issuer or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any

                                      60
<PAGE>

Liens otherwise permitted in Section 5.12 or (2) restricting the sale
                             ------------
or other disposition of property or assets of the Issuer or any of its
Restricted Subsidiaries that secure Indebtedness of the Issuer or any of its
Restricted Subsidiaries.

          Section 5.19  Limitation on Sales of Assets and Subsidiary Stock.
          ----------------------------------------------------------------

               (a)  The Issuer shall not, and shall not permit any Restricted
     Subsidiary to, directly or indirectly, consummate any Asset Disposition
     unless (x) the Issuer or such Restricted Subsidiary receives consideration
     at the time of such Asset Disposition at least equal to the fair market
     value (including as to the value of all non-cash consideration), as
     determined in good faith by the Board of Directors or an Officer of the
     Issuer, of the shares and/or assets subject to such Asset Disposition, (y)
     if the subject of the Asset Disposition consists of Aircraft, Airframes,
     Engines or Parts (each such term, as defined in the Aircraft Mortgage) and
     if any non-cash consideration is subject to a Lien at the time of
     acquisition thereof, the fair market value of such non-cash consideration,
     plus the amount of any consideration in the form of cash or Cash
     Equivalents, less the amount of all obligations secured by such Lien, is
     greater than the fair market value of such Aircraft, Airframe, Engine
     and/or Part subject to the Asset Disposition and (z) (A) at least eighty
     percent (80%) of the consideration thereof received by the Issuer or such
     Restricted Subsidiary is in the form of cash or Cash Equivalents, or (B) if
     the subject of the Asset Disposition consists of Aircraft, Airframes,
     Engines or Parts, and if at least eighty percent (80%) of the consideration
     thereof received by the Issuer or such Restricted Subsidiary is not in the
     form of cash or Cash Equivalents, the Issuer or such Restricted Subsidiary
     has subjected to the Lien of the Aircraft Mortgage any aircraft, aircraft
     engines or other flight equipment acquired in exchange ("Exchanged Flight
                                                              ----------------
     Equipment") for the Aircraft, Airframe, Engine or Parts subject to such
     ---------
     Asset Disposition unless any lien or encumbrance existing on the Exchanged
     Flight Equipment at the time of acquisition thereof and to which the Issuer
     or such Restricted Subsidiary takes subject to prohibits the Issuer or such
     Restricted Subsidiary from subjecting the Exchanged Flight Equipment to the
     Lien of the Aircraft Mortgage. In the event the Issuer subjects to the Lien
     of the Aircraft Mortgage any Exchanged Flight Equipment, the Lien of the
     Aircraft Mortgage shall constitute a first priority security interest in
     such Exchanged Flight Equipment unless the Issuer acquires the Exchanged
     Flight Equipment subject to a prior lien, in which event, the Lien of the
     Aircraft Mortgage shall be junior only to such prior lien . If the Issuer
     or any Restricted Subsidiary engages in an Asset Disposition, the Issuer
     may use the Net Available Cash from such Asset Disposition, within one (1)
     year after the later of such Asset Disposition and the receipt of such Net
     Available Cash (such later date, the "Trigger Date"), to (i) permanently
                                           ------------
     repay or prepay any then outstanding Senior Indebtedness of the Issuer or
     any Restricted Subsidiary or (ii) invest in or acquire (or enter into a
     legally binding commitment to invest in or acquire) Additional Assets;
     provided that the transaction subject to any such commitment be consummated
     --------
     within one hundred eighty (180) days after the date of such commitment. If
     any such legally binding commitment to invest in or acquire such

                                      61
<PAGE>

     Additional Assets is terminated, then the Issuer may, within ninety (90)
     days of such termination or the Trigger Date, whichever is later, use such
     Net Available Cash as provided in clause (i) or (ii) (without giving effect
     to the parenthetical contained in such clause (ii)) above. The amount of
     such Net Cash Proceeds not so used as set forth above in this paragraph
     constitutes "Excess Proceeds."
                  ---------------

               (b)  When the aggregate amount of Excess Proceeds exceeds the
     Asset Disposition Basket, the Issuer shall, within thirty (30) days
     thereof, apply all such Excess Proceeds (1) first, to make an Offer to
     Purchase outstanding Notes at one hundred percent (100%) of their principal
     amount plus accrued and unpaid interest and Special Interest, if any,
     thereon to the Purchase Date and, to the extent required by the terms
     thereof, any other Indebtedness of the Issuer that is pari passu with the
     Notes at a price no greater than one hundred percent (100%) of the
     principal amount thereof plus accrued interest to the date of purchase and
     (2) second, to the extent of any remaining Excess Proceeds following the
     completion of the Offer to Purchase, to any other use as determined by the
     Issuer which is not otherwise prohibited by the Indenture. Upon the
     completion of an Offer to Purchase pursuant to this paragraph (b), the
     amount of Excess Proceeds shall be reset to zero.

          Section 5.20  Limitation on Affiliate Transactions.
                        ------------------------------------

               (a)  The Issuer shall not, and shall not permit any Restricted
     Subsidiary to, enter into or permit to exist any transaction (including the
     purchase, sale, lease or exchange of any property or employee compensation
     arrangements) with any Affiliate of the Issuer (an "Affiliate Transaction")
                                                         ---------------------
     unless the terms thereof (1) are no less favorable to the Issuer or such
     Restricted Subsidiary than those that could be obtained at the time of such
     transaction in arm's- length dealings with a Person who is not such an
     Affiliate and (2) if such Affiliate Transaction involves an amount in
     excess of $5,000,000 (i) are set forth in writing and (ii) have been
     approved by a majority of the members of the Board of Directors having no
     personal stake in such Affiliate Transaction. If such Affiliate Transaction
     involves an amount in excess of $10,000,000, a fairness opinion must be
     obtained from a nationally recognized investment banking firm, appraisal
     firm or auditing firm with respect to the financial terms of such Affiliate
     Transaction.

               (b)  The provisions of the foregoing paragraph (a) shall not
     prohibit or apply to (i) any Restricted Payment permitted to be paid
     pursuant to Section 5.3, (ii) loans or advances to employees in the
                 -----------
     ordinary course of business and in an amount that does not exceed
     $1,000,000 in the aggregate outstanding at any one time, (iii) the payment
     of reasonable fees to directors of the Issuer and its Restricted
     Subsidiaries who are not employees of the Issuer or its Restricted
     Subsidiaries, (iv) any Affiliate Transaction between the Issuer and a
     Restricted Subsidiary or between Restricted Subsidiaries, (v) any issuance
     of securities, or other payments, awards or grants in cash, securities or
     otherwise pursuant to, or the funding of, employment arrangements, stock
     options and stock ownership

                                      62
<PAGE>

     plans approved by the Board of Directors, (vi) the grant of stock options
     or similar rights to employees and directors of the Issuer pursuant to
     plans approved by the Board of Directors of the Issuer.

          Section 5.21 Limitation on the Sale or Issuance of Capital Stock of
          -------------------------------------------------------------------
Restricted Subsidiaries.
-----------------------

          The Issuer shall not sell or otherwise dispose of any Capital Stock of
a Restricted Subsidiary, and shall not permit any such Restricted Subsidiary,
directly or indirectly, to issue or sell or otherwise dispose of any of its
Capital Stock except (i) to the Issuer or a Wholly-Owned Subsidiary, (ii) the
issuance and sale of directors' qualifying shares, (iii) if, immediately after
giving effect to any such issuance, sale or other disposition, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect thereto would have been permitted
to be made under Section 5.3 if made on the date of such issuance, sale or other
                 -----------
disposition, (iv) if such sale or other disposition is of all or any portion of
the Capital Stock of a Restricted Subsidiary and the Net Available Cash received
from such sale or other disposition are applied in accordance with Section 5.19,
                                                                   ------------
or (v) to the extent the ownership by a Person other than the Issuer or a
Wholly-Owned Subsidiary is required by applicable law, (vi) any Restricted
Subsidiary may issue or permit to exist Preferred Stock issued to and held by
Issuer or a Wholly-Owned Subsidiary; provided, however, that upon either (A) the
                                     --------  -------
transfer or other disposition by the Issuer or such Wholly-Owned Subsidiary of
any Preferred Stock so permitted to a Person other than the Issuer or another
Wholly-Owned Subsidiary or (B) such Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary, the provisions of this clause (vi) will no longer be
applicable to such Preferred Stock and such Preferred Stock will be deemed to
have been issued at the time of such transfer or other disposition or such
cessation; and (vii) Preferred Stock issued by a Person prior to the time such
Person becomes a Restricted Subsidiary (including by way of a merger or
consolidation with another Restricted Subsidiary), which Preferred Stock was not
issued in anticipation of and was outstanding prior to such transaction;

provided, however, that on the date of such acquisition and after giving effect
--------  -------
thereto, the Issuer would have been able to Incur at least $1.00 of additional
Indebtedness pursuant to Section 5.17(a).
                         ---------------

          Section 5.22  Limitation on Guarantees by Restricted Subsidiaries.
                        ---------------------------------------------------

          The Issuer shall not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness ("Guaranteed Indebtedness"), unless
                                            -----------------------
(i) such Restricted Subsidiary simultaneously executes and delivers a Subsidiary
Guaranty of payment of the Notes by such Restricted Subsidiary and (ii) such
Restricted Subsidiary waives and will not in any manner whatsoever claim or take
the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against the Issuer or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary under its
Subsidiary Guaranty; provided that this paragraph shall not be applicable to (1)
any Guarantee by any Restricted Subsidiary that existed at the time such Person
became a Restricted Subsidiary and was not Incurred in connection with, or in
<PAGE>

contemplation of, such Person becoming a Restricted Subsidiary or (2) Guarantees
of any Indebtedness that is permitted under Section 5.17.  If the Guaranteed
                                            ------------
Indebtedness is (A) pari passu with the Notes, then the Guarantee of such
Guaranteed Indebtedness shall be pari passu with, or subordinated to, the
Subsidiary Guaranty, or (B) subordinated to the Notes, then the Guarantee of
such Guaranteed Indebtedness shall be subordinated to the Subsidiary Guaranty at
least to the extent that the Guaranteed Indebtedness is subordinated to the
Notes.

          Notwithstanding the foregoing, any Subsidiary Guaranty by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Issuer, of all of the Issuer's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guaranty, except a discharge
or release by, or as a result of, payment under such Guarantee.

          Section 5.23  Limitation on Sale/Leaseback Transactions.
                        -----------------------------------------

          The Issuer shall not, and shall not permit any Restricted Subsidiary
to, enter into any Sale/Leaseback Transaction with respect to any property
unless (i) the Issuer or such Restricted Subsidiary would be entitled to (A)
Incur Indebtedness in an amount equal to the Attributable Debt with respect to
such Sale/Leaseback Transaction pursuant to Section 5.17 and (B) create a Lien
                                            ------------
on such property securing such Attributable Debt without equally and ratably
securing the Notes pursuant to Section 5.12, or (ii) the Sale/Leaseback
                               ------------
Transaction is treated as an Asset Disposition and the Issuer applies the
proceeds of such transaction in compliance with Section 5.19; provided, however,
                                                ------------  --------  -------
the Issuer and the Restricted Subsidiaries may, notwithstanding the foregoing,
sell and leaseback existing DC-9 or B737 aircraft or other non-aircraft flight
equipment owned by the Issuer or any Restricted Subsidiary as of the Issue Date
in any period of twelve consecutive months not exceeding $10,000,000 in
aggregate book value so long as the Issuer and the Restricted Subsidiaries have
sufficient remaining aircraft and other flight equipment to operate the Issuer's
business in the ordinary course substantially consistent with past practices
thereafter.

          Section 5.24  Excess Cash Flow Offer.
                        ----------------------

          Within one hundred twenty (120) days after the end of each fiscal
year, the Issuer will make an Offer to Purchase to all Holders (the "Excess Cash
                                                                     -----------
Flow Offer") to purchase the maximum principal amount of Notes that is an
----------
integral multiple of $1,000 that may be purchased with forty percent (40%) of
Excess Cash Flow for such fiscal year (the "Excess Cash Flow Offer Amount"), at
                                            -----------------------------
a purchase price in cash equal to one hundred one percent (101%) of the
principal amount of the Notes to be purchased, plus accrued and unpaid interest
to the date fixed for the closing of the Excess Cash Flow Offer; provided,
                                                                 --------
however, no such offer need be made by Issuer unless the Excess Cash Flow Offer
-------
Amount exceeds $2,000,000.  Each Excess Cash Flow Offer will remain open for a

                                      64
<PAGE>

period of twenty (20) Business Days and no longer, unless a longer period is
required by law (the "Excess Cash Flow Offer Period").  Promptly after the
                      -----------------------------
termination of the Excess Cash Flow Offer Period, the Issuer will purchase and
mail or deliver payment for the Excess Cash Flow Offer Amount for the Notes or
portions thereof tendered, pro rata, or by such other method as may be required
by law, or, if less than the Excess Cash Flow Offer Amount has been tendered,
all Notes tendered pursuant to the Excess Cash Flow Offer.  The principal amount
of Notes to be purchased pursuant to an Excess Cash Flow Offer may be reduced by
the principal amount of Notes acquired by the Issuer through purchase or
redemption (other than pursuant to a Change of Control Offer or an Amortization
Offer) surrendered to the Trustee for cancellation.  If the aggregate amount of
Notes tendered pursuant to any Excess Cash Flow Offer is less than the Excess
Cash Flow Offer Amount, the Issuer may, subject to the other provisions of this
Indenture and the Collateral Documents, use any remaining Excess Cash Flow for
general corporate purposes.  The Issuer shall not, and shall not permit any of
its Restricted Subsidiaries to, create or suffer to exist or become effective
any restriction that would impair the ability of the Issuer to make an Excess
Cash Flow Offer or, if such Excess Cash Flow Offer is made, to pay for the Notes
tendered for purchase.

                                  ARTICLE VI
                                  SUCCESSORS

          Section 6.1  Merger and Consolidation.
                       ------------------------

          The Issuer will not be permitted to consolidate with or merge with or
into, or sell, convey, transfer, lease or otherwise dispose of, in one
transaction or a series of transactions, all or substantially all of its assets
to, any Person, unless:

               (a)  the resulting, surviving or transferee Person (the
     "Successor Company") shall be a Person organized and existing under the
      -----------------
     laws of the United States, any state thereof or the District of Columbia
     and the Successor Company (if not the Issuer) shall expressly assume, by an
     indenture supplemental thereto, executed and delivered to the Trustee, in
     form satisfactory to the Trustee, all of the Issuer's obligations under the
     Notes, the Indenture and the Operative Documents;

               (b)  immediately after giving effect to such transaction (and
     treating any Indebtedness which becomes an obligation of the Successor
     Company or any Subsidiary of the Issuer as a result of such transaction as
     having been Incurred by such Successor Company or such Subsidiary at the
     time of such transaction), no Default shall have occurred and be
     continuing;

               (c)  immediately after giving effect to such transaction, the
     Successor Company would be able to Incur an additional $1.00 of
     Indebtedness pursuant to paragraph (a) of Section 5.17;
                                               ------------

               (d)  if, immediately after giving effect to such transaction, the
     Successor Company would have Consolidated Net Worth in an amount that is
     less

                                      65
<PAGE>

     than the Issuer's Consolidated Net Worth immediately prior to such
     transaction, the Issuer shall have been advised by Moody's or S&P that the
     rating of the Notes will not be withdrawn or downgraded immediately
     following and as a result of such transaction; and

               (e)  the Issuer shall have delivered to the Trustee an Officers'
     Certificate and an Opinion of Counsel, each stating that (i) such
     consolidation, merger or transfer and such supplemental indenture (if any)
     comply with the Indenture, (ii) the Indenture and the Notes will constitute
     valid and legally binding obligations of the Successor Company and (iii)
     the Indenture and the Operative Documents are enforceable against the
     Successor Company in accordance with their terms.

          Section 6.2  Successor Substituted.
                       ---------------------

          In the event of any transaction contemplated by Section 6.1 in which
                                                          -----------
the Issuer is not the surviving Person, the Successor Company shall be the
Issuer's successor and shall succeed to, and be substituted for, and be bound by
and obligated to pay the obligations of, and may exercise every right and power
of, the Issuer under this Indenture and the Collateral Documents , but the
predecessor Issuer in the case of a conveyance, transfer or lease shall not be
released from the obligation to pay the principal of, interest on, and Special
Interest, if any, with respect to, the Notes.

                                  ARTICLE VII
                             DEFAULTS AND REMEDIES

          Section 7.1  Events of Default.
                       -----------------

               (a)  Each of the following shall constitute an "Event of Default"
                                                               ----------------
     under this Indenture and the Collateral Documents:

                    (i)   the Issuer defaults in the payment of the principal
          (or premium, if any) on any series of Notes when the same becomes due
          and payable, whether on any Interest Payment Date, at the Stated
          Maturity, or upon redemption, by acceleration, in connection with the
          Offers to Purchase contemplated by Sections 5.15, 5.19 or 5.24, in
                                             -------------  ----    -----
          connection with mandatory redemption contemplated by Section 3.8, or
                                                               -----------
          otherwise;

                    (ii)  the Issuer defaults in the payment of interest or
          Special Interest, if any, on any series of Notes when the same becomes
          due and payable and the default continues for a period of thirty (30)
          days;

                    (iii) the Issuer or any Restricted Subsidiary defaults in
          the observance or performance of its covenants or agreements in the
          Indenture or any of the Transaction Documents that continues for the

                                      66
<PAGE>

          relevant period specified therein which is not cured within a 30-day
          period or the applicable grace period set forth in such Transaction
          Document;

                    (iv)   the Issuer fails to comply with its obligations under
          Sections 3.8, 5.21 or 6.1;
          -------------------------

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

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

                    (vii)  a final non-appealable judgment or judgments for the
          payment of money is or are entered by a court or courts of competent
          jurisdiction against the Issuer or any Significant Subsidiary of the
          Issuer which is a Restricted Subsidiary and such judgment or judgments
          remain unsatisfied, undischarged, unbonded or unstayed for a period of
          thirty (30) days after entry, provided that the aggregate amount of
                                        --------
          all such judgments exceeds $10 million;

                    (viii) (A) the Collateral Trustee fails to have a first-
          priority perfected security interest in any of the Collateral other
          than "Equipment" or "Inventory" (each as defined in the Issuer Pledge
          Agreement) (subject to Permitted Liens and Identified Liens) or (B)
          the Collateral Trustee fails to have a first-priority perfected
          security interest in any of the Collateral consisting of "Equipment"
          or "Inventory" (each as defined in the Issuer Pledge Agreement)
          subject to Permitted Liens and

                                      67
<PAGE>

          Identified Liens, and in the case of (B) only, such failure continues
          for 30 days after receipt of written notice of such failure from the
          Trustee or any Holder;

                    (ix)  the Issuer or any Significant Subsidiary of the Issuer
          which is a Restricted Subsidiary, pursuant to or within the meaning of
          any Bankruptcy Law:

                          (1)  commences a voluntary case,

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

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

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

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

                          (1)  is for relief against the Issuer or any
               Significant Subsidiary which is a Restricted Subsidiary in an
               involuntary case,

                          (2)  appoints a Custodian of the Issuer or any
               Significant Subsidiary which is a Restricted Subsidiary or for
               all or substantially all of their property,

                          (3)  orders the liquidation of the Issuer, or any
               Significant Subsidiary which is a Restricted Subsidiary,

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

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

                    (xii)  so long as Boeing, Rolls Royce PLC and their
          respective Affiliates hold a majority in principal amount of the
          outstanding Notes and an "Event of Default" has occurred and is
          continuing under any lease, purchase or other agreement (whether now
          existing or hereafter entered into) between (A) Boeing or Rolls-Royce
          PLC or its Affiliates, as the case may be, and (B) the Company, any of
          its Subsidiaries or Affiliates, and as a consequence thereof Boeing or
          Rolls-Royce PLC or its Affiliates, as the case may be, has commenced
          the exercising any of its
                                      68
<PAGE>

          remedies under such agreement; provided that the amount of all
          obligations under such agreements then exceeds $20,000,000 in the
          aggregate.

               (b)     The Issuer shall, upon becoming aware that a Default or
     Event of Default has occurred, deliver to the Trustee a statement
     specifying such Default or Event of Default and what action the Issuer is
     taking or propose to take with respect thereto.

          Section 7.2  Acceleration.
                       ------------

          If an Event of Default (other than an Event of Default specified in
Section 7.1(a)(i) with respect to mandatory redemption contemplated by Section
        ---------                                                      -------
3.8(ix) or (x)) occurs and is continuing, then and in every such case the
-------    ---
Trustee or the Holders of not less than twenty-five percent (25%) in principal
amount of the outstanding Notes may declare the principal amount of all the
Notes to be due and payable immediately, by a notice in writing to the Issuer
(and to the Trustee if given by Holders), and, if any Senior Credit Facility is
in effect, to the Agent, and upon any such declaration such principal amount
shall become immediately due and payable; provided, however, that in the event
                                          --------  -------
of an Event of Default specified in Section 7.1(a)(i) with respect to mandatory
                                    -----------------
redemption contemplated by Section 3.8 occurs and is continuing, then the
                           -----------
Trustee or the Holders of not less than twenty-five percent (25%) in principal
amount of the outstanding Amortizing Notes may so declare the principal amount
of all Series A Notes and Series B Notes to be due and payable immediately.  If
an Event of Default specified in Section 7.1(a)(ix) or (x) occurs and is
                                 ------------------    ---
continuing, then the principal amount of all the Notes shall ipso facto become
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any Holder.

          Section 7.3  Waiver of Past Defaults.
                       -----------------------

          The Holders of a majority in aggregate principal amount of the Notes
then outstanding, by written notice to the Trustee, may, on behalf of the
Holders of all the Notes, (a) waive any existing Default or Event of Default and
its consequences under this Indenture and any of the Collateral Documents except
a continuing Default or Event of Default specified in Section 7.1(a)(i) or (ii)
                                                      -----------------    ----
or Default or Event of Default with respect to any covenant or provision which
cannot be modified or amended except under Section 10.2(e), or (b) rescind an
                                           ---------------     ---
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal or interest that has become due solely because of the acceleration)
have been cured or waived.

          Section 7.4  Control by Majority.
                       -------------------

          The Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
them; provided, however, that the Holders of a majority in principal amount of
      --------  -------
the then

                                      69
<PAGE>

outstanding Amortizing Notes may so direct the Trustee if the only Default or
Event of Default then continuing is a Default or Event of Default specified in
Section 7.1(a)(i) with respect to mandatory redemption pursuant to
-----------------
Section 3.8.  However, Trustee may refuse to follow any direction that conflicts
-----------
with any law, this Indenture or any of the Collateral Documents, that the
Trustee determines may be unduly prejudicial to the rights of other Holders, or
that may involve the Trustee in personal liability.

          Section 7.5  Limitation on Suits.
                       -------------------
          A Holder may pursue a remedy with respect to this Indenture, any of
the Collateral Documents or the Notes only if:

                  (a)  the Holder gives to the Trustee written notice of a
     continuing Event of Default;

                  (b)  the Holders of at least twenty-five percent (25%) in
     principal amount of the then outstanding Notes (or twenty-five percent) in
     principal amount of the then outstanding Amortizing Notes with respect to
     Default or Event of Default specified in Section 7.1(a)(i) with respect to
                                              -----------------
     mandatory redemption pursuant to Section 3.8 make a written request to the
                                      -----------
     Trustee to pursue the remedy;

                  (c)  such Holder or Holders offer and, if requested, provide
     to the Trustee indemnity satisfactory to the Trustee against any loss,
     liability or expense;.

                  (d)  the Trustee does not comply with the request within sixty
     (60) days after receipt of the request and the offer and, if requested, the
     provision of indemnity; and

                  (e)  during such sixty (60) day period the Holders of a
     majority in principal amount of the then outstanding Notes do not give the
     Trustee a direction inconsistent with the request.

          A Holder may not use this Indenture or any Collateral Document to
prejudice the rights of another Holder or to obtain a preference or priority
over another Holder.

          Section 7.6  Rights of Holders to Receive Payment.
                       ------------------------------------

          Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal (or premium, if any) and
interest and Special Interest, if any, on the Notes, on or after the respective
due dates expressed in the Note, or to bring suit for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected without the consent of the Holder.

                                      70
<PAGE>

          Section 7.7  Collection of Indebtedness; Provisions Regarding Sale by
                       --------------------------------------------------------
Trustee.
-------

          If an Event of Default specified in Section 7.1(a)(i) or (ii) occurs
                                              -----------------    ----
and is continuing with respect to the Notes of any series, the Trustee is
authorized to recover judgment in its own name and as trustee of an express
trust against the Issuer for the whole amount of principal (and premium, if
any), interest and Special Interest, if any, remaining unpaid on the Notes of
that series and interest on overdue principal (and premium, if any) and, to the
extent lawful, interest on overdue interest and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee and
its agents and counsel.

          Section 7.8  Trustee May File Proofs of Claim.
                       --------------------------------

          The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee  (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Issuer (or any other
obligor under the Notes), their creditors or their property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any Custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee and its agents and counsel, and any other amounts due the Trustee under
Section 8.7.  To the extent that the payment of any such compensation, expenses,
-----------
disbursements and advances of the Trustee and its agents and counsel, and any
other amounts due the Trustee under Section 8.7 out of the estate in any such
                                    -----------
proceeding, shall be denied for any reason, payment of the same shall be secured
by a Lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders may be entitled to
receive in such proceeding in connection with any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Issuer or any other obligor upon the
Notes or the property of the Issuer or of such other obligor or their creditors,
the Trustee (irrespective of whether the principal of the Notes shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Issuer for
the payment of overdue principal of (premium, if any) or Special Interest, if
any, or interest on the Notes.  Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.

                                      71
<PAGE>

          Section 7.9   Trustee May Enforce Claims Without Possession of Notes.
                        ------------------------------------------------------

          All rights of action and claims under this Indenture or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name and as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee or its agents and counsel, be for the ratable benefit of
the Holders in respect of which such judgment has been recovered.

          Section 7.10  Priorities.
                        ----------
          Subject to the terms of the Collateral Trust Agreement, if the Trustee
collects any money pursuant to this Article VII, it shall pay out the money in
                                    -----------
the following order:

          First: to the Trustee and its agents and attorneys for amounts due
          -----
under Section 8.7, including payment of all compensation, expense and
      -----------
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;

          Second: to Holders for amounts due and unpaid for principal (and
          ------
premium, if any,) and interest and Special Interest, if any, on the Notes in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such Notes for principal (and premium, if any), interest and
Special Interest, if any, respectively;

          Third: without duplication, to Holders for any other Obligations owing
          -----
to the Holders under the Notes in respect of which or for the benefit of which
such money has been collected, the Indenture, the Collateral Documents or the
Registration Rights Agreement; and

          Fourth: to the Issuer or to such party as a court of competent
          ------
jurisdiction shall direct.

          The Trustee, upon written notice to the Issuer, may fix a record date
and payment date for any payment to Holders pursuant to this Section 7.10.

          Section 7.11  Restoration of Rights and Remedies.
                        ----------------------------------

          If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture or any Collateral Document and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Issuer, the Trustee
and the Holders shall be restored severally and respectively to their former
positions hereunder and under the Collateral Documents and

                                      72
<PAGE>

thereafter all rights and remedies of the Trustee, and the Holders shall
continue as though no such proceeding had been instituted.

          Section 7.12  Rights and Remedies Cumulative.
                        ------------------------------

          Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 2.7, no right or remedy herein conferred or conferred under any
   -----------
Collateral Document upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise.  The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

          Section 7.13  Delay or Omission Not Waiver.
                        ----------------------------

          No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein.  Every right and remedy given by this Article VII by
                                                               ------------
Law to the Trustee or to the Holders may be exercised from time to time, and as
often as maybe deemed expedient, by the Trustee or by the Holders, as the case
may be.

          Section 7.14  Undertaking for Costs.
                        ---------------------

          In any suit for the enforcement of any right or remedy under this
Indenture or any Collateral Document or in any suit against the Trustee for any
action taken or omitted by it as Trustee, a court in its discretion may require
the filing by any party litigant in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant.  This Section 7.14 does not apply to a suit by the Trustee,
                          -------------
a suit by a Holder pursuant to Section 7.5, or a suit by Holders of more than
                               -----------
ten percent (10%) in principal amount of the then outstanding Notes.

                                 ARTICLE VIII
                                  THE TRUSTEE

          Section 8.1   Duties.
                        ------

               (a)  If an Event of Default has occurred and is continuing, the
     Trustee shall exercise such of the rights and powers vested in it by this
     Indenture and the Collateral Documents and use the same degree of care and
     skill in their exercise as a prudent person would exercise or use under the
     circumstances in the conduct of his or her own affairs.

                                      73
<PAGE>

               (b)  Except during the continuance of an Event of Default:

                    (i)    The duties of the Trustee shall be determined solely
          by the express provisions of this Indenture or any Collateral
          Document, and the Trustee needs perform only those duties that are
          specifically set forth in this Indenture and the Collateral Documents,
          and no others, and no implied covenants or obligations shall be read
          into this Indenture or any Collateral Document against the Trustee.

                    (ii)   In the absence of bad faith on its part, the Trustee
          may conclusively rely, as to the truth of the statements and the
          correctness of the opinions expressed therein, upon certificates or
          opinions furnished to the Trustee and conforming to the requirements
          of this Indenture and the Collateral Documents. However, the Trustee
          shall examine the certificates and opinions to determine whether they
          conform to the requirements of this Indenture and the Collateral
          Documents.

               (c)  The Trustee may not be relieved from liabilities for its own
     negligent action, its own negligent failure to act, or its own willful
     misconduct, except that:

                    (i)    This paragraph does not limit the effect of paragraph
          (b) of this Section 8.1.
                      -----------

                    (ii)   The Trustee shall not be liable for any error of
          judgment made in good faith by a Responsible Officer, unless it is
          proved that the Trustee was negligent in ascertaining the pertinent
          facts.

                    (iii)  The Trustee shall not be liable with respect to any
          action it takes or omits to take in good faith in accordance with a
          direction received by it pursuant to Section 7.4.
                                               -----------

               (d)  Regardless of whether herein expressly so provided, every
     provision of this Indenture that in any way relates to the Trustee is
     subject to paragraphs (a), (b), (c) and (e) of this Section 8.1.
                ---------- ---  ---  ---     ---         -----------

               (e)  No provision of this Indenture or the Collateral Documents
     shall require the Trustee to expend or risk its own funds or incur any
     liability. The Trustee may refuse to perform any duty or exercise any right
     or power unless it receives security and indemnity satisfactory to it
     against any loss, liability or expense.

               (f)  The Trustee shall not be liable for interest on any money
     received by it except as the Trustee may agree in writing with the Issuer.
     Money held in trust by the Trustee need not be segregated from other funds
     except to the extent required by law.

                                      74
<PAGE>

               (g)  The Collateral Trustee is hereby authorized and directed to
     enter into the Collateral Trust Agreement upon execution thereof by the
     other parties thereto and to enter into an amendment thereof with respect
     to the Senior Credit Facility in accordance with Section 8.13 thereof.

          Section 8.2  Rights of Trustee and Collateral Trustee.
                       ----------------------------------------

               (a)  The Trustee may conclusively rely and shall be protected in
     acting or refraining from acting upon any document believed by either of
     them to be genuine and to have been signed or presented by the proper
     Person. The Collateral Trustee need not investigate any fact or matter
     stated in such document.

               (b)  Before the Trustee or the Collateral Trustee acts or
     refrains from acting, it may require an Officers' Certificate or an Opinion
     of Counsel or both. Neither the Trustee nor the Collateral Trustee shall be
     liable for any action it takes or omits to take in good faith in reliance
     on such Officers' Certificate or Opinion of Counsel. The Trustee or the
     Collateral Trustee, as the case may be, may consult with counsel of its
     selection and the advice of such counsel or any Opinion of Counsel shall be
     full and complete authorization and protection from liability in respect of
     any action taken, suffered or omitted by it hereunder in good faith and in
     reliance thereon.

               (c)  The Trustee may act through agents as appointed by such
     trustees with due care and shall not be responsible for the misconduct or
     negligence of any agent appointed with due care.

               (d)  The Trustee shall not be liable for any action it takes or
     omits to take in good faith which it believes to be authorized or within
     its rights or powers conferred upon it by this Indenture and the Collateral
     Documents.

               (e)  Unless otherwise specifically provided in this Indenture or
     any of the Collateral Documents, any demand, request, direction or notice
     from the Issuer shall be sufficient if signed by an Officer of the Issuer.

               (f)  Except with respect to Section 5.1, neither the Trustee nor
                                           -----------
     the Collateral Trustee shall have a duty to inquire as to the performance
     of the Issuer's covenants in Article V. In addition, neither the Trustee
                                  ---------
     nor the Collateral Trustee shall be deemed to have knowledge of any Default
     or Event of Default except (i) any Event of Default occurring pursuant to
     Sections 7.1(a)(i) or 7.1(a)(ii), or (ii) any Default or Event of Default
     ------------------    ----------
     of which the Trustee or the Collateral Trustee shall have received written
     notification or a Responsible Officer of the Trustee or the Collateral
     Trustee shall have obtained actual knowledge.

                                      75
<PAGE>

          Section 8.3  Individual Rights of Trustee.
                       ----------------------------

     The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Issuer or an Affiliate of the
Issuer with the same rights it would have if it were not Trustee, as the case
may be.  Any Agent may do the same with like rights.  However, the Trustee is
subject to Sections 8.10 and 8.12.
           --------------    ----

          Section 8.4  Disclaimer.
                       ----------

          The Trustee shall not be responsible for and does not make any
representation as to the validity or adequacy of this Indenture, any of the
Collateral Documents or the Notes, nor shall be accountable for the Issuer's use
of the proceeds from the Notes or any money paid to the Issuer or upon the
Issuer's direction under any provision hereof, neither shall be responsible for
the use or application of any money received by any Paying Agent other than the
Trustee and neither shall be responsible for any statement or recital herein or
any statement in the Notes, any of the Collateral Documents or any other
document in connection with the sale of the Notes or pursuant to this Indenture
or any of the Collateral Documents other than its certificate of authentication.

          Section 8.5  Notice of Defaults.
                       ------------------

          If a Default or Event of Default occurs and is continuing and if the
Trustee has actual knowledge thereof (within the meaning of Section 8.2(f)), the
                                                            -------------
Trustee shall mail to the Holders a notice of the Default or Event of Default
within ninety (90) days after it occurs.  Except in the case of a Default or
Event of Default in the payment of principal of, premium, or interest or Special
Interest, if any, on any Note, the Trustee may withhold the notice if and so
long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interest of the Holders.

          Section 8.6  Resignation and Removal, Appointment of Successor.
                       -------------------------------------------------

          Within sixty (60) days after each May 15 beginning with the May 15
following the date of this Indenture, the Trustee shall mail to the Holders a
brief report dated as of such reporting date that complies with TIA (S) 313(a)
(but if no event described in TIA (S) 313(a) has occurred within the twelve (12)
months preceding the reporting date, no report need be transmitted).  The
Trustee also shall comply with TIA (S) 313(b).  The Trustee shall also transmit
by mail all reports as required by TIA (S) 313(c).

          Commencing at the time this Indenture is qualified under the TIA, a
copy of each report at the time of its mailing to the Holders shall be filed
with the Commission and each stock exchange on which the Notes are listed.  The
Issuer shall promptly notify the Trustee when the Notes are listed on any stock
exchange.

                                      76
<PAGE>

          Section 8.7  Compensation and Indemnity.
                       --------------------------

          The Issuer shall pay to the Trustee from time to time such
compensation as shall be agreed to in writing in a separate agreement to be
entered into by the Issuer and the Trustee for its acceptance of this Indenture
and the Collateral Documents and services hereunder and thereunder.  The
Trustee's compensation shall not be limited by any Law relating to compensation
of a trustee of an express trust.  The Issuer shall reimburse the Trustee
promptly upon request for all reasonable disbursements, advances and expenses
incurred or made by either of them in addition to the compensation for their
services.  Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel, except such
disbursements, advances and expenses as may be attributable to the Trustee's
negligence or bad faith.

          Except as set forth below, the Issuer shall indemnify the Trustee, any
predecessor thereof and its officers, directors, agents and employees against
any and all losses, liabilities, damages, claims, actions, suits, costs or
expenses of any kind or nature whatsoever incurred by them without negligence or
bad faith on their part arising out of or in connection with the acceptance or
administration of their duties under this Indenture and the Collateral Documents
(including the costs and expenses of enforcing this Indenture or the other
Collateral Documents against the Issuer and defending themselves against any
claim (regardless of whether asserted by the Issuer or any Holder or any other
person) or liability in connection with the exercise or performance of any of
their powers or duties hereunder), except as set forth below. The Trustee shall
notify the Issuer promptly of any claim for which it may seek indemnity. Failure
by the Trustee to so notify the Issuer shall not relieve the Issuer of its
obligations hereunder. The Issuer shall defend the claim and the Trustee shall
cooperate in the defense. In the event that a conflict of interest or
conflicting defenses would arise in connection with the representation of the
Issuer and the Trustee by the same counsel, the Trustee may have separate
counsel and the Issuer shall pay the reasonable fees and expenses of such
counsel. The Issuer need not pay for any settlement made without their consent,
which consent shall not be unreasonably withheld.

          The obligations of the Issuer under this Section 8.7 shall survive the
                                                   ------------
satisfaction and discharge of this Indenture and the resignation or removal of
the Trustee.

          The Issuer need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own negligence or bad
faith.

          To secure the Issuer's payment obligations in this Section 8.7, the
                                                             -----------
Trustee shall have a Lien prior to the Holders on all money or property held or
collected by the Trustee.  Such Lien shall survive the satisfaction and
discharge of this Indenture and the resignation or removal of the Trustee.

          When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 7.1(a)(x) or (xi) occurs, the expenses and the
                     ------------------   ----
compensation

                                      77
<PAGE>

for the services are intended to constitute expenses of administration under any
Bankruptcy Law.

          The provisions of this Section 8.7 shall survive the termination of
                                 ------------
this Indenture.

          Section 8.8  Resignation and Removal; Appointment of Successor.
                       -------------------------------------------------

          A resignation or removal of the institution acting as Trustee and
appointment of a successor Trustee shall become effective only upon the
successor Trustee's acceptance of appointment as provided in this Section 8.8
                                                                  -----------
and upon the Issuer's receipt of notice from the successor Trustee of such
appointment.

          The institution acting as Trustee may resign at any time without cause
and be discharged from the trust hereby created by giving thirty (30) days
written notice to the Issuer.  The Holders of a majority in principal amount of
the then outstanding Notes may remove the Trustee by so notifying the Trustee
and the Issuer.  The Issuer may remove the institution acting as Trustee if:

               (a)  the institution acting as Trustee fails to comply with
     Section 8.10;
     ------------

               (b)  the institution acting as Trustee is adjudged a bankrupt or
     an insolvent or an order for relief is entered with respect to the
     institution acting as Trustee under any Bankruptcy Law;

               (c)  a Custodian or public officer takes charge of the
     institution acting as Trustee or its property; or

               (d)  the institution acting as Trustee becomes incapable of
     acting.

          If the institution acting as Trustee resigns or is removed or if a
vacancy exists in the office of Trustee or any reason, the Issuer shall promptly
appoint a successor Trustee.  Within one (1) year after the successor Trustee
takes office, the Holders of a majority in principal amount of the then
outstanding Notes may appoint a successor Trustee to replace the successor
Trustee appointed by the Issuer.

          If a successor Trustee does not take office within sixty (60) days
after the retiring Trustee resigns or is removed, the retiring Trustee the
Issuer or the Holders of at least ten percent (10%) in principal amount of the
then outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.

          If the Trustee after written request by any Holder who has been a
Holder for at least six (6) months fails to comply with Section 8.10, such
                                                        ------------
Holder may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.

                                      78
<PAGE>

          A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture and the Collateral Documents. The successor Trustee shall
mail a notice of its succession to the Holders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
provided that all sums owing to the Trustee, hereunder have been paid and
--------
subject to the Lien provided for in Section 8.7.  Notwithstanding replacement of
                                    -----------
the Trustee pursuant to this Section 8.8, the Issuer's obligations under Section
                             -----------                                 -------
8.7 shall continue for the benefit of the retiring Trustee and the Issuer shall
----
pay to any such replaced or removed Trustee all amounts owed under Section 8.7
                                                                   -----------
upon such replacement or removal.

          Section 8.9   Successor Trustee by Merger, etc.
                        ---------------------------------

          If the institution acting as Trustee consolidates, merges or converts
into, or transfers all or substantially all of its corporate trust business to,
another corporation or banking association, the successor corporation or banking
association without any further act shall be the successor Trustee.

          Section 8.10  Eligibility; Disqualification.
                        -----------------------------

          There shall at all times be a Trustee hereunder that shall (a) be a
corporation or banking association organized and doing business under the Laws
of the United States of America or of any state thereof or of the District of
Columbia authorized under such Laws to exercise corporate trustee power, (b) be
subject to supervision or examination by the applicable federal or state or the
District of Columbia authority, and (c) have a combined capital and surplus of
at least $200.0 million as set forth in its most recent published annual report
of condition.

          This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S)(S) 310(a)(1), 310(a)(2) and 310(a)(5).  The Trustee is
subject to TIA (S) 310(b); provided, however, that there shall be excluded from
                           --------  -------
the operations of TIA (S) 310(b)(1) any indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of the Issuer are outstanding, if the requirements for such
exclusion set forth in TIA (S) 310(b)(1) are met.

          Section 8.11  Intentionally Omitted.
                        ---------------------

          Section 8.12  Preferential Collection of Claims Against the Issuer.
                        ----------------------------------------------------

          The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). An institution serving as Trustee who has
resigned or been removed shall be subject to TIA (S) 311(a) to the extent
indicated therein. The provisions of TIA (S) 311 shall apply to the Issuer, as
obligor on the Notes.

                                      79
<PAGE>

                                  ARTICLE IX
              DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE

          Section 9.1  Discharge; Option to Effect Legal or Covenant Defeasance.
                       --------------------------------------------------------

          This Indenture and the Collateral Documents shall cease to be of
further effect (except that the Issuer's and the Subsidiary Guarantors'
obligations under Section 8.7 and the Trustee's and the Paying Agent's
                  ------------
obligations under Sections 9.6 and 9.7 shall survive) when all outstanding Notes
                  -------------    ---
theretofore authenticated and issued have been delivered (other than destroyed,
lost or stolen Notes that have been replaced or paid) to the Trustee for
cancellation and the Issuer or the Subsidiary Guarantors have paid all sums
payable hereunder and under the Collateral Documents.  In addition, the Issuer
may elect at any time and at the Issuer's option, to have Section 9.2 or Section
                                                          ------------   -------
9.3, of this Indenture applied to all outstanding Notes upon compliance with the
---
conditions set forth below in this Article IX.
                                   ----------

          Section 9.2  Legal Defeasance and Discharge.
                       ------------------------------

          Upon the Issuer's exercise under Section 9.1 of the option applicable
                                           ------------
to this Section 9.2, except as set forth below, the Issuer and the Subsidiary
        -----------
Guarantors shall be deemed to have been discharged from their respective
obligations with respect to all outstanding Notes on the date the conditions set
forth below are satisfied (hereinafter, "Legal Defeasance").  Following such
                                         ----------------
Legal Defeasance, (a) the Issuer shall be deemed to have paid and discharged the
entire indebtedness outstanding hereunder, and this Indenture and the Collateral
Documents shall cease to be of further effect as to all outstanding Notes and
Subsidiary Guarantees, and (b) the Issuer and the Subsidiary Guarantors shall be
deemed to have satisfied all other of their respective obligations under the
Notes, the Subsidiary Guarantees, this Indenture and the Collateral Documents
(and the Trustee and the Collateral Trustee, on demand of and at the expense of
the Issuer, shall execute proper instruments acknowledging the same), except for
the following which shall survive until otherwise terminated or discharged
hereunder:

               (i)    the rights of Holders to receive payments in respect of
     the principal of (and premium, if any) and interest (and Special Interest,
     if any) on such Notes when such payments are due from the trust described
     in Section 9.5;
        -----------

               (ii)   the Issuer's obligations under Sections 2.4, 2.6, 2.7,
                                                     ------------  ---  ---
     2.10, 5.2, 9.5, 9.6 and 9.7; and
     ----  ---  ---  ---     ---

               (iii)  the rights, powers, trusts, duties and immunities of the
     Trustee and the Collateral Trustee hereunder and under and the Collateral
     Documents and the Issuer's and the Subsidiary Guarantors' obligations in
     connection therewith.

Subject to compliance with the provisions of this Article IX, the Issuer may
                                                  ----------
exercise its option under this Section 9.2 notwithstanding the prior exercise of
                               ------------
its option under Section 9.3.
                 -----------

                                      80
<PAGE>

          Section 9.3  Covenant Defeasance.
                       -------------------

          Upon the Issuer's exercise under Section 9.1 of the option applicable
                                           -----------
to this Section 9.3, the Issuer and the Subsidiary Guarantors shall be released
        -----------
from their respective obligations under the covenants contained in Sections,
                                                                   --------
5.3, 5.5, 5.7, 5.8, 5.9, 5.12, 5.13, 5.15, 5.16, 5.17, 5.18, 5.19, 5.20, 5.21,
---  ---  ---  ---  ---  ----  ----  ----  ----  ----  ----  ----  ----  ----
5.23, 5.24, and Article VI on and after the date the conditions set forth below
----  ----      ----------
are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
                             -------------------
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder.  Following such Covenant
Defeasance, (a) none of the Issuer or any Subsidiary Guarantor need comply with,
and none of them shall have any liability in respect of, any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein, in any
Collateral Document or in any other document, but, except as specified above,
the remainder of this Indenture, the Collateral Documents, the Notes and the
Subsidiary Guarantees shall be unaffected thereby, and (b) Sections 7.1(a)(iii)
                                                           --------------------
through 7.1(a)(ix) shall not constitute Events of Default with respect to the
        ----------
Notes.

          Section 9.4  Conditions to Legal or Covenant Defeasance.
                       ------------------------------------------

          The following shall be the conditions to the application of either
Section 9.2 or 9.3 to the outstanding Notes:
------------   ---

               (a)  the Issuer shall irrevocably have deposited or caused to be
     deposited with the Trustee (or other trustee satisfying the requirements of
     Section 8.10 who shall agree to comply with the provisions of this Article
     ------------                                                       -------
     IX applicable to it), in trust, for the benefit of the Holders, cash in
     --
     U.S. Dollars, non-callable Government Securities, or a combination thereof,
     in such amounts as will be sufficient, in the opinion of a nationally
     recognized firm of independent public accountants, to pay the principal of,
     premium, if any, and interest (and Special Interest, if any) on such
     outstanding Notes on the stated maturity or on the applicable redemption
     date, as the case may be, and the Issuer must specify whether the Notes are
     being defeased to Maturity or to a particular redemption date;

               (b)  in the case of Legal Defeasance, the Issuer shall have
     delivered to the Trustee an Opinion of Counsel confirming that (i) the
     Issuer has received from, or there has been published by, the Internal
     Revenue Service a ruling or (ii) since the Issue Date, there has been a
     change in the applicable federal income tax law, in either case to the
     effect that, and based thereon such Opinion of Counsel shall confirm that,
     the Holders will not recognize income, gain or loss for federal income tax
     purposes as a result of such Legal Defeasance and will be subject to
     federal income tax on the same amounts, in the same

                                      81
<PAGE>

     manner and at the same times as would have been the case if such Legal
     Defeasance had not occurred;

               (c)  in the case of Covenant Defeasance, the Issuer shall have
     delivered to the Trustee an Opinion of Counsel confirming that the Holders
     of the outstanding Notes will not recognize income, gain or loss for
     federal income tax purposes as a result of such Covenant Defeasance and
     will be subject to federal income tax on the same amounts, in the same
     manner and at the same times as would have been the case if such Covenant
     Defeasance had not occurred;

               (d)  no Default or Event of Default shall have occurred and be
     continuing on the date of such deposit (other than a Default or Event of
     Default resulting from the borrowing of funds to be applied to such
     deposit);

               (e)  such Legal Defeasance or Covenant Defeasance will not result
     in a breach or violation of, or constitute a default under any material
     agreement or instrument (other than this Indenture) to which the Issuer or
     any of its Subsidiaries is a party or by which the Issuer or any of its
     Subsidiaries is bound;

               (f)  the Issuer shall have delivered to the Trustee an Officers'
     Certificate stating that the deposit was not made by the Issuer with the
     intent of preferring the Holders over the other creditors of the Issuer
     with the intent of defeating, hindering delaying or defrauding other
     creditors of the Issuer or others;

               (g)  the Issuer shall have delivered to the Trustee an Officers'
     Certificate and an Opinion of Counsel, each stating, subject to certain
     factual assumptions and bankruptcy and insolvency exceptions, that all
     conditions precedent provided for in, in the case of the Officers'
     Certificate, clauses (a) through (f) of this paragraph and, in the case of
     the Opinion of Counsel, clauses (b), (c) and (e) of this paragraph, have
     been complied with; and

               (h)  in the event all or any portion of the Notes are to be
     redeemed through such irrevocable trust, the Issuer must make arrangements
     satisfactory to the Trustee, at the time of such deposit, for the giving of
     notice of such redemption or redemptions by the Trustee in the name and at
     the expense of the Issuer.

          Section 9.5  Deposits to be Held in Trust; Other Miscellaneous
                       -------------------------------------------------
Provisions.
----------

          Subject to Section 9.6, all cash in U.S. Dollars and non-callable
                     -----------
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
                                                                        -------
9.5, the "Paying Agent") pursuant to Section 9.4 in respect of the outstanding
---       ------------               ------------
Notes shall be held in trust and applied by the Paying Agent, in accordance with
the provisions of such Notes and this Indenture, to the payment, either directly
or through any other Paying Agent as the

                                      82
<PAGE>

Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest (and
Special Interest, if any).

          The Issuer shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the Government Securities deposited
pursuant to Section 9.4 or the principal and interest received in respect
            ------------
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of outstanding Notes.

          Section 9.6  Repayment to the Issuer.
                       -----------------------

               (a)  The Trustee or the Paying Agent shall deliver or pay to the
     Issuer from time to time upon the request of the Issuer any cash in U.S.
     Dollars or non-callable Government Securities held by it as provided in
     Section 9.4 which in the opinion of a nationally recognized firm of
     -----------
     independent public accountants expressed in a written certification thereof
     delivered to the Trustee (which may be the opinion delivered under Section
                                                                        -------
     9.4(a)), are in excess of the amount thereof that would then be required to
     -------
     be deposited to effect an equivalent Legal Defeasance or Covenant
     Defeasance.

               (b)  Any cash in U.S. Dollars and non-callable Government
     Securities (including the proceeds thereof) deposited with the Trustee or
     any Paying Agent, or then held by the Issuer, in trust for the payment of
     the principal of, premium, if any, or interest (and Special Interest, if
     any) on any Note and remaining unclaimed for two years after such
     principal, and premium, if any, or interest has become due and payable
     shall be paid to the Issuer on its request; and the Holder of such Note
     shall thereafter look only to the Issuer for payment thereof, and all
     liability of the Trustee or such Paying Agent with respect to such trust
     money shall thereupon cease; provided, however, that the Trustee or such
                                  --------  -------
     Paying Agent, before being required to make any such repayment, shall at
     the expense of the Issuer cause to be published once in the New York Times
                                                                 --------------
     and The Wall Street Journal (national edition), notice that such money
         -----------------------
     remains unclaimed and that, after a date specified therein, which shall not
     be less than thirty (30) days from the date of such notification or
     publication, any unclaimed balance of such money then remaining will be
     repaid to the Issuer.

          Section 9.7  Reinstatement.
                       -------------

     If the Trustee or Paying Agent is unable to apply any cash in U.S. Dollars
or non-callable Government Securities in accordance with Section 9.2 or Section
                                                         ------------   -------
9.3, as the case may be, of this Indenture by reason of any order or judgment of
---
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, or if any event occurs at any time in the period
ending on the 91st day after the date of deposit pursuant to Section 9.2 or 9.3
                                                             ------------   ---
which event would constitute an Event of Default under Section 7.1(a,)(ix) or
                                                       --------------------
(x) had Legal Defeasance or Covenant Defeasance, as the case may be, not
---
occurred, then the Issuer's and the Subsidiary Guarantors' obligations under
this Indenture and the Notes shall be revived and reinstated as though no
deposit

                                      83
<PAGE>

had occurred pursuant to Section 9.2 or 9.3 until such time as the Trustee or
                         -----------    ---
Paying Agent is permitted to apply such money in accordance with Section 9.2 or
                                                                 -----------
9.3, as the case may be; provided, however, that, if the Issuers make any
---                      --------  -------
payment of principal of, premium, if any, or interest or Special Interest, if
any (and Liquidated Damages, if any) on any Note following the reinstatement of
their obligations, the Issuer shall be subrogated to the rights of the Holders
of such Notes to receive such payment from the cash in U.S. Dollars or non-
callable Government Securities held by the Trustee or Paying Agent.

                                   ARTICLE X
                                  AMENDMENTS

          Section 10.1  Without Consent of Holders.
                        --------------------------

               (a)  The Issuer, the Subsidiary Guarantors and the Trustee (or,
     with respect to the Collateral Documents, the Collateral Trustee) may amend
     or supplement this Indenture, the Collateral Documents and the Notes
     without the consent of any Holder:

                    (i)    to cure any ambiguity, defect or inconsistency;

                    (ii)   to provide for uncertificated Notes in addition to or
     in place of certificated Notes;

                    (iii)  to comply with Article VI and Section 11.6;
                                          -----------    ------------

                    (iv)   to make any change that would provide any additional
     rights or benefits to the Holders or that does not adversely affect the
     legal rights hereunder or thereunder of any Holder;

                    (v)    to comply with requirements of the Commission in
     order to effect or maintain the qualification of this Indenture under the
     TIA; or

                    (vi)   to release any Subsidiary Guaranty of the Notes
     permitted to be released under Section 11.7, 12.1, 12.2 or 12.3.
                                    ------------  ----  -----   ----

          Upon the request of the Issuer, accompanied by a resolution of the
Board of Directors of the Issuer authorizing the execution of any such
supplemental indenture or amendment, and upon receipt by the Trustee or the
Collateral Trustee of the documents described in Section 10.6 required or
                                                 -------------
requested by the Trustee, the Trustee shall join with the Issuer in the
execution of any supplemental indenture or amendment authorized or permitted by
the terms of this Indenture and shall make any further appropriate agreements
and stipulations which may be therein contained, but the Trustee shall not be
obligated to enter into such supplemental indenture or amendment that affects
its own rights, duties or immunities under this Indenture or under the
Collateral Documents or otherwise.

                                      84
<PAGE>

          Section 10.2  With Consent of Holders.
                        -----------------------

               (a)  Subject to Sections 5.7, 7.3 and 10.2(e), the Issuer and the
                               ------------  ---     -------
     Trustee and the Collateral Trustee, as applicable, may amend, or waive any
     provision of, this Indenture, any of the Collateral Documents, or the
     Notes, with the written consent of the Holders of at least a majority in
     aggregate principal amount of the then outstanding Notes (including
     consents obtained in connection with a tender offer or exchange offer for
     Notes); provided, however, that any such amendment or waiver with respect
             --------  -------
     to a provision that affects the Amortizing Notes differently than the other
     Notes may only be amended or waived with the written consent of the Holders
     of at least a majority in aggregate principal amount of the then
     outstanding Amortizing Notes.

               (b)  Upon the request of the Issuer, accompanied by a resolution
     of the Board of Directors of the Issuer authorizing the execution of any
     such supplemental indenture or amendment, and upon filing with the Trustee
     or the Collateral Trustee of evidence satisfactory to the Trustee and the
     Collateral Trustee of the consent of the Holders as aforesaid, and upon
     receipt by the Trustee of the documents described in Section 10.6, the
                                                          ------------
     Trustee shall join with the Issuer in the execution of such supplemental
     indenture or amendment unless such supplemental indenture or amendment
     affects the Trustee's or the Collateral Trustee's own rights, duties or
     immunities under this Indenture or otherwise, in which case the Trustee may
     in its discretion, but shall not be obligated to, enter into such
     supplemental indenture.

               (c)  It shall not be necessary for the consent of the Holders
     under this Section 10.2 to approve the particular form of any proposed
                ------------
     supplemental indenture or amendment, but it shall be sufficient if such
     consent approves the substance thereof.

               (d)  After a supplemental indenture or amendment under this
     Section 10.2 becomes effective, the Issuer shall mail to the Holders of
     ------------
     each Note affected thereby a notice briefly describing the amendment or
     waiver. Any failure of the Issuer to mail such notice, or any defect
     therein, shall not, however, in any way impair or affect the validity of
     any such supplemental indenture, amendment or waiver.

               (e)  Notwithstanding any other provision hereof, without the
     consent of each Holder affected, an amendment or waiver under this Section
                                                                        -------
     10.2 may not (with respect to any Notes held by a non-consenting Holder):
     ----

                    (i)   reduce the principal amount of Notes whose Holders
          must consent to an amendment, supplement or waiver;

                    (ii)  reduce the principal of, or the premium (including,
          without limitation, redemption premium) on, or change the Stated
          Maturity of, any Note; or alter the provisions with respect to the

                                      85
<PAGE>

          redemption of the Notes or decrease the price at which repurchases of
          the Notes may be made pursuant to Sections 3.8, 5.15, 5.19 or 5.24;
                                            ------------  ----  ----    ----

                    (iii)  reduce the rate of or change the time for payment of
          interest, including default interest and Special Interest, if any, on
          any Note;

                    (iv)   waive a Default or Event of Default in the payment of
          principal of or premium, if any, interest or Special Interest, if any,
          on, or redemption payment with respect to, any Note (other than a
          Default in the payment of an amount due as a result of an acceleration
          if the Holders rescind such acceleration pursuant to Section 7.2);
                                                               -----------

                    (v)    make any Note payable in money other than that stated
          in the Notes;

                    (vi)   make any change in Section 7.3 or 7.6 or in this
                                              -----------    ---
          Section 10.2 with respect to the requirement for the consent of any
          ------------
          affected Holder;

                    (vii)  waive a redemption payment with respect to any Note;

                    (viii) make any change adversely affecting the contractual
          ranking of the Obligations of the Issuer under the Notes or this
          Indenture or of the Subsidiary Guarantors under their respective
          Subsidiary Guarantees;

                    (ix)   create any Lien on the Collateral (other than
          Permitted Collateral Liens) ranking prior to, or on it parity with,
          the security interest created by this Indenture and the Collateral
          Documents or deprive any Holder of Notes of the benefit of the Lien of
          the Indenture and the Collateral Documents;

                    (x)    make any change adversely affecting the right of such
          Holder to convert Amortizing Notes; or

                    (xi)   make any change in any of the foregoing clauses (i)
          through (x).

          Section 10.3  Compliance with Trust Indenture Act.
                        -----------------------------------

          If, at the time of an amendment to this Indenture, the Collateral
Documents, or the Notes, this Indenture shall be qualified under the TIA, every
amendment to this Indenture, the Collateral Documents, or the Notes shall be set
forth in a supplemental indenture that complies with the TIA as then in effect.

                                      86
<PAGE>

          Section 10.4  Revocation and Effect of Consents.
                        ---------------------------------

          Until a supplemental indenture, an amendment or waiver becomes
effective, a consent to it by a Holder of a Note is a continuing consent by the
Holder and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note.  A supplemental indenture, amendment or waiver becomes
effective in accordance with its terms and thereafter binds every Holder of
Notes amended thereby.

          A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.

          The Issuer may fix a record date for determining which Holders must
consent to such supplemental indenture, amendment or waiver.  If the Issuer
fixes a record date, the record date shall be fixed at (a) the later of thirty
(30) days prior to the first solicitation of such consent or the date of the
most recent list of Holders furnished to the Trustee prior to such solicitation
pursuant to Section 2.5, or (b) such other date as the Issuer shall designate.
            -----------

          Section 10.5  Notation on or Exchange of Notes.
                        --------------------------------

          The Trustee may place an appropriate notation about a supplemental
indenture, amendment or waiver on any Note thereafter authenticated.  The Issuer
in exchange for all Series A Notes and Series C Notes may issue and the Trustee
shall authenticate Series B Notes and Series D Notes, respectively, that reflect
the amendment or waiver.

          Failure to make the appropriate notation or issue a Series B Note or
Series D Note shall not affect the validity and effect of such amendment or
waiver.

          Section 10.6  Trustee to Sign Amendments, etc.
                        -------------------------------

          The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article X if the amendment does not adversely affect
                            ---------
the rights, duties, liabilities or immunities of the Trustee or the Collateral
Trustee.  If it does, the Trustee may, but need not, sign it.  In signing or
refusing to sign such amendment or supplemental indenture, the Trustee shall be
entitled to receive, if requested, an indemnity reasonably satisfactory to it
and to receive and, subject to Section 8.1, shall be fully protected in relying
                               -----------
upon, an Officers' Certificate and an Opinion of Counsel as conclusive evidence
that such amendment or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, that all conditions precedent
to the execution of such amendment have been met and that it shall be valid and
binding upon the Issuer in accordance with its terms.

                                      87
<PAGE>

                                  ARTICLE XI
                             SUBSIDIARY GUARANTEES

          Section 11.1  Subsidiary Guaranty.
                        -------------------

               (a)  For good and valuable consideration, the receipt and
     sufficiency of which is hereby acknowledged, subject to Section 11.3, each
                                                             ------------
     Subsidiary Guarantor, jointly and severally, hereby unconditionally
     guarantees to each Holder and the Trustee, irrespective of the validity or
     enforceability of this Indenture, the Notes, the Collateral Documents, the
     Registration Rights Agreement or the Obligations of the Issuer hereunder or
     thereunder:

                    (i)    the due and punctual payment of the principal and
          premium, if any, of, interest and Special Interest, if any, on, the
          Notes (including, without limitation, interest after the filing of a
          petition initiating any proceedings referred to in clause (ix) or (x)
          of Section 7.1(a)), whether at Stated Maturity or on an interest
             ---------------
          payment date, by acceleration, call for redemption or otherwise;

                    (ii)   the due and punctual payment of interest and Special
          Interest, if any, on the overdue principal and premium, if any, of
          interest and Special Interest, if any, on, the Notes, if lawful;

                    (iii)  the due and punctual payment and performance of all
          other Obligations of the Issuer under the Notes, this Indenture, the
          Collateral Documents and the Registration Rights Agreement, all in
          accordance with the terms set forth herein and in the Notes, the
          Collateral Documents and the Registration Rights Agreement; and

                    (iv)   in case of any extension of time of payment or
          renewal of any Notes or any of such other Obligations hereunder or
          under the Notes, the Collateral Documents or the Registration Rights
          Agreement, the due and punctual payment or performance thereof in
          accordance with the terms of the extension or renewal, whether at
          stated maturity, by acceleration or otherwise.

               (b)  Failing payment when due by the Issuer of any amount so
     guaranteed for whatever reason, the Subsidiary Guarantors shall be jointly
     and severally obligated to pay the same immediately.

               (c)  Each Subsidiary Guarantor hereby agrees that (i) its
     obligations hereunder shall be unconditional, irrespective of the validity,
     regularity or enforceability of the Notes, this Indenture, the Collateral
     Documents, the Registration Rights Agreement or the Obligations of the
     Issuer hereunder or thereunder, the absence of any action to enforce the
     same, any waiver or consent by any Holder with respect to any provisions
     hereof or thereof, any releases of Collateral, any amendment of this
     Indenture, the Notes or the Collateral

                                      88
<PAGE>

     Documents, any delays in obtaining or realizing upon or failure to obtain
     or realize upon the Collateral, the recovery of any judgment against either
     of the Issuer or any of its Subsidiaries, any action to enforce the same,
     or any other circumstance that might otherwise constitute a legal or
     equitable discharge or defense of a guarantor and (ii) each Subsidiary
     Guaranty will not be discharged except by complete performance of the
     Obligations of the Issuer under the Notes, this Indenture, the Collateral
     Documents and the Registration Rights Agreement.

               (d)  Each Subsidiary Guarantor hereby agrees that it shall not be
     entitled to and irrevocably waives diligence, presentment, demand of
     payment, filing of claim with a court in the event of insolvency or
     bankruptcy of the Issuer, any Subsidiary Guarantor, any other Subsidiary of
     the Issuer or any other obligor under the Notes, any right to require a
     proceeding first against the Issuer, any Subsidiary Guarantor, any other
     Subsidiary of the Issuer or any other obligor under this Indenture, the
     Notes or the Collateral Documents, protest, notice and all demands
     whatsoever.

               (e)  If any Holder, the Trustee or the Collateral Trustee is
     required by any court or otherwise to return to the Issuer, any Subsidiary
     Guarantor, any other Subsidiary of the Issuer or any other obligor under
     this Indenture, the Notes or the Security Collateral, or any trustee,
     liquidator or other similar official, any amount paid by the Issuer, any
     Subsidiary Guarantor, any other Subsidiary of the Issuer or any other
     obligor under this Indenture, the Notes or the Collateral Documents to the
     Trustee, the Collateral Trustee or such Holder, the Subsidiary Guarantees,
     to the extent theretofore discharged, shall be reinstated in full force and
     effect.

               (f)  Each Subsidiary Guarantor agrees that, as between the
     Subsidiary Guarantors, on the one hand, and the Holders, the Trustee and
     the Collateral Trustee, on the other hand, (i) the maturity of the
     Obligations of the Issuer guaranteed, hereby maybe accelerated as provided
     in Section 7.2 for the purposes of the Subsidiary Guarantees,
        -----------
     notwithstanding any stay, injunction or other prohibition preventing such
     acceleration as to the Issuer of the Obligations guaranteed hereby, and
     (ii) in the event of any declaration of acceleration of those Obligations
     as provided in Section 7.2, those Obligations (regardless of whether due
                    -----------
     and payable) will forthwith become due and payable by each of the
     Subsidiary Guarantors for the purpose of the Subsidiary Guarantees.

          Section 11.2  Execution and Delivery of the Subsidiary Guarantees.
                        ---------------------------------------------------

               (a)  To evidence the Subsidiary Guarantees set forth in Section
                                                                       -------
     11.1, the Issuer and each Subsidiary Guarantor hereby agrees that
     ----

                    (i)  a notation of the Subsidiary Guarantees substantially
          as set forth on Exhibit C hereto shall be endorsed on each Note
                          ---------
          authenticated and delivered by the Trustee,

                                      89
<PAGE>

                    (ii)   such endorsement shall be executed on behalf of each
          Subsidiary Guarantor by its manager, chairman of the board, president,
          chief financial officer, chief operating officer, treasurer, secretary
          or any vice president, and

                    (iii)  a counterpart signature page to this Indenture and
          each Collateral Document shall be executed on behalf of each
          Subsidiary Guarantor by its manager, chairman of the board, president
          or one of its vice presidents and attested to by another officer
          acknowledging such Subsidiary Guarantor's agreement to be bound by the
          provisions hereof and thereof.

               (b)  Each Subsidiary Guarantor hereby agrees that its Subsidiary
     Guaranty set forth in Section 11.1 shall remain in full force and effect
                           ------------
     notwithstanding any failure to endorse on each Note a notation of such
     Subsidiary Guaranty.

               (c)  If an officer whose signature is on this Indenture no longer
     holds that office at the time the Trustee authenticates the Notes on which
     a Subsidiary Guaranty is endorsed, the Subsidiary Guaranty shall
     nevertheless be valid.

               (d)  The delivery of any Note by the Trustee, after the
     authentication thereof hereunder, shall constitute due delivery of the
     Subsidiary Guarantees set forth in this Indenture on behalf of the
     Subsidiary Guarantors.

          Section 11.3  Limitation on Subsidiary Guarantor's Liability.
                        ----------------------------------------------

          Each Subsidiary Guarantor and, by its acceptance hereof, each Holder
hereby confirms that it is the intention of all such parties that the guaranty
by such Subsidiary Guarantor pursuant to its Subsidiary Guaranty not constitute
a fraudulent transfer or conveyance for purposes of any federal or state law.
To effectuate the foregoing intention, the Holders and the Subsidiary Guarantors
hereby irrevocably agree that the Obligations of each Subsidiary Guarantor under
its Subsidiary Guaranty shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor and to any collections from or payments made by or on behalf of any
other Subsidiary Guarantor in respect of the Obligations of such other
Subsidiary Guarantor under its Subsidiary Guaranty, result in the Obligations of
such Subsidiary Guarantor under its Subsidiary Guaranty not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law and not
rendering a Subsidiary Guarantor insolvent.

          Section 11.4  Rights under the Subsidiary Guarantees.
                        --------------------------------------

               (a)  No payment by any Subsidiary Guarantor pursuant to the
     provisions hereof shall entitle such Subsidiary Guarantor to any payment
     out of

                                      90
<PAGE>

     any Collateral or give rise to any claim of the Subsidiary Guarantors
     against the Trustee, the Collateral Trustee or any Holder.

               (b)  Each Subsidiary Guarantor waives notice of the issuance,
     sale and purchase of the Notes and notice from the Trustee, the Collateral
     Trustee or the Holders from time to time of any of the Notes of their
     acceptance and reliance on its Subsidiary Guaranty.

               (c)  No set-off, counterclaim, reduction or diminution of any
     obligation or any defense of any kind or nature (other than performance by
     the Subsidiary Guarantors of their obligations hereunder) that any
     Subsidiary Guarantor may have or assert against the Trustee, the Collateral
     Trustee or any Holder shall be available hereunder to such Subsidiary
     Guarantor.

               (d)  Each Subsidiary Guarantor shall pay all costs, expenses and
     fees, including all reasonable attorneys' fees, that may be incurred by the
     Trustee or the Collateral Trustee in enforcing or attempting to enforce the
     Subsidiary Guarantees or protecting the rights of the Trustee, the
     Collateral Trustee or the Holder, if any, in accordance with this Indenture
     and the Collateral Documents.

          Section 11.5  Primary Obligations.
                        -------------------

          The Obligations of each Subsidiary Guarantor hereunder shall
constitute a guaranty of payment and not of collection.  Each Subsidiary
Guarantor agrees that it is directly liable to each Holder hereunder, that the
Obligations of each Subsidiary Guarantor hereunder are independent of the
Obligations of the Issuer or any other Subsidiary Guarantor, and that a separate
action may be brought against each Subsidiary Guarantor, whether such action is
brought against the Issuer or any other Subsidiary Guarantor or whether the
Issuer or any other Subsidiary Guarantor is joined in such action.  Each
Subsidiary Guarantor agrees that its liability hereunder shall be immediate and
shall not be contingent upon the exercise or enforcement by the Trustee, the
Collateral Trustee or the Holders of whatever remedies they may have against the
Issuer or any other Subsidiary Guarantor or the enforcement of any lien or
realization upon any security the Trustee or the Collateral Trustee may at any
time possess.  Each Subsidiary Guarantor agrees that any release that may be
given by the Trustee, the Collateral Trustee or the Holders to the Issuer or any
other Subsidiary Guarantor shall not release such Subsidiary Guarantor.

          Section 11.6  Guaranty by Future Subsidiaries.
                        -------------------------------

          The Issuer shall cause each Person that becomes a Restricted
Subsidiary after the Issue Date (regardless of whether through formation,
acquisition, merger or otherwise) to, concurrently with so becoming a Restricted
Subsidiary to

               (a)  become a Subsidiary Guarantor hereunder and execute and
     deliver to the Trustee an endorsement of its Subsidiary Guaranty in the
     form of Exhibit C attached hereto and a supplemental indenture in form
             ---------
     reasonably

                                      91
<PAGE>

     satisfactory to the Trustee, pursuant to which such Restricted Subsidiary
     shall unconditionally guarantee all of the Issuer's Obligations under the
     Notes, this Indenture, the Collateral Documents and the Registration Rights
     Agreement as set forth in Section 11.1,
                               ------------

               (b)  execute Collateral Documents (substantially in the form of
     the Collateral Documents entered into on the Issue Date) necessary to grant
     to the Trustee a valid, enforceable, perfected Lien on the Collateral
     described therein, and

               (c)  deliver to the Trustee an Opinion of Counsel, in form
     reasonably satisfactory to the Trustee, to the effect that (i) such
     supplemental indenture, Subsidiary Guaranty and Collateral Documents have
     been duly authorized, executed and delivered by such Restricted Subsidiary
     and (ii) such supplemental indenture, Subsidiary Guaranty and Collateral
     Documents constitute legal, valid, binding and enforceable obligations of
     such Restricted Subsidiary, subject to customary exceptions for bankruptcy,
     fraudulent transfer and equitable principles.

          Each Note issued after the date of execution by any Subsidiary
Guarantor of a Subsidiary Guaranty shall be endorsed with a form of Subsidiary
Guaranty that has been executed by such Subsidiary Guarantor.  However, the
failure of any Note to have endorsed thereon a Subsidiary Guaranty executed by
such Subsidiary Guarantor shall not affect the validity or enforceability of
such Subsidiary Guaranty against such Subsidiary Guarantor.

          Section 11.7  Release of Subsidiary Guarantors.
                        --------------------------------

          If all of the Capital Stock of any Subsidiary Guarantor is sold by the
Issuer or any of the Subsidiaries to a Person (other than the Issuer or any of
its Subsidiaries) and the Net Proceeds from such Asset Disposition are used in
accordance with Section 5.19, then such Subsidiary Guarantor shall be released
                ------------
and discharged from all of its obligations under its Subsidiary Guaranty of the
Notes, this Indenture and the Collateral Documents.

          Section 11.8  Activities of the B717 Subsidiaries.
                        -----------------------------------

               (a)  No Subsidiary Guarantor will, nor will the Issuer allow any
     B717 Subsidiary to engage in any business activity other than such B717
     Subsidiaries (i) continuing ownership whether direct or beneficial of B717
     aircraft and continuing compliance with the terms and conditions of any
     leveraged lease or similar agreements to which such B717 Subsidiary is a
     party from time to time; and (ii) compliance with the obligations
     applicable to it under this Agreement, the Notes, the Collateral Documents
     and any Senior Credit Facility, (iii) payments of any dividends or other
     distributions in respect of its Capital Stock, (iv) repurchase or
     redemption of, any of its Capital Stock not otherwise prohibited hereunder,
     (v) issuance of Capital Stock or Indebtedness not otherwise prohibited
     hereunder, (vi)
                                      92
<PAGE>

     its payment of principal and interest on any Indebtedness not otherwise
     prohibited hereunder, and (vii) its payment of overhead expenses and taxes.

               (b)  Without limiting the generality of clause (a) above, the
     Issuer will not allow any Subsidiary Guarantor or any B717 Subsidiary to
     and no Subsidiary Guarantor or B717 Subsidiary will (i) create, incur,
     assume or suffer to exist any Indebtedness or otherwise become or be liable
     in respect of any Indebtedness (other than in respect of the Obligations or
     any other Indebtedness permitted by clause (b)(2) of Section 5.17), (ii)
                                                          -------------
     create, assume, or suffer to exist any Lien upon, or grant any options or
     other rights with respect to, any of its revenues, property or other
     assets, whether now owned or hereafter acquired (other than Permitted
     Liens), (iii) other than as permitted hereunder, wind-up, liquidate or
     dissolve itself (or suffer to exist any of the foregoing), or consolidate
     or amalgamate with or merge into or with any other Person, or convey, sell,
     transfer, lease or otherwise dispose of all or any part of its assets, in
     one transaction or a series of transactions, to any Person or Persons, (iv)
     create, incur, assume or suffer to exist any Investment in any other
     Person, other than an Investment in the Issuer and the Issuer's Restricted
     Subsidiaries, or (v) materially amend its bylaws or articles of
     incorporation.

                                  ARTICLE XII
                               SECURITY INTEREST

          Section 12.1  Collateral Documents.
                        --------------------

          To secure the due and punctual payment, performance and observance of
the Obligations, the Issuer has simultaneously with the execution of this
Indenture entered into the Collateral Documents and has made an assignment and
pledge of or otherwise transferred or caused to be transferred its right, title
and interest in and to the Collateral, pursuant to the other Collateral
Documents and in the manner and to the extent therein provided.  Each Holder, by
accepting a Note, agrees to all of the terms and provisions of each Collateral
Document (including, without limitation, the provisions providing for the
release of Collateral), as the same may be in effect or may be amended from time
to time pursuant to its terms and the terms hereof.  The Issuer will execute,
acknowledge and deliver to the Collateral Trustee such further assignments,
transfers, assurances or other instruments as the Collateral Trustee may require
or request, and will do or cause to be done all such acts and things as may be
necessary or proper, or as may be reasonably required by the Collateral Trustee
to assure and confirm to the Collateral Trustee the security interest in the
Collateral contemplated hereby and by the other Collateral Documents or any part
thereof, as from time to time constituted, so as to render the same available
for the security and benefit of this Indenture and of the Securities secured
hereby, according to the intent and purposes herein expressed.

                                      93
<PAGE>

Section 12.2   Opinions, Certificates and Appraisals.
               -------------------------------------
          (a)  The Issuer shall furnish to the Collateral Trustee promptly after
     the execution and delivery of this Indenture but prior to authentication of
     any Notes, Opinions of Counsel covering such jurisdictions as the Initial
     Purchasers may reasonably request stating that in the opinion of such
     counsel the actions necessary to be taken under the Federal Aviation Act,
     the Uniform Commercial Code of all applicable jurisdictions, or otherwise
     with respect to the recording, registering and filing of this Indenture,
     the other Collateral Documents, financing statements or other instruments
     to make effective and to perfect the Liens intended to be created by the
     Collateral Documents have been taken and reciting with respect to the
     security interests in the Collateral, the details of such actions, or (ii)
     stating that, in the opinion of such counsel, no such action is necessary
     to make such Liens effective and perfected.

          (b)  The Issuer shall furnish to the Collateral Trustee one hundred
     twenty (120) days after January 1 in each year beginning with January 1,
     2002, an Opinion of Counsel, dated as of such date, either (a)(i) stating
     that, in the opinion of such counsel, action has been taken with respect to
     the recording, registering, filing rerecording, re-registering and refiling
     (in this section, "recordation") of all supplemental indentures, financing
                        -----------
     statements, continuation statements or other instruments of further
     assurance as is necessary to maintain the Lien intended to be created by
     the Collateral Documents (if not then terminated pursuant to their terms)
     and the perfection thereof and reciting with respect to the security
     interests in the Collateral the details of such action or referring to
     prior Opinions of Counsel in which such details are given, and (ii) stating
     that all financing statements and continuation statements have been
     executed and filed that are necessary as of such date and during the
     succeeding seventeen (17) months fully to maintain the Lien in favor of the
     Collateral Trustee intended to be created hereunder and under the
     Collateral Documents with respect to the security interest in the
     Collateral and the perfection thereof, or (b) stating that, in the opinion
     of such counsel, no such action is necessary to maintain such Lien and the
     perfection thereof.

          (c)  The release of any Collateral from the terms of the Collateral
     Documents and as permitted in Section 12.5 will not be deemed to impair the
                                   ------------
     security under this Indenture in contravention of the provisions hereof if
     and to the extent the Collateral is released pursuant to the Collateral
     Documents. To the extent applicable, the Issuer shall cause TIA (S) 314(d)
     relating to the release of property or securities from the lien of the
     Collateral Documents and relating to the substitution therefor of any
     property or securities to be subjected to the Lien of the Collateral
     Documents, to be complied with. With respect to any such substitution, the
     Issuer shall furnish to the Trustee an Independent Appraiser's Certificate
     if required by TIA (S) 314(d). Any certificate or opinion required by TIA
     ((S)) 314(d) may be made by an Officer of the Issuer, except in cases where
     TIA (S) 314(d) requires that such certificate or opinion be

                                      94
<PAGE>

     made by an independent person, which person shall meet the requirements set
     forth in clauses (a) through (c) of the definition of the term "Independent
     Appraiser."

          Section 12.3  Intentionally Omitted.
                        ---------------------
          Section 12.4  Release of Collateral.
                        ---------------------

               (a)  Collateral may be released from time to time in accordance
     with the terms of the Collateral Documents. The Trustee shall, from time to
     time, confirm to the Collateral Trustee that any release of Collateral from
     the security interest or Lien of the Collateral Documents is permitted
     under this Indenture upon receipt by a Trust Officer of (i) at least one
     (1) Business Day prior to the requested date for such confirmation, an
     Officers' Certificate from the Issuer requesting such release and
     describing the property to be so released and stating that such release
     complies with the terms of this Indenture and the Collateral Documents, and
     (ii) simultaneous with or prior to such request, any Officers' Certificates
     or Opinions of Counsel required by TIA (S)314(d) in connection with such
     release, in compliance with Section 14.4 and Section 14.5.
                                 ------------     ------------

          Section 12.5  Release Upon Termination of the Issuer's Obligations.
                        ----------------------------------------------------

               (a)  In the event that the Issuer delivers an Officers'
     Certificate certifying that all of the Obligations have been satisfied and
     discharged by complying with the provisions of Section 4.1 or Article IX
     hereof, the Trustee shall deliver to the Collateral Trustee a notice
     stating that the Trustee, on behalf of the Holders, disclaims and gives up
     any and all rights it has in or to the Collateral, and any rights it has
     under the Collateral Documents, and, upon and after the receipt by the
     Collateral Trustee of such notice, Collateral Trustee shall not be deemed
     to hold the security interests in the Collateral on behalf of the Trustee
     for the benefit of the Holders.

               (b)  Any release of Collateral made strictly in compliance with
     the provisions of this Section 12.5 shall not be deemed to impair the
                            ------------
     security interests in contravention of the provisions of this Indenture.

                                      95
<PAGE>

          Section 12.6    When Trustee is Collateral Trustee. At any time the
                          ----------------------------------
Trustee under this Indenture and the Collateral Trustee under the Security
Documents are the same Person. then the Trustee and the Collateral Trustee shall
not be required to provide any written notices or issue any written instructions
that are required under this Indenture to be provided or issued (i) by the
Trustee to the Collateral Trustee, or (ii) by the Collateral Trustee to the
Trustee.

                                 ARTICLE XIII
                        CONVERSION OF AMORTIZING NOTES

          Section 13.1    Conversion Privilege.
                          --------------------

          Subject to and upon compliance with the provisions of this Article
XIII, at the option of the Holder thereof, any Series A Note or Series B Note
may at any time be converted, in whole, or in part in multiples of $1,000
principal amount, into $1,000 principal amount of duly authorized, valid and
binding Series C Notes and Series D Notes, respectively, for each $1,000
principal amount of Series A Notes and Series B Notes so converted, until and
including, but not after the close of business on the second Business Day prior
to Stated Maturity, or unless such Amortizing Note or some portion thereof shall
have been called for redemption or delivered for repurchase prior to such date
and no default is made in making due provision for the payment of the redemption
price in accordance with the terms of this Indenture, in which case, with
respect to such Amortizing Note or portion thereof as has been so called for
redemption or delivered for repurchase, such Amortizing Note or portion thereof
may be so converted until and including, but not after, the close of business on
the tenth Business Day prior to the redemption date for such Amortizing Note,
unless the Company subsequently fails to pay the applicable redemption price or
repurchase price.

          Section 13.2    Exercise of Conversion Privileges.
                          ---------------------------------

          In order to exercise the conversion privilege, the Holder of any
Amortizing Note to be converted shall surrender such Amortizing Note to the
Issuer at any time during usual business hours at its office or agency
maintained for the purpose as provided in this Indenture, accompanied by a fully
executed written notice, in substantially the form set forth on the reverse of
the Amortizing Note, that the Holder elects to convert such Amortizing Note or a
stated portion thereof constituting a multiple of $1,000 principal amount.  Such
notice of conversion shall also state the name or names (with address) in which
the certificate or certificates representing Series C Notes or Series D Notes,
as the case may be, shall be issued.  Amortizing Notes surrendered for
conversion shall (if reasonable required by the Issuer or the Trustee) be duly
endorsed by, or be accompanied by a written instrument or instruments of
transfer in form satisfactory to the Issuer duly executed by, the Holder or his
attorney duly authorized in writing.  As promptly as practicable after the
receipt of such notice and the surrender of such Amortizing Notes as aforesaid,
the Issuer shall, subject to the provisions of Section 13.3 hereof, issue and
deliver at such office or agency to such Holder, or on his written order, a
certificate or certificates for the aggregate principal amount of Series C Notes
or Series

                                      96
<PAGE>

D Notes, as the case may be, issuable on such conversion of Amortizing Notes in
accordance with the provisions of this Article XIII. Such conversion shall be
deemed to have been effected immediately prior to the close of business on the
date (herein called the "Date of Conversion") on which such Amortizing Note
                         ------------------
shall have been surrendered as aforesaid, and the person or persons in whose
name or names any certificate or certificates representing Series C Notes or
Series D Notes, as the case may be, shall be issuable upon such conversion shall
be deemed to have become on the Date of Conversion the holder or holders of
record of the Series C Notes or Series D Notes represented thereby. In the case
of conversion of a portion, but less than all, of a Series A Note or Series B
Note, the Issuer shall as promptly as practicable execute, and the Trustee shall
authenticate and deliver to the Holder thereof, at the expense of the Issuer, a
Series A Note or a Series B Note, as the case may be, in the aggregate principal
amount of the unconverted portion of the Series A Note or Series B Note
surrendered. Each Series C Note and Series D Note shall bear interest from the
last Interest Payment Date on which interest was paid on the Notes surrendered
in exchange therefor or, if no interest has been paid on the Notes, from the
date of original issue of the Notes.

          Section 13.3    Taxes on Conversion.
                          -------------------

          The Issuer will pay any and all documentary, stamp or similar taxes
payable to the United States of America or any political subdivision or taxing
authority thereof or therein in respect of the issue or delivery of Series C
Notes or Series D Notes on conversion of Amortizing Notes pursuant thereto;
provided, however, that the Company shall not be required to pay any tax which
--------  -------
may be payable in respect of any transfer involved in the issue or delivery of
Series C Notes or Series D Notes in a name other than that of the Holder of the
Amortizing Notes to be converted and no such issue or delivery shall be made
unless and until the person requesting such issue or delivery has paid to the
Issuer the amount of any such tax or has established, to the satisfaction of the
Issuer, that such tax has been paid.  The Issuer extends no protection with
respect to any other taxes imposed in connection with conversion of Amortizing
Notes.

                                  ARTICLE XIV
                                 MISCELLANEOUS

          Section 14.1    Trust Indenture Act Controls.
                          ----------------------------
          If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA (S) 318(c), the imposed duties shall control.

          Section 14.2    Notices.
                          -------

          Any notice or communication by the Issuer or the Trustee to others is
duly given if in writing and delivered in person or mailed by first-class mail
(registered or certified, return receipt requested), telecopier or overnight air
courier guaranteeing next day delivery, to the others' addresses:

                         If to the Issuer.
                         ----------------

                                      97
<PAGE>

                         AirTran Airways, Inc.
                         9955 AirTran Boulevard
                         Orlando, FL 32827
                         Attention: Treasurer
                         Telephone No.: (407) 251-5600
                         Telecopier No.: (407) 251-5567

                         If to the Trustee:

                         Wilmington Trust Company
                         Rodney Square North
                         1100 North Market Street
                         Wilmington, DE  19890-0001
                         Attention: Corporate Trust Administration
                         Telecopier No.: (302) 651-8882

          The Issuer or the Trustee, as the case may be by notice to the others
may designate additional or different addresses for subsequent notices or
communications.

          All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; upon receipt, if deposited in the mail, postage prepaid;
when receipt acknowledged, if telecopied; and the next Business Day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next day
delivery.  All notices and communications to the Trustee shall be deemed to have
been duly given only if actually received by the Trustee.

          Any notice or communication to a Holder shall be mailed by first-class
mail, to his address shown on the register kept by the Registrar.  Failure to
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.

          If a notice communication is mailed in the manner provided above
within the time prescribed, it is duly given, regardless of whether the
addressee receives it.

          If the Issuer mails a notice or communication to Holders, they shall
mail a copy to the Trustee at the same time.

          Section 14.3  Communication by Holders with Other Holders.
                        -------------------------------------------

          Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes.  The Issuer, the
Trustee, the Registrar and any other person shall have the protection of TIA (S)
312(c).

                                      98
<PAGE>

          Section 14.4  Certificate and Opinion as to Conditions Precedent.
                        --------------------------------------------------
          Upon any request or application by the Issuer, the Trustee, or the
Collateral Trustee to take any action under this Indenture, the Issuer shall
furnish to the Trustee:

               (a)  an Officers' Certificate in form and substance reasonably
     satisfactory to the Trustee (which shall include the statements set forth
     in Section 14.5) stating that, in the opinion of the signers, all
        ------------
     conditions precedent and covenants, if any, provided for in this Indenture
     relating to the proposed action have been complied with; and

               (b)  an Opinion of Counsel in form and substance reasonably
     satisfactory to the Trustee (which shall include the statements set forth
     in Section 14.5) stating that, in the opinion of such counsel, all such
        ------------
     conditions precedent and covenants have been complied with.

          Section 14.5  Statements Required in Certificate or Opinion.
                        ---------------------------------------------

          Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture or any Collateral Documents
(other than a certificate provided pursuant to TIA (S) 314(a)(4)) shall include:

               (a)  a statement that the Person making such certificate or
     opinion has read such covenant or condition;

               (b)  a brief statement as to the nature and scope of the
     examination or investigation upon which the statements or opinions
     contained in such certificate or opinion are based;

               (c)  a statement that, in the opinion of such Person, he or she
     has made such examination or investigation as is necessary to enable him to
     express an informed opinion as to whether such covenant or condition has
     been complied with; and

               (d)  a statement as to whether, in the opinion of such Person,
     such condition or covenant has been complied with,

provided that with respect to matters of fact, an Opinion of Counsel may rely
---------
upon an Officers' Certificate or a certificate of a public official.

          Section 14.6  Rules of Trustee and Agents.
                        ---------------------------

          The Trustee may make reasonable rules for action by or at a meeting of
Holders.  The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.

                                      99
<PAGE>

          Section 14.7  Legal Holidays.
                        --------------

          If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.

          Section 14.8  No Recourse Against Others.
                        --------------------------

          No director, officer, employee, incorporator, stockholder, member or
controlling person of either of the Issuer or any Guarantor, as such, shall have
any liability for any obligations of either of the Issuer or any Guarantor under
the Notes, this Indenture, the Collateral Documents or the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of such
obligations or their creation.  Each Holder by accepting a Note waives and
releases all such liability.  The waiver and release shall be part of the
consideration for the issuance of the Notes and the Subsidiary Guarantees.
Notwithstanding the foregoing nothing its this provision shall be construed as a
waiver or release of any claims under the federal securities laws.

          Section 14.9  Governing Law.
                        -------------

          This Indenture shall be construed and interpreted and the rights of
the parties shall be determined in accordance with the laws of the State of New
York, as applied to contracts made and performed within the State of New York,
including, without limitation, Sections 5-1401 and 5-1402 of the New York
General Obligations Laws and New York Civil Practice Laws and Rules 327(b).  The
Issuer hereby irrevocably submits to the jurisdiction of any New York state
court sitting in the Borough of Manhattan in The City of New York or any federal
court sitting in the Borough of Manhattan in The City of New York in respect of
any suit, action or proceeding arising out of or relating to this Indenture, and
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, jurisdiction of the aforesaid courts.  The Issuer irrevocably
waives, to the fullest extent it may effectively do so under applicable law,
trial by jury and any objection that it may now or hereafter have to the laying
of the venue of any such suit, action or proceeding brought in any such court
and any claim that any such suit, action or proceeding brought in such court has
been brought in an inconvenient forum.  The Issuer irrevocably consents, to the
fullest extent it may effectively do so under applicable law, to the service of
process of any of the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail, postage prepaid,
to the Issuer at the address set forth herein, such service to become effective
thirty (30) days after such mailing.  Nothing herein shall affect the right of
any holder to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Issuer in any other
jurisdiction.

                                      100
<PAGE>

          Section 14.10  No Adverse Interpretation of Other Agreements.
                         ---------------------------------------------

          This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of the Issuer or its Subsidiaries.  Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.

          Section 14.11  Successors.
                         ----------

          All agreements of the Issuer and any Subsidiary Guarantors in this
Indenture and the Notes shall bind their respective successors.  All agreements
of the Trustee in this Indenture and the Collateral Documents shall bind their
successors.

          Section 14.12  Severability.
                         ------------

          In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

          Section 14.13  Counterpart Originals.
                         ---------------------
          The parties may sign any number of copies of this Indenture.  Each
signed copy shall be an original, but all of them together represent the same
agreement.

          Section 14.14  Table of Contents, Headings, etc.
                         --------------------------------

          The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.

                           (Signature pages follow.)

                                      101
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Indenture as of the date first written above.

                                                AIRTRAN AIRWAYS, INC., as Issuer

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

Attest:

       /s/ Richard P. Magurno
-----------------------------------
Name:  Richard P. Magurno
Title: Secretary
                                                AIRTRAN AIRWAYS 717 LEASING
                                                CORPORATION, as Guarantor

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

       /s/ Richard P. Magurno
-----------------------------------
Name:  Richard P. Magurno
Title: Secretary
                                                WILMINGTON TRUST COMPANY,
                                                   as Trustee

                                             By: /s/ Patricia A. Evans
                                                 -------------------------------
                                                 Name:  Patricia A. Evans
                                                 Title: Senior Financial
                                                        Services Officer
<PAGE>

                               TABLE OF CONTENTS

                                                                     Page
                                                                     ----

EXHIBIT A - Form of Note...........................................   A-1
EXHIBIT B - Certificate to be Delivered upon Exchange or
            Registration of Transfer of Notes......................   B-1
EXHIBIT C - Form of Subsidiary Guaranty............................   C-1
EXHIBIT D - Form of Collateral Trust Agreement.....................   D-1
EXHIBIT E - Form of Registration Rights Agreement..................   D-1

<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                         Page
                                                                                                         ----
<S>                                                                                                      <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE..................................................     1

     Section 1.1    Definitions.......................................................................     1
     Section 1.2    Incorporation by Reference of Trust Indenture Act.................................    29
     Section 1.3    Rules of Construction.............................................................    30

ARTICLE II THE NOTES..................................................................................    31

     Section 2.1    Designation; Form and Dating......................................................    31
     Section 2.2    Execution and Authentication......................................................    31
     Section 2.3    Registrar, Paying Agent and Depositary............................................    32
     Section 2.4    Paying Agent to Hold Money in Trust...............................................    33
     Section 2.5    Holder Lists......................................................................    33
     Section 2.6    Transfer and Exchange.............................................................    33
     Section 2.7    Replacement Notes.................................................................    37
     Section 2.8    Outstanding Notes.................................................................    38
     Section 2.9    Treasury Notes....................................................................    38
     Section 2.10   Temporary Notes...................................................................    38
     Section 2.11   Cancellation......................................................................    39
     Section 2.12   Defaulted Interest................................................................    39
     Section 2.13   Legends...........................................................................    39
     Section 2.14   Deposit of Moneys.................................................................    40
     Section 2.15   CUSIP Numbers.....................................................................    41

ARTICLE III REDEMPTION................................................................................    41

     Section 3.1    Notices to Trustee................................................................    41
     Section 3.2    Selection of Notes to Be Redeemed.................................................    42
     Section 3.3    Notice of Redemption..............................................................    42
     Section 3.4    Effect of Notice of Redemption....................................................    43
     Section 3.5    Deposit of Redemption Price.......................................................    43
     Section 3.6    Notes Redeemed in Part............................................................    43
     Section 3.7    Optional Redemption...............................................................    43
     Section 3.8    Mandatory Redemption..............................................................    44

ARTICLE IV SATISFACTION AND DISCHARGE.................................................................    45

     Section 4.1    Satisfaction and Discharge of Indenture...........................................    45
     Section 4.2    Application of Trust Money........................................................    46
</TABLE>

                                       i

<PAGE>

                               TABLE OF CONTENTS
                                  (continued)

<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----
<S>                                                                                                     <C>
ARTICLE V COVENANTS, REPRESENTATIONS AND WARRANTIES...................................................    46

     Section 5.1    Payment of Notes..................................................................    46
     Section 5.2    Maintenance of Office or Agency...................................................    47
     Section 5.3    Limitation on Restricted Payments.................................................    47
     Section 5.4    Corporate Existence...............................................................    51
     Section 5.5    Payment of Taxes and Other Claims.................................................    52
     Section 5.6    Intentionally Omitted.............................................................    52
     Section 5.7    Maintenance of Properties and Insurance...........................................    52
     Section 5.8    Default Notices and Compliance Certificates.......................................    53
     Section 5.9    Commission Reports................................................................    53
     Section 5.10   Waiver of Stay, Extension or Usury Laws...........................................    54
     Section 5.11   Amendment to Certain Agreements...................................................    55
     Section 5.12   Title to Collateral; Limitation on Liens..........................................    55
     Section 5.13   Books, Records, Access; Confidentiality...........................................    55
     Section 5.14   Security Interests................................................................    56
     Section 5.15   Repurchase of Notes Upon a Change in Control......................................    56
     Section 5.16   Restrictions on Becoming an Investment Company....................................    57
     Section 5.17   Limitation on Indebtedness........................................................    57
     Section 5.18   Limitation on Distributions from Restricted Subsidiaries..........................    59
     Section 5.19   Limitation on Sales of Assets and Subsidiary Stock................................    61
     Section 5.20   Limitation on Affiliate Transactions..............................................    62
     Section 5.21   Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries....    63
     Section 5.22   Limitation on Guarantees by Restricted Subsidiaries...............................    63
     Section 5.23   Limitation on Sale/Leaseback Transactions.........................................    64
     Section 5.24   Excess Cash Flow Offer............................................................    64

ARTICLE VI SUCCESSORS.................................................................................    65

     Section 6.1    Merger and Consolidation..........................................................    65
     Section 6.2    Successor Substituted.............................................................    66

ARTICLE VII DEFAULTS AND REMEDIES.....................................................................    66

     Section 7.1    Events of Default.................................................................    66
     Section 7.2    Acceleration......................................................................    69
     Section 7.3    Waiver of Past Defaults...........................................................    69
     Section 7.4    Control by Majority...............................................................    69
     Section 7.5    Limitation on Suits...............................................................    70
     Section 7.6    Rights of Holders to Receive Payment..............................................    70
</TABLE>

                                      ii

<PAGE>

                               TABLE OF CONTENTS
                                  (Continued)

<TABLE>
<CAPTION>
                                                                                             Page
                                                                                             ----
<S>                                                                                         <C>
     Section 7.7    Collection of Indebtedness; Provisions Regarding Sale by Trustee.......    71
     Section 7.8    Trustee May File Proofs of Claim.......................................    71
     Section 7.9    Trustee May Enforce Claims Without Possession of Notes.................    72
     Section 7.10   Priorities.............................................................    72
     Section 7.11   Restoration of Rights and Remedies.....................................    72
     Section 7.12   Rights and Remedies Cumulative.........................................    73
     Section 7.13   Delay or Omission Not Waiver...........................................    73
     Section 7.14   Undertaking for Costs..................................................    73

ARTICLE VIII THE TRUSTEE...................................................................    73

     Section 8.1    Duties.................................................................    73
     Section 8.2    Rights of Trustee and Collateral Trustee...............................    75
     Section 8.3    Individual Rights of Trustee...........................................    76
     Section 8.4    Disclaimer.............................................................    76
     Section 8.5    Notice of Defaults.....................................................    76
     Section 8.6    Resignation and Removal, Appointment of Successor......................    76
     Section 8.7    Compensation and Indemnity.............................................    77
     Section 8.8    Resignation and Removal; Appointment of Successor......................    78
     Section 8.9    Successor Trustee by Merger, etc.......................................    79
     Section 8.10   Eligibility; Disqualification..........................................    79
     Section 8.11   Intentionally Omitted..................................................    79
     Section 8.12   Preferential Collection of Claims Against the Issuer...................    79

ARTICLE IX DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE.............................    80

     Section 9.1    Discharge; Option to Effect Legal or Covenant Defeasance...............    80
     Section 9.2    Legal Defeasance and Discharge.........................................    80
     Section 9.3    Covenant Defeasance....................................................    81
     Section 9.4    Conditions to Legal or Covenant Defeasance.............................    81
     Section 9.5    Deposits to be Held in Trust; Other Miscellaneous Provisions...........    82
     Section 9.6    Repayment to the Issuer................................................    83
     Section 9.7    Reinstatement..........................................................    83

ARTICLE X AMENDMENTS.......................................................................    84

     Section 10.1   Without Consent of Holders.............................................    84
     Section 10.2   With Consent of Holders................................................    85
     Section 10.3   Compliance with Trust Indenture Act....................................    86
</TABLE>

                                      iii
<PAGE>

                               TABLE OF CONTENTS
                                  (Continued)

<TABLE>
<CAPTION>
                                                                                              Page
                                                                                              ----
<S>                                                                                           <C>
     Section 10.4      Revocation and Effect of Consents...................................    87
     Section 10.5      Notation on or Exchange of Notes....................................    87
     Section 10.6      Trustee to Sign Amendments, etc.....................................    87

ARTICLE XI SUBSIDIARY GUARANTEES...........................................................    88

     Section 11.1      Subsidiary Guaranty.................................................    88
     Section 11.2      Execution and Delivery of the Subsidiary Guarantees.................    89
     Section 11.3      Limitation on Subsidiary Guarantor's Liability......................    90
     Section 11.4      Rights under the Subsidiary Guarantees..............................    90
     Section 11.5      Primary Obligations.................................................    91
     Section 11.6      Guaranty by Future Subsidiaries.....................................    91
     Section 11.7      Release of Subsidiary Guarantors....................................    92
     Section 11.8      Activities of the B717 Subsidiaries.................................    92

ARTICLE XII SECURITY INTEREST..............................................................    93

     Section 12.1      Collateral Documents................................................    93
     Section 12.2      Opinions, Certificates and Appraisals...............................    94
     Section 12.3      Intentionally Omitted...............................................    95
     Section 12.4      Release of Collateral...............................................    95
     Section 12.5      Release Upon Termination of the Issuer's Obligations................    95
     Section 12.6      When Trustee is Collateral Trustee..................................    96

ARTICLE XIII CONVERSION OF AMORTIZING NOTES................................................    96

     Section 13.1      Conversion Privilege................................................    96
     Section 13.2      Exercise of Conversion Privileges...................................    96
     Section 13.3      Taxes on Conversion.................................................    97

ARTICLE XIV MISCELLANEOUS..................................................................    97

     Section 14.1      Trust Indenture Act Controls........................................    97
     Section 14.2      Notices.............................................................    97
     Section 14.3      Communication by Holders with Other Holders.........................    98
     Section 14.4      Certificate and Opinion as to Conditions Precedent..................    99
     Section 14.5      Statements Required in Certificate or Opinion.......................    99
     Section 14.6      Rules of Trustee and Agents.........................................    99
     Section 14.7      Legal Holidays......................................................   100
     Section 14.8      No Recourse Against Others..........................................   100
     Section 14.9      Governing Law.......................................................   100
     Section 14.10     No Adverse Interpretation of Other Agreements.......................   101
     Section 14.11     Successors..........................................................   101
</TABLE>

                                      iv
<PAGE>

                               TABLE OF CONTENTS
                                  (Continued)

<TABLE>
<CAPTION>
                                                                                Page
                                                                                ----
<S>                                                                             <C>
     Section 14.12     Severability...........................................  101
     Section 14.13     Counterpart Originals..................................  101
     Section 14.14     Table of Contents, Headings, etc.......................  101
</TABLE>

                                       vExhibit 4.3

                       BUNGE LIMITED EQUITY INCENTIVE PLAN

         Bunge Limited ("Bunge") hereby establishes an equity compensation plan
to be known as the Bunge Limited Equity Incentive Plan (the "Plan"). The Plan
shall become effective on the date it is approved by the Board of Directors of
Bunge (the "Board"), subject to the approval of Bunge's shareholders within
twelve months after its approval by the Board in accordance with Section 15(a)
hereof. Capitalized terms that are not otherwise defined in the text of this
Plan are defined in Section 2 below.

1.       Purposes

         The purposes of the Plan are to attract, retain and motivate key
employees of the Company; to compensate them for their contributions to the
growth and profits of the Company; to encourage ownership by them of Common
Stock in order to align key employee interests with shareholder interests; and
to link the compensation of key employees to the overall performance of the
Company in order to promote cooperation among the Company's diverse areas of
business.

2.       Definitions

         For purposes of the Plan, the following terms shall be defined as
follows:

                  "Administrator" means the individual or individuals to whom
         the Committee delegates authority under the Plan in accordance with
         Section 3(d).

                  "Award" means an award made pursuant to the terms of the Plan
         to an Eligible Individual in the form of Stock Options or Other Awards.

                  "Award Agreement" means a written document approved in
         accordance with Section 3 which sets forth the terms and conditions of
         an Award to a Participant. An Award Agreement may be in the form of (i)
         an agreement between the Company and a Participant which is executed by
         an officer on behalf of the Company and is signed by the Participant or
         (ii) a certificate issued by the Company which is executed by an
         officer on behalf of the Company but does not require the signature of
         the Participant.

                  "Board" means the Board of Directors of Bunge.

                  "Bunge" means Bunge Limited, a company incorporated under the
         laws of Bermuda, and any successor thereto.

                  "Cause" means the termination of a Participant's employment
         with the Company as a consequence of:

                           (i) the willful and continued failure or refusal of
                  the Participant to substantially perform the duties required
                  of him or her as an employee of Bunge;

                           (ii) any willful and material violation by the
                  Participant of any law or regulation applicable to any
                  business of Bunge, or the Participant's conviction of, or a
                  plea of nolo contendere to, a felony, or any willful
                  perpetration by the Participant of a common law fraud; or

                                       1
<PAGE>

                           (iii) any other willful misconduct by the Participant
                  that is materially injurious to the financial condition or
                  business reputation of, or is otherwise materially injurious
                  to, Bunge.

                   "Change in Control" shall mean any of the following:

                           (i) the acquisition by any Person of beneficial
                  ownership (within the meaning of Rule 13d-3 promulgated under
                  the Exchange Act) of 35% or more of the Common Stock then
                  outstanding, but shall not include any such acquisition by any
                  employee benefit plan of the Company, or any Person or entity
                  organized, appointed or established by the Company for or
                  pursuant to the terms of any such employee benefit plan;

                           (ii) consummation after approval by the shareholders
                  of Bunge of either (A) a plan of complete liquidation or
                  dissolution of Bunge or (B) a merger, amalgamation or
                  consolidation of Bunge with any other corporation, the
                  issuance of voting securities of Bunge in connection with a
                  merger, amalgamation or consolidation of Bunge or sale or
                  other disposition of all or substantially all of the assets of
                  Bunge or the acquisition of assets of another corporation
                  (each, a "Business Combination"), unless, in each case of a
                  Business Combination, immediately following such Business
                  Combination, all or substantially all of the individuals and
                  entities who were the beneficial owners of the Common Stock
                  outstanding immediately prior to such Business Combination
                  beneficially own, directly or indirectly, more than 50% of the
                  then outstanding shares of common stock and 50% of the
                  combined voting power of the then outstanding voting
                  securities entitled to vote generally in the election of
                  directors, as the case may be, of the entity resulting from
                  such Business Combination (including, without limitation, an
                  entity which as a result of such transaction owns the Company
                  or all or substantially all of Bunge's assets either directly
                  or through one or more subsidiaries) in substantially the same
                  proportions as their ownership, immediately prior to such
                  Business Combination, of the Common Stock; or

                           (iii) with respect to any period on or after a Public
                  Offering, the individuals who, as of the effective date of the
                  Plan, constitute the Board, and subsequently elected members
                  of the Board whose election is approved or recommended by at
                  least a majority of such current members or their successors
                  whose election was so approved or recommended (other than any
                  subsequently elected members whose initial assumption of
                  office occurs as a result of an actual or threatened election
                  contest with respect to the election or removal of directors
                  or other actual or threatened solicitation of proxies or
                  consents by or on behalf of a Person other than the Board),
                  cease for any reason to constitute at least a majority of such
                  Board.

                  "Code" means the Internal Revenue Code of 1986, as amended,
         and the applicable rulings and regulations (including any proposed
         regulations) thereunder.

                                       2
<PAGE>

                  "Committee" means the Compensation Committee of the Board, any
         successor committee thereto or any other committee appointed from time
         to time by the Board to administer the Plan. The Committee shall
         consist of at least two individuals who are not and have never been
         employees of the Company and who shall serve at the pleasure of the
         Board.

                  "Common Stock" means shares in the capital of Bunge, including
         ordinary shares and non-voting shares.

                  "Company" means, individually and collectively, Bunge, and its
         Subsidiaries, and any successors thereto.

                  "Disability" means, with respect to any Award other than an
         Incentive Stock Option, long term disability, as defined under Bunge's
         long-term disability insurance plan or such other applicable plan, as
         the Committee, in its sole discretion, may determine. With respect to
         any Incentive Stock Option, Disability means permanent and total
         disability within the meaning of Section 22(e)(3) of the Code.

                  "Eligible Individuals" means the individuals described in
         Section 6 who are eligible for Awards under the Plan.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
         amended, and the applicable rulings and regulations thereunder.

                  "Fair Market Value" of a share of Common Stock as of any date
         means:

                           (i) if the Common Stock is listed on an established
                  stock exchange or exchanges (including for this purpose, the
                  NASDAQ National Market), the average of the highest and lowest
                  sale prices of the stock quoted for such date as reported in
                  the Transactions Index of each such exchange, as published in
                  The Wall Street Journal and determined by the Committee, or,
                  if no sale price was quoted in any such Index for such date,
                  then as of the next preceding date on which such a sale price
                  was quoted;

                           (ii) if the Common Stock is not then listed on an
                  exchange or the NASDAQ National Market, the average of the
                  closing bid and asked prices per share for the stock in the
                  over-the-counter market as quoted on The NASDAQ Small Cap or
                  OTC Electronic Bulletin Board, as appropriate, on such date;
                  or

                           (iii) if the Common Stock is not then listed on an
                  exchange or quoted in the over-the-counter market, an amount
                  determined in good faith by the Committee; provided, however,
                  that when appropriate, the Committee, in determining Fair
                  Market Value of the Common Stock, may take into account such
                  factors as it may deem appropriate under the circumstances.

         Notwithstanding the foregoing, the Fair Market Value of Common Stock
         for purposes of grants of Incentive Stock Options shall be determined
         in compliance with applicable provisions of the Code.

                                       3
<PAGE>

                  "Incentive Stock Option" means a Stock Option that is an
         "incentive stock option" within the meaning of Section 422 of the Code
         and designated by the Committee as an Incentive Stock Option in an
         Award Agreement.

                  "Nonqualified Stock Option" means a Stock Option that is not
         an Incentive Stock Option.

                  "Option Term" has the meaning set forth in Section 8(e).

                  "Other Award" means any form of Award other than a Stock
         Option or Restricted Stock authorized under Section 10 of the Plan.

                  "Participant" means an Eligible Individual to whom an Award
         has been granted under the Plan.

                  "Performance-Based Restricted Stock" means Restricted Stock
         with respect to which the lapsing of the applicable restrictions are
         linked to performance criteria.

                  "Permitted Transferee" has the meaning set forth in Section
         11(b).

                  "Person" means any person, entity or "group" within the
         meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act,
         except that such term shall not include (i) Bunge International
         Limited, (ii) the Company, (iii) a trustee or other fiduciary holding
         securities under an employee benefit plan of the Company, (iv) an
         underwriter temporarily holding securities pursuant to an offering of
         such securities, or (v) an entity owned, directly or indirectly, by the
         shareholders of Bunge in substantially the same proportions as their
         ownership of stock of Bunge.

                  "Pre-IPO Exercise Period" means the ninety-day period
         immediately following the date that the annual valuation of the Company
         is submitted to the Committee.

                  "Public Offering" means a public offering of the Common Stock
         pursuant to an effective registration statement under the Securities
         Act of 1933, as amended, or any other transaction resulting in Bunge
         having a class of equity securities registered under Section 12 of the
         Exchange Act.

                  "Restricted Stock" means restricted Shares granted to an
         Eligible Individual pursuant to Section 9 hereof.

                  "Retirement" means the termination of a Participant's
         employment with the Company after such Participant's sixty-fifth
         birthday and in accordance with the applicable retirement policies of
         the Company with which the Participant was employed.

                  "Shares" means shares comprising the Common Stock.

                  "Stock Option" means an Award to purchase shares of Common
         Stock granted to an Eligible Individual pursuant to Section 8 hereof,
         which Award may be either an Incentive Stock Option or a Nonqualified
         Stock Option.

                                       4
<PAGE>

                  "Subsidiary" means (i) a corporation or other entity with
         respect to which Bunge, directly or indirectly, has the power, whether
         through the ownership of voting securities, by contract or otherwise,
         to elect at least a majority of the members of such corporation's board
         of directors or analogous governing body, or (ii) any other corporation
         or other entity in which Bunge, directly or indirectly, has an equity
         or similar interest and which the Committee designates as a Subsidiary
         for purposes of the Plan; provided, however, that for purposes of any
         Award of Incentive Stock Options, a Subsidiary shall be defined as any
         corporation (i) as to which Bunge, directly or indirectly through an
         unbroken chain of corporations, owns more than fifty per cent of the
         total combined voting power of all classes of stock issued by such
         corporation and (ii) which is designated by the Committee as a
         Subsidiary for purposes of the Plan.

3.       Administration of the Plan

         (a) Power and Authority of the Committee. The Plan shall be
administered by the Committee, which shall have full power and authority,
subject to the express provisions hereof:

                  (i) to select Participants from the Eligible Individuals;

                  (ii) to make Awards in accordance with the Plan and to issue,
         allot and purchase Shares;

                  (iii) to determine the number of shares of Common Stock
         subject to each Award or the cash amount payable in connection with an
         Award;

                  (iv) to determine the terms and conditions of each Award,
         other than the terms and conditions that are expressly required under
         the terms of the Plan;

                  (v) to specify and approve the provisions of the Award
         Agreements delivered to Participants in connection with their Awards;

                  (vi) to construe and interpret any Award Agreement delivered
         under the Plan;

                  (vii) to prescribe, amend and rescind rules and procedures
         relating to the Plan;

                  (viii) to vary the terms of Awards to take account of tax,
         securities law and other regulatory requirements of foreign
         jurisdictions;

                  (ix) subject to the provisions of the Plan and subject to such
         additional limitations and restrictions as the Committee may impose, to
         delegate to one or more officers of the Company some or all of its
         authority under the Plan;

                  (x) to employ such legal counsel, independent auditors and
         consultants as it deems desirable for the administration of the Plan
         and to rely upon any opinion or computation received therefrom; and

                                       5
<PAGE>

                  (xi) to make all other determinations and to formulate such
         procedures as may be necessary or advisable for the administration of
         the Plan.

         (b) Plan Construction and Interpretation. The Committee shall have full
power and authority, subject to the express provisions hereof, to construe and
interpret the Plan.

         (c) Determinations of Committee Final and Binding. All determinations
by the Committee in carrying out and administering the Plan and in construing
and interpreting the Plan shall be final, binding and conclusive for all
purposes and upon all persons interested herein.

         (d) Delegation of Authority. The Committee may, but need not, from time
to time delegate some or all of its authority under the Plan to an Administrator
consisting of one or more members of the Committee or of one or more officers of
the Company; provided, however, that the Committee may not delegate its
authority (i) to make Awards to Eligible Individuals who are officers of the
Company who are delegated authority by the Committee hereunder, or (ii) under
Sections 3(b) and 12 of the Plan. Any delegation hereunder shall be subject to
the restrictions and limits that the Committee specifies at the time of such
delegation or thereafter. Nothing in the Plan shall be construed as obligating
the Committee to delegate authority to an Administrator, and the Committee may
at any time rescind the authority delegated to an Administrator appointed
hereunder or appoint a new Administrator. At all times, the Administrator
appointed under this Section 3(d) shall serve in such capacity at the pleasure
of the Committee. Any action undertaken by the Administrator in accordance with
the Committee's delegation of authority shall have the same force and effect as
if undertaken directly by the Committee, and any reference in the Plan to the
Committee shall, to the extent consistent with the terms and limitations of such
delegation, be deemed to include a reference to the Administrator.

         (e) Liability of Committee. No member of the Committee shall be liable
for any action or determination made in good faith, and the members of the
Committee shall be entitled to indemnification and reimbursement in the manner
provided in Bunge's by-laws as they may be amended from time to time. In the
performance of its responsibilities with respect to the Plan, the Committee
shall be entitled to rely upon information and advice furnished by the Company's
officers, the Company's accountants, the Company's counsel and any other party
the Committee deems necessary, and no member of the Committee shall be liable
for any action taken or not taken in reliance upon any such advice.

         (f) Action by the Board. Anything in the Plan to the contrary
notwithstanding, any authority or responsibility which, under the terms of the
Plan, may be exercised by the Committee may alternatively be exercised by the
Board.

4.       Effective Date and Term

         The Plan shall become effective on October 10, 2000, subject to its
adoption by the Board and its approval by the shareholders of Bunge. Prior to
such shareholder approval, the Committee may grant Awards conditioned on
shareholder approval. If such shareholder approval is not obtained at or before
the first annual meeting of shareholders to occur after the adoption of the Plan
by the Board (including any adjournment or adjournments thereof), the Plan and
any Awards made thereunder shall terminate ab initio and be of no further force
and effect. In no

                                       6
<PAGE>

event shall any Awards be made under the Plan after the tenth anniversary of the
date of shareholder approval.

5.        Shares of Common Stock Subject to the Plan

         (a) General. Subject to adjustment as provided in Section 12 hereof,
the number of shares of Common Stock that may be issued pursuant to Awards under
the Plan (the "Section 5 Limit") shall not exceed, in the aggregate five percent
of the issued Common Stock outstanding; provided, however, that, subject to the
provisions of Section 12 below and based on the fact that, as of the date the
Plan become effective, Bunge was authorized to issue and had issued 12,000
Shares, the number of Shares subject to Incentive Stock Options awarded under
the Plan shall not exceed 600. Shares available under this Plan shall be
authorized but unissued Shares.

         (b) Non-Voting Shares. Prior to a Public Offering, any Shares issued
pursuant to any Award shall carry no rights to vote and no rights to receive
notice of, or attend at, meetings of shareholders. Furthermore, such Shares will
carry no dividend rights except that, in the sole discretion of the Committee,
the holders of such Shares may be accorded the right to receive payments in lieu
of dividends. At the time of a Public Offering, those Shares shall automatically
convert into ordinary Shares with full rights to attend at shareholder meetings
and to vote. The Shares subject to any Award granted on or after a Public
Offering shall be ordinary Shares with full voting rights and dividend rights.

         (c) Rules Applicable to Determining Shares Available for Issuance. For
purposes of determining the number of shares of Common Stock that remain
available for issuance, the following Shares shall be added back to the Section
5 Limit and again be available for Awards:

                  (i) The number of Shares tendered to pay the exercise price of
         a Stock Option or Other Award;

                  (ii) The number of Shares withheld from any Award to satisfy a
         Participant's tax withholding obligations or, if applicable, to pay the
         exercise price of a Stock Option or Other Award; and

                  (iii) The number of Shares subject to Awards that expire
         unexercised or that become forfeited.

6.       Eligible Individuals

         Awards may be granted by the Committee to individuals ("Eligible
Individuals") who are: (a) officers or employees of the Company; and (b) any
individual who the Committee anticipates will become a person described in
Section 6(a) above; provided, however, that Incentive Stock Options may be
granted only to employees of the Company. Members of the Committee will not be
eligible to receive Awards under the Plan. An individual's status as an
Administrator will not affect his or her eligibility to participate in the Plan.

7.       Awards in General

                                       7
<PAGE>

         (a) Types of Award and Award Agreement. Awards under the Plan may
consist of Stock Options, Restricted Stock, or Other Awards. Any Award described
in Sections 8 through 10 of the Plan may be granted singly or in combination or
tandem with any other Award, as the Committee may determine. Awards may be made
in combination with, in replacement of, or as alternatives to grants of rights
under any other employee compensation plan of the Company, including the plan of
any acquired entity, or may be granted in satisfaction of the Company's
obligations under any such plan.

         (b) Terms Set Forth in Award Agreement. The terms and provisions of an
Award shall be set forth in a written Award Agreement approved by the Committee
and delivered or made available to the Participant as soon as practicable
following the date of the award. The vesting, exercisability, payment and other
restrictions applicable to an Award shall be in accordance with the terms of the
Plan unless the Committee, in its sole discretion, determines that other terms
shall apply to any given Award, which alternative terms shall be set forth in
the applicable Award Agreement. Notwithstanding the foregoing, the Committee may
accelerate (i) the vesting or payment of any Award, (ii) the lapse of
restrictions on any Award or (iii) the date on which any Stock Option, or Other
Award first becomes exercisable. The terms of Awards may vary among Participants
and the Plan does not impose upon the Committee any requirement to make Awards
subject to uniform terms. Accordingly, the terms of individual Award Agreements
may vary.

         (c) Dividends and Dividend Equivalents. With respect to Awards of
Restricted Stock, all dividends paid with respect to Shares underlying
Restricted Stock shall be invested in additional whole Shares, which Shares
shall be subject to the same restrictions as the corresponding Award. In
addition, the Committee may provide Participants with the right to receive
dividends or payments equivalent to dividends or interest with respect to an
outstanding Award, which payments can either be paid currently or deemed to have
been reinvested in shares of Common Stock, and can be made in Common Stock, cash
or a combination thereof, as the Committee shall determine.

8.       Stock Options

         (a) Terms of Stock Options Generally; Vesting. A Stock Option shall
entitle the Participant to whom the Stock Option was granted to purchase a
specified number of Shares during a specified period at a price that is
determined in accordance with Section 8(b) below. Stock Options may be either
Nonqualified Stock Options or Incentive Stock Options. Unless otherwise
specified in the applicable Award Agreement, Stock Options shall become
one-third vested on the first anniversary of the date of grant and shall vest
with respect to an additional one-third on each of the second and third such
anniversaries.

         (b) Exercise Price. The exercise price per Share purchasable under a
Stock Option shall be fixed by the Committee at the time of grant or,
alternatively, shall be determined by a method specified by the Committee at the
time of grant; provided, however, that (except with regard to the first series
of grants under the Plan) the exercise price per share shall be no less than
100% of the Fair Market Value per share on the date of grant (or if the exercise
price is not fixed on the date of grant, then on such date as the exercise price
is fixed); and provided further, that, except as provided in Section 12 below,
the exercise price per Share applicable to a Stock Option may not be adjusted or
amended, including by means of amendment, cancellation or the replacement of
such Stock Option with a subsequently awarded Stock Option.

                                       8
<PAGE>

         (c) Adjustments. Notwithstanding Section 8(b) above, in the event of an
extraordinary dividend, the Committee, in its sole discretion, may adjust the
exercise price of, and number of Shares subject to, Stock Options then
outstanding under the Plan; provided, however, that any such adjustment shall
not increase the aggregate intrinsic value of any Award and the ratio of the
exercise price to the Fair Market Value of each Share subject to such Award
shall not be reduced.

         (d) Termination of Employment. The terms of this Section 8(d) shall
apply unless the Committee, in its sole discretion, determines that alternative
terms shall be included in any Award Agreement in which case the terms in such
Award Agreement shall govern the rights of the Participant. Notwithstanding the
terms of this Section 8(d), in no event shall any Stock Option be exercisable
after the end of the applicable Option Term.

         (i) Termination for Cause. In the event that a Participant's employment
with the Company is terminated for Cause, all unexercised Stock Options (both
Incentive Stock Options and Non-Qualified Stock Options) held by such
Participant, whether vested or unvested, shall lapse and become void on the date
of such termination.

         (ii) Normal Retirement, Death and Disability. In the event of a
Participant's termination of employment due to such Participant's Retirement,
death or Disability, all unvested Stock Options (both Incentive Stock Options
and Non-Qualified Stock Options) shall become immediately vested and
exercisable. Thereafter, all vested Non-Qualified Stock Options shall remain
exercisable by the Participant (or by the Participant's beneficiary, as
applicable) until the third anniversary of the date of the Participant's
termination of employment. All vested Incentive Stock Options shall remain
exercisable until the first anniversary of the Participant's termination of
employment, except in the event of a termination due to Retirement in which case
Incentive Stock Options shall remain exercisable for a period of ninety days
after the date of termination. Any unexercised Stock Options will thereafter
lapse and become void.

         (iii) Early Retirement and Termination by the Company Without Cause. In
the event of a Participant's termination of employment due to such Participant's
early retirement prior to age 65 (as defined under the Company's applicable
retirement policies), or in the event of the Participant's termination by the
Company other than for Cause, any unvested Stock Options (both Incentive Stock
Options and Non-Qualified Stock Options) held by such Participant that would
have become vested at any time during the twelve-month period following the date
of his or her termination of employment, had such employment continued, shall
become immediately vested and exercisable. Any remaining unvested Stock Options
(both Incentive Stock Options and Non-Qualified Stock Options) shall immediately
lapse and become void. Thereafter, all vested Incentive Stock Options shall
remain exercisable by the Participant until the end of the ninetieth day after
such Participant's termination of employment. All vested Non-Qualified Stock
Options shall remain exercisable by the Participant until either (i) if such
termination occurs prior to a Public Offering, the end of the first Pre-IPO
Exercise Period occurring on or after the date of the Participant's termination
of employment or (ii) in all other circumstances, until the end of the ninetieth
day after such Participant's termination of employment. Any unexercised vested
Stock Options will thereafter lapse and become void.

         (iv) Transfer to Bunge International Limited. In the event that a
Participant is transferred to Bunge International Limited prior to a Public
Offering, any unvested Stock Options (both Incentive Stock Options and
Non-Qualified Stock Options) held by such

                                       9
<PAGE>

Participant that would have become vested at any time during the twelve-month
period following the date of his or her transfer of employment, had such
employment continued with the Company, shall become immediately vested and
exercisable. Any remaining unvested Stock Options (both Incentive Stock Options
and Non-Qualified Stock Options) shall immediately lapse and become void.
Thereafter, all vested Incentive Stock Options shall remain exercisable by the
Participant until the end of the ninetieth day after such Participant's transfer
to Bunge International Limited. All vested Non-Qualified Stock Options shall
remain exercisable by the Participant until the third anniversary of the date of
such transfer. Any unexercised vested Stock Options will thereafter lapse and
become void.

         (v) Participant's Resignation. In the event that a Participant resigns
from his or her employment with the Company for any reason, such Participant's
unvested Stock Options (both Incentive Stock Options and Non-Qualified Stock
Options) shall immediately lapse and become void. Any vested Stock Options (both
Incentive Stock Options and Non-Qualified Stock Options) shall remain
exercisable by the Participant until the end of the ninetieth day after such
Participant's termination of employment, except that if the date of the
Participant's resignation occurs prior to a Public Offering, his or her vested
Non-Qualified Stock Options shall remain exercisable by the Participant until
the end of the first Pre-IPO Exercise Period occurring on or after the date of
the Participant's termination of employment. Any unexercised vested Stock
Options will thereafter lapse and become void.

         (vi) Committee Determinations. The date of a Participant's transfer to
Bunge International Limited or termination of employment for any reason shall be
determined in the sole discretion of the Committee. The Committee, in its sole
discretion, may permit any Incentive Stock Option to convert into a
Non-Qualified Stock Option as of a Participant's termination of employment for
purposes of providing such Participant with the benefit of the extended exercise
period applicable to Non-Qualified Stock Options.

         (e) Option Term. The term of each Stock Option (the "Option Term")
shall be fixed by the Committee and shall not exceed ten years from the date of
grant.

         (f) Method of Exercise. Subject to the provisions of the applicable
Award Agreement, the exercise price of a Stock Option may be paid in cash or
previously owned shares or a combination thereof and, if the applicable Award
Agreement so provides, in whole or in part through the withholding of shares
subject to the Stock Option with a value equal to the exercise price. In
accordance with the rules and procedures established by the Committee for this
purpose, the Stock Option may also be exercised through a "cashless exercise"
procedure approved by the Committee involving a broker or dealer approved by the
Committee, that affords Participants the opportunity to sell immediately some or
all of the shares underlying the exercised portion of the Stock Option in order
to generate sufficient cash to pay the Stock Option exercise price and/or to
satisfy withholding tax obligations related to the Stock Option.

         (g) Exercise Restrictions Prior to Public Offering. Prior to a Public
Offering, vested Stock Options shall be exercisable only during a Pre-IPO
Exercise Period.

9.       Restricted Stock

         (a) Awards Generally. An Award of Restricted Stock shall consist of one
or more Shares granted to a Participant for no consideration other than the
provision of services

                                       10
<PAGE>

(or such minimum payment as may be required under applicable law) or for such
other consideration as the Committee may specify in connection with the grant.
Each Award of Restricted Stock shall be subject to forfeiture in the event of
termination of employment and/or failure to meet performance goals. If and when
the forfeiture provisions lapse, the Restricted Stock shall become unrestricted
Shares owned by the corresponding Participant. The terms of this Section 9 shall
apply to Awards of Restricted Stock unless the Committee, in its sole
discretion, determines that alternative terms shall be included in any Award
Agreement in which case the terms in such Award Agreement shall govern the
rights of the Participant.

         (b) Restricted Stock. Unless otherwise specified in the applicable
Award Agreement, Restricted Stock that is not Performance-Based Restricted Stock
shall vest and become nonforfeitable on the fourth anniversary of the date of
grant. In the event that a Participant's employment is terminated by the Company
for Cause or as a consequence of the Participant's resignation for any reason,
any unvested Awards of Restricted Stock to such Participant shall lapse and
become void as of the date of such termination. In the event that the
Participant's employment terminates for any other reason, a portion of such
Participant's Awards of Restricted Stock equal to the result of the following
formula shall become immediately vested on the date of termination:

         (Y/X) x R, rounded down to the nearest whole number of Shares, where

         X= number of days from the date of grant until the date the Award would
         have vested;
         Y= number of days from the date of grant until the date of the
         Participant's termination of employment; and
         R= number of Shares subject to the Award (including any Shares added as
         a consequence of dividend payments).

         (c) Performance-Based Restricted Stock. (i) General. Performance-Based
Restricted Stock shall vest based on the attainment of performance goals over a
period of time that the Committee, in its sole discretion, shall determine.
Performance goals, the period of time during which such performance goals shall
be measured, any applicable vesting formula or other elements applicable to the
performance goals shall be set forth in the applicable Award Agreements.

         (ii) Permitted Adjustments. The Committee, in its sole discretion, may
equitably adjust any performance goals in order to take into account the
occurrence of extraordinary events such as material acquisitions and
divestitures, changes in the capital structure of the Company and extraordinary
accounting charges. In addition, the Committee, in its sole discretion, may
unilaterally adjust to the extent of up to plus or minus twenty percent the
number of Shares that would otherwise have vested based on the attainment of
performance goals, as set forth in the corresponding Award Agreement.

         (iii) Termination of Employment. In the event that a Participant's
employment is terminated by the Company for Cause or as a consequence of the
Participant's resignation for any reason, any unvested Awards of
Performance-Based Restricted Stock to such Participant shall lapse and become
void as of the date of such termination. In the event that the Participant's
employment terminates for any other reason or in the event that the Participant
is transferred to Bunge International Limited, such Participant's Awards of
Performance-Based Restricted Stock shall continue to be subject to the
applicable terms of vesting and, if such terms

                                       11
<PAGE>

are met, shall vest at the end of the applicable performance period on a
pro-rata basis from the date of grant until the date of the Participant's
termination of employment. Notwithstanding the terms of this Section 9(c)(iii),
the Committee may, in its sole discretion, accelerate the vesting of any
Performance-Based Restricted Stock Award at the time of an event described
herein.

10.      Other Awards

         The Committee shall have the authority to specify the terms and
provisions of other forms of equity-based or equity-related Awards not described
above which the Committee determines to be consistent with the purpose of the
Plan and the interests of the Company, which Awards may provide for cash
payments based in whole or in part on the value or future value of Common Stock,
for the acquisition or future acquisition of Common Stock, or any combination
thereof. Other Awards shall also include cash payments (including the cash
payment of dividend equivalents) under the Plan which may be based on one or
more criteria determined by the Committee which are unrelated to the value of
Common Stock and which may be granted in tandem with, or independent of, Awards
of Stock Options and Restricted Stock under the Plan.

11.      Certain Restrictions

         (a) Transfers Prior to a Public Offering. Prior to a Public Offering,
no Award shall be transferable other than by will or by the laws of descent and
distribution.

         (b) Transfers On and After a Public Offering. On and after a Public
Offering, unless the Committee determines otherwise, no Award shall be
transferable other than by will or by the laws of descent and distribution or
pursuant to a domestic relations order; provided, however, that the Committee
may, in its discretion and subject to such terms and conditions as it shall
specify, permit the transfer of an Award (other than an Award of any Incentive
Stock Option) for no consideration to a Participant's family members or to one
or more trusts or partnerships established in whole or in part for the benefit
of one or more of such family members (collectively, "Permitted Transferees").
Any Award transferred to a Permitted Transferee shall be further transferable
only by will or the laws of descent and distribution or, for no consideration,
to another Permitted Transferee of the Participant.

         (c) Lock-up Periods. Each Participant shall agree to be bound by the
applicable terms of any lock-up agreement between the Company and any
underwriter that restricts or prohibits transactions in Shares for any period of
time.

         (d) Exercise. During the lifetime of the Participant, a Stock Option or
similar-type Other Award shall be exercisable only by the Participant or by a
Permitted Transferee to whom such Stock Option or Other Award has been
transferred in accordance with Section 11(b).

12.      Recapitalization or Reorganization

         (a) Authority of the Company and Shareholders. The existence of the
Plan, the Award Agreements and the Awards granted hereunder shall not affect or
restrict in any way the right or power of the Company or the shareholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of stock or of

                                       12
<PAGE>

options, warrants or rights to purchase stock or of bonds, debentures, preferred
or prior preference stocks whose rights are superior to or affect the Common
Stock or the rights thereof or which are convertible into or exchangeable for
Common Stock, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.

         (b) Change in Control. In addition to the alternatives described in
Section 12(c) below, in the event of a Change in Control, the Committee in its
sole discretion may take such measures as it deems appropriate with respect to
any outstanding Awards, which measures may include, without limitation, the
acceleration of vesting, the rollover of outstanding Awards into awards
exercisable for or subject to the acquirer's securities, the cash of vested
Awards or any combination of the forgoing; provided, however, that unless the
Committee, in its sole discretion, determines otherwise, in the event of a
Change in Control all outstanding Awards of Stock Options and Restricted Stock
shall become fully vested immediately prior to the consummation of such Change
in Control transaction; and provided further, that Performance-Based Restricted
Stock Awards shall become vested according to the assumption that the applicable
performance goals have been met at the target level.

         (c) Change in Capitalization. The number and kind of shares authorized
for issuance under Section 5(a) above, shall be equitably adjusted in the event
of a stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, extraordinary dividend, split-up, spin-off, combination, exchange
of shares, warrants or rights offering to purchase Common Stock at a price
substantially below Fair Market Value, or other similar corporate event
affecting the Common Stock in order to preserve, but not increase, the benefits
or potential benefits intended to be made available under the Plan. In addition,
upon the occurrence of any of the foregoing events, the number of outstanding
Awards and the number and kind of shares subject to any outstanding Award and
the purchase price per share, if any, under any outstanding Award shall be
equitably adjusted (including by payment of cash to a Participant) in order to
preserve the benefits or potential benefits intended to be made available to
Participants granted Awards. Such adjustments shall be made by the Board, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final. Unless otherwise determined by the Board, such adjusted Awards
shall be subject to the same vesting schedule and restrictions to which the
underlying Award is subject.

                                       13

<PAGE>

13.      Participation Rights

         (a) Call Right. In the event that a Public Offering has not occurred
prior to the date that a Participant's employment with the Company terminates
for any reason, beginning on the date of such termination and continuing for a
period of ninety days following such date, Bunge shall have the right (the "Call
Right") to purchase all unrestricted shares of Common Stock then held by such
Participant and acquired by such Participant in connection with an Award under
the Plan (the "Award Shares") in accordance with the terms set forth in this
Section 13(a). Bunge shall have a Call Right to purchase all Award Shares that
become subject to a Call Right under this Section 13(a) at a price per share
equal to the Fair Market Value of such Award Shares as follows:

         (i) If the Participant's termination of employment occurs during the
six-month period after a determination of Fair Market Value, such Fair Market
Value will apply to any Call Right exercised in connection with such
termination.

         (ii) Under any other circumstances, the Fair Market Value determined as
of the first valuation made after the date of termination will apply to any Call
Right exercised in connection with such termination. Bunge shall exercise the
Call Right by sending written notice (the "Call Notice") of such exercise to the
Participant (or, in the event of the Participant's death, the Participant's
beneficiary). If applicable, the Call Notice will specify the Fair Market Value
per Award Share. Otherwise, as soon as practicable after the Call Notice is
delivered to the Participant, Bunge shall notify the Participant in writing of
the Fair Market Value. Within ten days after the Participant has received notice
of the Fair Market Value, the Participant shall deliver all Award Shares owned
or held by the Participant to Bunge. The purchase price for the Award Shares
subject to the Call Right shall be paid by Bunge in a lump sum cash amount as
soon as practicable but in no event more than five business days after delivery
of the Award Shares to Bunge.

         (b) Bring-Along Right. With respect to any corporate sale or merger
transaction involving the sale of Common Stock prior to a Public Offering, Bunge
will have the right (the "Bring-Along Right") to require any Participant to
transfer in such sale any Award Shares held by such Participant. Any Award
Shares purchased from a Participant pursuant to the Bring-Along Right will be
paid for with the same proportional consideration, at the same price per Share
and upon the same terms and conditions as those applicable to other Common
Stock. Bunge shall provide each affected Participant with a written notice of
the exercise of the Bring-Along Right, and shall include the amount and form of
consideration and the terms and conditions of payment.

         (c) Put Right. Prior to a Public Offering, each Participant shall have
the right (the "Put Right") to sell any or all Award Shares in accordance with
the terms set forth in this Section 13(c). Each year prior to a Public Offering,
during the ninety-day period immediately following the date the annual valuation
of the Company is submitted to the Committee, each Participant shall have a Put
Right to sell his or her Award Shares at a price per share equal to the Fair
Market Value of such Award Shares as of the date of such valuation. As soon as
practicable after the annual valuation, the Company shall provide each
Participant with written notice of the Fair Market Value and the period during
which each such Participant may exercise the Put Right. A Participant may
exercise the Put Right by sending written notice of such exercise to Bunge and
by delivering all Award Shares with respect to which the Participant is
exercising the Put Right with such notice. The purchase price for the Award
Shares subject to

                                       14
<PAGE>

the Put Right shall be paid by Bunge in a lump sum cash amount as soon as
practicable but in no event more than five business days after delivery of the
Award Shares to Bunge.

         (d) Other Participation Rights. Prior to a Public Offering, the
Committee may, in its sole discretion, agree to include other participation
rights in any Participant's Award Agreement, including, without limitation, the
provision to a Participant of the right to require Bunge to purchase Shares
acquired by such Participant in connection with an Award.

14.      Amendments

         The Board may at any time and from time to time alter, amend, suspend
or amend the Plan in whole or in part; provided, however, that any amendment
which under the requirements of any applicable law or stock exchange rule must
be approved by the shareholders of the Company shall not be effective unless and
until such shareholder approval has been obtained in compliance with such law or
rule; and provided further, that, except as contemplated by Sections 8(b), 8(c)
and 12(c) above, the Board may not, without the approval of the Company's
shareholders, increase the maximum number of shares issuable under the Plan or
reduce the exercise price of a Stock Option. No termination or amendment of the
Plan may, without the consent of the Participant to whom an Award has been
granted, adversely affect the rights of such Participant under such Award.
Notwithstanding any provision herein to the contrary, the Board shall have broad
authority to amend the Plan or any Award under the Plan to take into account
changes in applicable tax laws, securities laws, accounting rules and other
applicable state and federal laws.

15.      Miscellaneous

         (a) Shareholder Approval. The shareholders of Bunge shall duly approve
this Plan within twelve months after its adoption by the Board. If such
shareholder approval is not obtained, then any Awards made hereunder shall be
automatically rescinded and the Plan and any such Awards shall be void, ab
initio.

         (b) Tax Withholding. The Company may require any individual entitled to
receive a payment in respect of an Award to remit to the Company, prior to such
payment, an amount sufficient to satisfy any Federal, state or local tax
withholding requirements. The Company shall also have the right to deduct from
all cash payments made pursuant to or in connection with any Award any Federal,
state or local taxes required to be withheld with respect to such payments. In
the case of an Award payable in Shares, the Company may permit such individual
to satisfy, in whole or in part, such obligation to remit taxes by directing the
Company to withhold Shares that would otherwise be received by such individual,
pursuant to such rules as the Committee may establish from time to time.

         (c) No Right to Grants or Employment. No Eligible Individual or
Participant shall have any claim or right to receive grants of Awards under the
Plan. Nothing in the Plan or in any Award or Award Agreement shall confer upon
any employee of the Company any right to continued employment with the Company
or interfere in any way with the right of the Company to terminate the
employment of any of its employees at any time, with or without cause.

                                       15
<PAGE>

         (d) Other Compensation. Nothing in this Plan shall preclude or limit
the ability of the Company to pay any compensation to a Participant under the
Company's other compensation and benefit plans and programs.

         (e) Other Employee Benefit Plans. Payments received by a Participant
under any Award made pursuant to the Plan shall not be included in, nor have any
effect on, the determination of benefits under any other employee benefit plan
or similar arrangement provided by the Company, unless otherwise specifically
provided for under the terms of such plan or arrangement or by the Committee.

         (f) Unfunded Plan. The Plan is intended to constitute an unfunded plan
for incentive compensation. Prior to the payment or settlement of any Award,
nothing contained herein shall give any Participant any rights that are greater
than those of a general creditor of the Company. In its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Common Stock or payments in lieu
thereof with respect to awards hereunder.

         (g) Securities Law Restrictions. The Committee may require each
Eligible Individual purchasing or acquiring Shares pursuant to a Stock Option or
other Award under the Plan to represent to and agree with the Company in writing
that such Eligible Individual is acquiring the Shares for investment and not
with a view to the distribution thereof. All certificates for Shares delivered
under the Plan shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations,
and other requirements of the Securities and Exchange Commission, any exchange
upon which the Common Stock is then listed, and any applicable federal or state
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions. No Shares
shall be issued hereunder unless the Company shall have determined that such
issuance is in compliance with, or pursuant to an exemption from, all applicable
federal and state securities laws.

         (h) Compliance with Rule 16b-3. Notwithstanding anything contained in
the Plan or in any Award Agreement to the contrary, if the consummation of any
transaction under the Plan would result in the possible imposition of liability
on a Participant pursuant to Section 16(b) of the Exchange Act, the Committee
shall have the right, in its sole discretion, but shall not be obligated, to
defer such transaction or the effectiveness of such action to the extent
necessary to avoid such liability, but in no event for a period longer than six
months.

         (i) Award Agreement. Except as expressly provided herein, in the event
of any conflict or inconsistency between the Plan and any Award Agreement, the
Plan shall govern, and the Award Agreement shall be interpreted to minimize or
eliminate any such conflict or inconsistency.

         (j) Expenses. The costs and expenses of administering the Plan shall be
borne by the Company.

         (k) Application of Funds. The proceeds received from the Company from
the sale of Common Stock or other securities pursuant to Awards will be used for
general corporate purposes.

                                       16
<PAGE>

         (l) Applicable Law. Except as to matters of federal law, the Plan and
all actions taken thereunder shall be governed by and construed in accordance
with the laws of the State of New York.

         (m) Stated Periods of Time. In the event that any period of days,
months or years set forth in this Plan ends on a date that is Saturday, Sunday
or a public holiday in the United States, the end of such period shall be the
first business day following such date.

                                       17

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